Fair Value Measurement and Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value, Financial Assets and Liabilities Measured on Recurring and Nonrecurring Basis

Schedule of financial assets (liabilities) measured at fair value on a recurring basis

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2019
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Fair Value
Available-for-sale investment securities:
U.S. Treasury securities	$	520,440	$	—		$	—	$	520,440
U.S. government agency and U.S. government sponsored enterprise debt securities	—		182,536			—		182,536
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		426,291			—		426,291
Residential mortgage-backed securities	—		886,825			—		886,825
Municipal securities	—		76,004			—		76,004
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		42,299			—		42,299
Residential mortgage-backed securities	—		9,455			—		9,455
Corporate debt securities	—		11,094			—		11,094
Foreign bonds	—		472,669			—		472,669
Asset-backed securities	—		12,545			—		12,545
Total available-for-sale investment securities	$	520,440	$	2,119,718		$	—	$	2,640,158

Investments in tax credit and other investments:
Equity securities with readily determinable fair value ⁽¹⁾	$	21,051	$	9,886		$	—	$	30,937
Total investments in tax credit and other investments	$	21,051	$	9,886		$	—	$	30,937

Derivative assets:
Interest rate contracts	$	—	$	96,256		$	—	$	96,256
Foreign exchange contracts	—		30,085			—		30,085
Credit contracts	—		1			—		1
Equity contracts	—		1,759			442		2,201
Commodity contracts	—		7,239			—		7,239
Gross derivative assets	$	—	$	135,340		$	442	$	135,782
Netting adjustments ⁽²⁾	$	—	$	(40,038	)	$	—	$	(40,038	)
Net derivative assets	$	—	$	95,302		$	442	$	95,744

Derivative liabilities:
Interest rate contracts	$	—	$	76,572		$	—	$	76,572
Foreign exchange contracts	—		24,918			—		24,918
Credit contracts	—		81			—		81
Commodity contracts	—		8,016			—		8,016
Gross derivative liabilities	$	—	$	109,587		$	—	$	109,587
Netting adjustments ⁽²⁾	$	—	$	(56,102	)	$	—	$	(56,102	)
Net derivative liabilities	$	—	$	53,485		$	—	$	53,485


(1)	Equity securities with readily determinable fair value were comprised of mutual funds.


(2)	Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 7 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2018
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Fair Value
Available-for-sale investment securities:
U.S. Treasury securities	$	564,815	$	—		$	—	$	564,815
U.S. government agency and U.S. government sponsored enterprise debt securities	—		217,173			—		217,173
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		408,603			—		408,603
Residential mortgage-backed securities	—		946,693			—		946,693
Municipal securities	—		82,020			—		82,020
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		26,052			—		26,052
Residential mortgage-backed securities	—		9,931			—		9,931
Corporate debt securities	—		10,869			—		10,869
Foreign bonds	—		463,048			—		463,048
Asset-backed securities	—		12,643			—		12,643
Total available-for-sale investment securities	$	564,815	$	2,177,032		$	—	$	2,741,847

Investment in tax credit and other investments:
Equity securities with readily determinable fair value⁽¹⁾	$	20,678	$	10,531		$	—	$	31,209
Total investments in tax credit and other investments	$	20,678	$	10,531		$	—	$	31,209

Derivative assets:
Interest rate contracts	$	—	$	69,818		$	—	$	69,818
Foreign exchange contracts	—		21,624			—		21,624
Credit contracts	—		1			—		1
Equity contracts	—		1,278			673		1,951
Commodity contracts	—		14,422			—		14,422
Gross derivative assets	$	—	$	107,143		$	673	$	107,816
Netting adjustments ⁽²⁾	$	—	$	(45,146	)	$	—	$	(45,146	)
Net derivative assets	$	—	$	61,997		$	673	$	62,670

Derivative liabilities:
Interest rate contracts	$	—	$	75,133		$	—	$	75,133
Foreign exchange contracts	—		19,940			—		19,940
Credit contracts	—		164			—		164
Commodity contracts	—		23,068			—		23,068
Gross derivative liabilities	$	—	$	118,305		$	—	$	118,305
Netting adjustments ⁽²⁾	$	—	$	(38,402	)	$	—	$	(38,402	)
Net derivative liabilities	$	—	$	79,903		$	—	$	79,903


(1)	Equity securities with readily determinable fair value were comprised of mutual funds.


(2)	Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 7 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.

Reconciliation of the beginning and ending balances for warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances of these warrants for the three months ended March 31, 2019 and 2018:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2019			2018
Equity warrants
Beginning balance	$	673		$	679
Total (losses) gains included in earnings ⁽¹⁾	(231		)	244
Issuances	—			8
Ending balance	$	442		$	931


(1)	Includes unrealized (losses) gains of $(43) thousand and $244 thousand for the three months ended March 31, 2019 and 2018, respectively. Unrealized gains and losses of equity warrants were included in Lending fees on the Consolidated Statement of Income.

Schedule of assets with fair value changes measured on a nonrecurring basis

The following tables present the carrying amounts of assets included on the Consolidated Balance Sheet that had fair value changes measured on a nonrecurring basis as of March 31, 2019 and December 31, 2018:




($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of March 31, 2019
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Non-PCI impaired loans:
Commercial:
Commercial and industrial (“C&I”)	$	—	$	—	$	15,388	$	15,388
Commercial real estate (“CRE”)	—		—		785		785
Consumer:
Home equity lines of credit (“HELOCs”)	—		—		918		918
Total non-PCI impaired loans	$	—	$	—	$	17,091	$	17,091




	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2018
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Non-PCI impaired loans:
Commercial:
C&I	$	—	$	—	$	26,873	$	26,873
CRE	—		—		3,434		3,434
Consumer:
Single-family residential	—		—		2,551		2,551
Total non-PCI impaired loans	$	—	$	—	$	32,858	$	32,858

Schedule of fair value adjustments of financial assets measured on a nonrecurring basis recognized

The following table presents the increase (decrease) in value of assets for which a fair value adjustment has been included on the Consolidated Statement of Income for the three months ended March 31, 2019 and 2018:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2019			2018
Non-PCI impaired loans:
Commercial:
C&I	$	(2,734	)	$	(13,899	)
CRE	2			(95		)
Consumer:
Single-family residential	—			15
HELOCs	(78		)	—
Total non-PCI impaired loans	$	(2,810	)	$	(13,979	)
Impairment on tax credit investments	$	(6,978	)	$	—

Schedule of the carrying and fair values per the fair value hierarchy of financial instruments measured on a nonrecurring basis

The following tables present the fair value estimates for financial instruments as of March 31, 2019 and December 31, 2018, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable and mortgage servicing rights that are included in Other assets, and accrued interest payable that is included in Accrued expenses and other liabilities. These financial assets and liabilities are measured at amortized cost basis on the Company’s Consolidated Balance Sheet.




($ in thousands)	March 31, 2019
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,785,325	$	3,785,325	$	—	$	—	$	3,785,325
Interest-bearing deposits with banks	$	134,000	$	—	$	134,000	$	—	$	134,000
Resale agreements ⁽¹⁾	$	1,035,000	$	—	$	1,025,288	$	—	$	1,025,288
Restricted equity securities, at cost	$	74,736	$	—	$	74,736	$	—	$	74,736
Loans held-for-investment, net	$	32,545,392	$	—	$	—	$	32,775,546	$	32,775,546
Mortgage servicing rights	$	7,754	$	—	$	—	$	11,099	$	11,099
Accrued interest receivable	$	157,335	$	—	$	157,335	$	—	$	157,335
Financial liabilities:
Demand, checking, savings and money market deposits	$	26,427,303	$	—	$	26,427,303	$	—	$	26,427,303
Time deposits	$	9,846,669	$	—	$	9,876,954	$	—	$	9,876,954
Short-term borrowings	$	39,550	$	—	$	39,550	$	—	$	39,550
FHLB advances	$	344,657	$	—	$	352,610	$	—	$	352,610
Repurchase agreements ⁽¹⁾	$	50,000	$	—	$	107,103	$	—	$	107,103
Long-term debt	$	146,900	$	—	$	152,531	$	—	$	152,531
Accrued interest payable	$	25,814	$	—	$	25,814	$	—	$	25,814




($ in thousands)	December 31, 2018
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,001,377	$	3,001,377	$	—	$	—	$	3,001,377
Interest-bearing deposits with banks	$	371,000	$	—	$	371,000	$	—	$	371,000
Resale agreements ⁽¹⁾	$	1,035,000	$	—	$	1,016,724	$	—	$	1,016,724
Restricted equity securities, at cost	$	74,069	$	—	$	74,069	$	—	$	74,069
Loans held-for-sale	$	275	$	—	$	275	$	—	$	275
Loans held-for-investment, net	$	32,073,867	$	—	$	—	$	32,273,157	$	32,273,157
Mortgage servicing rights	$	7,836	$	—	$	—	$	11,427	$	11,427
Accrued interest receivable	$	146,262	$	—	$	146,262	$	—	$	146,262
Financial liabilities:
Demand, checking, savings and money market deposits	$	26,370,562	$	—	$	26,370,562	$	—	$	26,370,562
Time deposits	$	9,069,066	$	—	$	9,084,597	$	—	$	9,084,597
Short-term borrowings	$	57,638	$	—	$	57,638	$	—	$	57,638
FHLB advances	$	326,172	$	—	$	334,793	$	—	$	334,793
Repurchase agreements ⁽¹⁾	$	50,000	$	—	$	87,668	$	—	$	87,668
Long-term debt	$	146,835	$	—	$	152,556	$	—	$	152,556
Accrued interest payable	$	22,893	$	—	$	22,893	$	—	$	22,893


(1)	Resale and repurchase agreements are reported net pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of both March 31, 2019 and December 31, 2018, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.

Fair Value, Measurements, Recurring

Fair Value, Financial Assets and Liabilities Measured on Recurring and Nonrecurring Basis

Schedule of quantitative information about significant unobservable inputs used in the valuation of assets classified as Level 3

The following table presents quantitative information about the significant unobservable inputs used in the valuation of assets measured on a recurring basis classified as Level 3 as of March 31, 2019. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.

($ in thousands)

Fair Value

Measurements

(Level 3)

Valuation

Technique

Unobservable

Inputs

Range of Inputs

Weighted-

Average ⁽¹⁾

Derivative assets:

Equity warrants

442

Black-Scholes option pricing model

Volatility

41% — 49%

47%

Liquidity discount

47%


(1)	Weighted-average is calculated based on fair value of equity warrants as of March 31, 2019.

Fair Value, Measurements, Nonrecurring

Fair Value, Financial Assets and Liabilities Measured on Recurring and Nonrecurring Basis

Schedule of quantitative information about significant unobservable inputs used in the valuation of assets classified as Level 3

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of assets measured on a nonrecurring basis classified as Level 3 as of March 31, 2019 and December 31, 2018:




($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique(s)	Unobservable Input(s)	Range of Input(s)	Weighted- Average ⁽¹⁾
March 31, 2019
Non-PCI impaired loans	$	8,423	Discounted cash flows	Discount	4% — 12%	7%
	$	918	Fair value of property	Selling cost	8%	8%
	$	7,750	Fair value of collateral	Discount	50% — 65%	65%
Tax credit investments	$	—	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM

December 31, 2018
Non-PCI impaired loans	$	16,921	Discounted cash flows	Discount	4% — 7%	6%
	$	1,687	Fair value of property	Selling cost	8%	8%
	$	2,751	Fair value of collateral	Discount	15% — 50%	21%
	$	11,499	Fair value of collateral	Contract value	NM	NM

NM — Not meaningful.


(1)	Weighted-average is based on the relative fair value of the respective assets as of March 31, 2019 and December 31, 2018.