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

6 Months Ended

Jun. 30, 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 June 30, 2019 and December 31, 2018:




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 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	$	326,535	$	—		$	—	$	326,535
U.S. government agency and U.S. government sponsored enterprise debt securities	—		241,967			—		241,967
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		474,832			—		474,832
Residential mortgage-backed securities	—		843,574			—		843,574
Municipal securities	—		87,529			—		87,529
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		70,549			—		70,549
Residential mortgage-backed securities	—		24,539			—		24,539
Corporate debt securities	—		11,156			—		11,156
Foreign bonds	—		484,416			—		484,416
Asset-backed securities	—		27,816			—		27,816
Total available-for-sale investment securities	$	326,535	$	2,266,378		$	—	$	2,592,913

Investments in tax credit and other investments:
Equity securities ⁽¹⁾	$	21,466	$	9,957		$	—	$	31,423
Total investments in tax credit and other investments	$	21,466	$	9,957		$	—	$	31,423

Derivative assets:
Interest rate contracts	$	—	$	190,388		$	—	$	190,388
Foreign exchange contracts	—		27,849			—		27,849
Credit contracts	—		3			—		3
Equity contracts	—		1,593			392		1,985
Commodity contracts	—		22,651			—		22,651
Gross derivative assets	$	—	$	242,484		$	392	$	242,876
Netting adjustments ⁽²⁾	$	—	$	(44,203	)	$	—	$	(44,203	)
Net derivative assets	$	—	$	198,281		$	392	$	198,673

Derivative liabilities:
Interest rate contracts	$	—	$	124,371		$	—	$	124,371
Foreign exchange contracts	—		22,528			—		22,528
Credit contracts	—		118			—		118
Commodity contracts	—		25,906			—		25,906
Gross derivative liabilities	$	—	$	172,923		$	—	$	172,923
Netting adjustments ⁽²⁾	$	—	$	(74,494	)	$	—	$	(74,494	)
Net derivative liabilities	$	—	$	98,429		$	—	$	98,429


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


(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 ⁽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 were comprised of mutual funds with readily determinable fair values.

(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 and six months ended June 30, 2019 and 2018:




($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019			2018			2019			2018
Equity warrants
Beginning balance	$	442		$	931		$	673		$	679
Total gains (losses) included in earnings ⁽¹⁾	769			(76		)	538			168
Issuances	28			26			28			34
Settlements	(847		)	(233		)	(847		)	(233		)
Ending balance	$	392		$	648		$	392		$	648


(1)	Includes unrealized (losses) gains of $(4) thousand and $(13) thousand for the three months ended June 30, 2019 and 2018, respectively, and $(235) thousand and $231 thousand for the six months ended June 30, 2019 and 2018, respectively. The realized/unrealized gains (losses) of equity warrants are 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 June 30, 2019 and December 31, 2018:




($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 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”)	$	—	$	—	$	38,412	$	38,412
Commercial real estate (“CRE”)	—		—		774		774
Total non-PCI impaired loans	$	—	$	—	$	39,186	$	39,186
OREO	$	—	$	—	$	130	$	130




	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 increase (decrease) in value of assets for which a fair value adjustment has been included on the Consolidated Statement of Income, nonrecurring basis

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 and six months ended June 30, 2019 and 2018:




($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019			2018			2019			2018
Non-PCI impaired loans:
Commercial:
C&I	$	(24,001	)	$	4,544		$	(25,823	)	$	595
CRE	2			66			4			(23		)
Consumer:
Single-family residential	—			—			—			15
Home equity lines of credit (“HELOCs”)	—			(73		)	—			(73		)
Total non-PCI impaired loans	$	(23,999	)	$	4,537		$	(25,819	)	$	514
OREO	$	(3	)	$	—		$	(3	)	$	—
Investments in tax credit and other investments, net	$	(2,892	)	$	—		$	(9,870	)	$	—

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 June 30, 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)	June 30, 2019
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,621,614	$	3,621,614	$	—	$	—	$	3,621,614
Interest-bearing deposits with banks	$	150,273	$	—	$	150,273	$	—	$	150,273
Resale agreements ⁽¹⁾	$	1,010,000	$	—	$	1,009,457	$	—	$	1,009,457
Restricted equity securities, at cost	$	78,093	$	—	$	78,093	$	—	$	78,093
Loans held-for-sale	$	3,879	$	—	$	3,879	$	—	$	3,879
Loans held-for-investment, net	$	33,399,752	$	—	$	—	$	33,605,951	$	33,605,951
Mortgage servicing rights	$	6,749	$	—	$	—	$	9,379	$	9,379
Accrued interest receivable	$	151,700	$	—	$	151,700	$	—	$	151,700
Financial liabilities:
Demand, checking, savings and money market deposits	$	25,880,826	$	—	$	25,880,826	$	—	$	25,880,826
Time deposits	$	10,596,716	$	—	$	10,626,897	$	—	$	10,626,897
Short-term borrowings	$	19,972	$	—	$	19,972	$	—	$	19,972
FHLB advances	$	745,074	$	—	$	754,240	$	—	$	754,240
Repurchase agreements ⁽¹⁾	$	50,000	$	—	$	109,525	$	—	$	109,525
Long-term debt	$	146,966	$	—	$	152,478	$	—	$	152,478
Accrued interest payable	$	27,684	$	—	$	27,684	$	—	$	27,684




($ 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 June 30, 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 June 30, 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

392

Black-Scholes option pricing model

Equity volatility

43% — 51%

49%

Liquidity discount

47%

(1)

Weighted-average is calculated based on fair value of equity warrants as of June 30, 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 June 30, 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⁾
June 30, 2019
Non-PCI impaired loans	$	9,595	Discounted cash flows	Discount	4% — 14%	9%
	$	26,798	Fair value of collateral	Discount	20% — 55%	37%
	$	2,793	Fair value of collateral	Contract value	NM	NM
OREO	$	130	Fair value of property	Selling cost	8%	8%
Investments in tax credit and other investments, net	$	—	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 June 30, 2019 and December 31, 2018.