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

6 Months Ended

Jun. 30, 2020

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, 2020 and December 31, 2019:



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2020
			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	251,201		$	—		$	—		$	251,201
U.S. government agency and U.S. government- sponsored enterprise debt securities	—			442,644			—			442,644
U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—			858,440			—			858,440
Residential mortgage-backed securities	—			1,280,895			—			1,280,895
Municipal securities	—			215,184			—			215,184
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—			151,368			—			151,368
Residential mortgage-backed securities	—			114,338			—			114,338
Corporate debt securities	—			30,826			—			30,826
Foreign bonds	—			204,080			—			204,080
Asset-backed securities	—			61,619			—			61,619
Collateralized loan obligations (“CLOs”)	—			273,979			—			273,979
Total AFS debt securities	$	251,201		$	3,633,373		$	—		$	3,884,574

Investments in tax credit and other investments:
Equity securities ⁽¹⁾	$	22,462		$	8,680		$	—		$	31,142
Total investments in tax credit and other investments	$	22,462		$	8,680		$	—		$	31,142

Derivative assets:
Interest rate contracts	$	—		$	613,480		$	—		$	613,480
Foreign exchange contracts	—			24,289			—			24,289
Credit contracts	—			41			—			41
Equity contracts	—			8,857			316			9,173
Commodity contracts	—			117,447			—			117,447
Gross derivative assets	$	—		$	764,114		$	316		$	764,430
Netting adjustments ⁽²⁾	$	—		$	(122,218)		$	—		$	(122,218)
Net derivative assets	$	—		$	641,896		$	316		$	642,212

Derivative liabilities:
Interest rate contracts	$	—		$	401,803		$	—		$	401,803
Foreign exchange contracts	—			19,741			—			19,741
Credit contracts	—			327			—			327
Commodity contracts	—			138,298			—			138,298
Gross derivative liabilities	$	—		$	560,169		$	—		$	560,169
Netting adjustments ⁽²⁾	$	—		$	(205,004)		$	—		$	(205,004)
Net derivative liabilities	$	—		$	355,165		$	—		$	355,165

(1)Equity securities consist 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 6 — 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, 2019
			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	176,422		$	—		$	—		$	176,422
U.S. government agency and U.S. government- sponsored enterprise debt securities	—			581,245			—			581,245
U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—			603,471			—			603,471
Residential mortgage-backed securities	—			1,003,897			—			1,003,897
Municipal securities	—			102,302			—			102,302
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—			88,550			—			88,550
Residential mortgage-backed securities	—			46,548			—			46,548
Corporate debt securities	—			11,149			—			11,149
Foreign bonds	—			354,172			—			354,172
Asset-backed securities	—			64,752			—			64,752
CLOs	—			284,706			—			284,706
Total AFS debt securities	$	176,422		$	3,140,792		$	—		$	3,317,214

Investments in tax credit and other investments:
Equity securities ⁽¹⁾	$	21,746		$	9,927		$	—		$	31,673
Total investments in tax credit and other investments	$	21,746		$	9,927		$	—		$	31,673

Derivative assets:
Interest rate contracts	$	—		$	192,883		$	—		$	192,883
Foreign exchange contracts	—			54,637			—			54,637
Credit contracts	—			2			—			2
Equity contracts	—			993			421			1,414
Commodity contracts	—			81,380			—			81,380
Gross derivative assets	$	—		$	329,895		$	421		$	330,316
Netting adjustments ⁽²⁾	$	—		$	(125,319)		$	—		$	(125,319)
Net derivative assets	$	—		$	204,576		$	421		$	204,997

Derivative liabilities:
Interest rate contracts	$	—		$	127,317		$	—		$	127,317
Foreign exchange contracts	—			48,610			—			48,610
Credit contracts	—			84			—			84
Commodity contracts	—			80,517			—			80,517
Gross derivative liabilities	$	—		$	256,528		$	—		$	256,528
Netting adjustments ⁽²⁾	$	—		$	(159,799)		$	—		$	(159,799)
Net derivative liabilities	$	—		$	96,729		$	—		$	96,729

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

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

The following table provides a reconciliation of the beginning and ending balances of these equity warrants for the three and six months ended June 30, 2020 and 2019:





($ in thousands)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Equity Contracts
Beginning balance	$	713		$	442		$	421		$	673

Total gains included in earnings ⁽¹⁾	7,976			769			8,268			538




Issuances	—			28			—			28

Settlements	—			(847)			—			(847)
Transfers out of Level 3 ⁽²⁾	(8,373)			—			(8,373)			—
Ending balance	$	316		$	392		$	316		$	392

(1)Includes unrealized gains (losses) of $8.0 million and $(4) thousand for the three months ended June 30, 2020 and 2019, respectively, and $8.3 million and $(235) thousand for the six months ended June 30, 2020 and 2019, respectively. The realized/unrealized gains (losses) of equity warrants are included in Lending fees on the Consolidated Statement of Income.

(2)During the three and six months ended June 30, 2020, the Company transferred $8.4 million of equity contracts measured on a recurring basis out of Level 3 into Level 2 after the corresponding issuer of the equity warrant, which was previously a private company, completed its initial public offering and became a public company.

Schedule of carrying amounts of assets that were still held and had fair value changes measured on a nonrecurring basis

The following tables present the carrying amounts of assets that were still held and had fair value changes measured on a nonrecurring basis as of June 30, 2020 and December 31, 2019:



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2020
			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Fair Value Measurements
Individually evaluated loans ⁽¹⁾:
Commercial:
C&I	$	—		$	—		$	53,122		$	53,122
CRE:
CRE	—			—			50,453			50,453



Total commercial	—			—			103,575			103,575
Consumer:
Residential mortgage:

HELOCs	—			—			3,338			3,338

Other consumer	—			—			2,491			2,491
Total consumer	—			—			5,829			5,829
Total individually evaluated loans	$	—		$	—		$	109,404		$	109,404

Investments in tax credit and other investments, net	$	—		$	—		$	6,216		$	6,216



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2019
			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	$	—		$	—		$	47,554		$	47,554
CRE:
CRE	—			—			753			753



Total commercial	—			—			48,307			48,307
Consumer:
Residential mortgage:

HELOCs	—			—			1,372			1,372


Total consumer	—			—			1,372			1,372
Total non-PCI impaired loans	$	—		$	—		$	49,679		$	49,679
OREO ⁽²⁾	$	—		$	—		$	125		$	125
Investments in tax credit and other investments, net	$	—		$	—		$	3,076		$	3,076
Other nonperforming assets	$	—		$	—		$	1,167		$	1,167

(1)The Company adopted ASU 2016-13 using the prospective transition approach for PCD loans that were previously accounted for as PCI loans. Total individually evaluated loans as of June 30, 2020 considers PCD loans, if impaired, whereas the impaired loans as of December 31, 2019 include only non-PCI loans.

(2)Amounts are included in Other assets on the Consolidated Balance Sheet and represent the carrying value of OREO properties that were written down subsequent to their initial classification as OREO.

Schedule of increase (decrease) in fair value of assets for which a fair value adjustment has been recognized, nonrecurring basis

The following table presents the increase (decrease) in fair value of assets for which a nonrecurring fair value adjustment has been recognized for the three and six months ended June 30, 2020 and 2019:



($ in thousands)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
			Individually Evaluated Loans ⁽¹⁾			Non-PCI Impaired Loans			Individually Evaluated Loans ⁽¹⁾			Non-PCI Impaired Loans
Loans:
Commercial:
C&I	$	(8,846)		$	(24,001)		$	(30,372)		$	(25,823)
CRE:
CRE	(271)			2			(276)			4



Total commercial	(9,117)			(23,999)			(30,648)			(25,819)
Consumer:
Residential mortgage:

HELOCs	(64)			—			(257)			—

Other consumer	—			—			2,491			—
Total consumer	(64)			—			2,234			—
Total loans	$	(9,181)		$	(23,999)		$	(28,414)		$	(25,819)
OREO	$	—		$	(3)		$	—		$	(3)
Investments in tax credit and other investments, net	$	(733)		$	(2,892)		$	(583)		$	(9,870)
Other nonperforming assets	$	—		$	—		$	—		$	(3,000)

(1)The Company adopted ASU 2016-13 using the prospective transition approach for PCD loans that were previously accounted for as PCI loans. Total individually evaluated loans during the three and six months ended June 30, 2020 considers PCD loans, if impaired, whereas impaired loans during the three and six months ended June 30, 2019 include only non-PCI loans.

Schedule of the carrying and fair value estimates 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, 2020 and December 31, 2019, 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, 2020
			Carrying Amount			Level 1			Level 2			Level 3			Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	4,533,502		$	4,533,502		$	—		$	—		$	4,533,502
Interest-bearing deposits with banks	$	531,591		$	—		$	531,591		$	—		$	531,591
Resale agreements ⁽¹⁾	$	1,260,000		$	—		$	1,263,068		$	—		$	1,263,068

Restricted equity securities, at cost	$	78,963		$	—		$	78,963		$	—		$	78,963
Loans held-for-sale	$	3,875		$	—		$	3,875		$	—		$	3,875
Loans held-for-investment, net	$	36,597,341		$	—		$	—		$	36,714,052		$	36,714,052
Mortgage servicing rights	$	5,363		$	—		$	—		$	7,798		$	7,798
Accrued interest receivable	$	149,595		$	—		$	149,595		$	—		$	149,595
Financial liabilities:
Demand, checking, savings and money market deposits	$	31,410,130		$	—		$	31,410,130		$	—		$	31,410,130
Time deposits	$	9,262,548		$	—		$	9,295,199		$	—		$	9,295,199
Short-term borrowings	$	252,851		$	—		$	252,851		$	—		$	252,851

FHLB advances	$	656,759		$	—		$	667,996		$	—		$	667,996
Repurchase agreements ⁽¹⁾	$	300,000		$	—		$	320,361		$	—		$	320,361
Long-term debt	$	1,575,653		$	—		$	1,578,801		$	—		$	1,578,801
Accrued interest payable	$	23,007		$	—		$	23,007		$	—		$	23,007



($ in thousands)	December 31, 2019
			Carrying Amount			Level 1			Level 2			Level 3			Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,261,149		$	3,261,149		$	—		$	—		$	3,261,149
Interest-bearing deposits with banks	$	196,161		$	—		$	196,161		$	—		$	196,161
Resale agreements ⁽¹⁾	$	860,000		$	—		$	856,025		$	—		$	856,025

Restricted equity securities, at cost	$	78,580		$	—		$	78,580		$	—		$	78,580
Loans held-for-sale	$	434		$	—		$	434		$	—		$	434
Loans held-for-investment, net	$	34,420,252		$	—		$	—		$	35,021,300		$	35,021,300

Mortgage servicing rights	$	6,068		$	—		$	—		$	8,199		$	8,199
Accrued interest receivable	$	144,599		$	—		$	144,599		$	—		$	144,599
Financial liabilities:

Demand, checking, savings and money market deposits	$	27,109,951		$	—		$	27,109,951		$	—		$	27,109,951
Time deposits	$	10,214,308		$	—		$	10,208,895		$	—		$	10,208,895
Short-term borrowings	$	28,669		$	—		$	28,669		$	—		$	28,669
FHLB advances	$	745,915		$	—		$	755,371		$	—		$	755,371
Repurchase agreements ⁽¹⁾	$	200,000		$	—		$	232,597		$	—		$	232,597
Long-term debt	$	147,101		$	—		$	152,641		$	—		$	152,641
Accrued interest payable	$	27,246		$	—		$	27,246		$	—		$	27,246

(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 June 30, 2020, none of the $300.0 million of gross repurchase agreements were eligible for netting against gross resale agreements. Out of $450.0 million of gross repurchase agreements, $250.0 million were eligible for netting against gross resale agreements as of December 31, 2019

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 Level 3 fair value measurements

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of June 30, 2020 and December 31, 2019, respectively. 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⁾
June 30, 2020
Derivative assets:
Equity contracts	$	316	Black-Scholes option pricing model	Equity volatility	58% — 70%	63%
				Liquidity discount	47%	47%
December 31, 2019
Derivative assets:
Equity contracts	$	421	Black-Scholes option pricing model	Equity volatility	39% — 44%	42%
				Liquidity discount	47%	47%

(1)Weighted-average is calculated based on fair value of equity warrants as of June 30, 2020 and December 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 Level 3 fair value measurements

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of June 30, 2020 and December 31, 2019:



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs ⁽¹⁾
June 30, 2020
Individually evaluated loans ⁽²⁾	$	29,949	Discounted cash flows	Discount	4% — 15%	10%
	$	5,658	Fair value of collateral	Discount	10% — 63%	19%
	$	21,452	Fair value of collateral	Contract value	NM	NM
	$	52,345	Fair value of property	Selling cost	8%	8%


Investments in tax credit and other investments, net	$	6,216	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM


December 31, 2019
Non-PCI impaired loans	$	27,841	Discounted cash flows	Discount	4% — 15%	14%

	$	1,014	Fair value of collateral	Discount	8% — 20%	19%
	$	20,824	Fair value of collateral	Contract value	NM	NM

OREO	$	125	Fair value of property	Selling cost	8%	8%
Other nonperforming assets	$	1,167	Fair value of collateral	Contract value	NM	NM
Investments in tax credit and other investments, net	$	3,076	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM

NM — Not meaningful.

(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of June 30, 2020 and December 31, 2019.

(2)The Company adopted ASU 2016-13 using the prospective transition approach for PCD loans that were previously accounted for as PCI loans. Total individually evaluated loans as of June 30, 2020 considers PCD loans, if impaired, whereas the impaired loans as of December 31, 2019 include only non-PCI loans.