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

9 Months Ended

Sep. 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 September 30, 2019 and December 31, 2018:




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 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	$	426,113	$	—		$	—	$	426,113
U.S. government agency and U.S. government sponsored enterprise debt securities	—		691,368			—		691,368
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		549,793			—		549,793
Residential mortgage-backed securities	—		925,387			—		925,387
Municipal securities	—		78,159			—		78,159
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		70,243			—		70,243
Residential mortgage-backed securities	—		31,495			—		31,495
Corporate debt securities	—		11,022			—		11,022
Foreign bonds	—		453,179			—		453,179
Asset-backed securities	—		47,275			—		47,275
Total available-for-sale investment securities	$	426,113	$	2,857,921		$	—	$	3,284,034

Investments in tax credit and other investments:
Equity securities ⁽¹⁾	$	21,737	$	9,987		$	—	$	31,724
Total investments in tax credit and other investments	$	21,737	$	9,987		$	—	$	31,724

Derivative assets:
Interest rate contracts	$	—	$	264,603		$	—	$	264,603
Foreign exchange contracts	—		59,512			—		59,512
Credit contracts	—		4			—		4
Equity contracts	—		1,140			402		1,542
Commodity contracts	—		32,978			—		32,978
Gross derivative assets	$	—	$	358,237		$	402	$	358,639
Netting adjustments ⁽²⁾	$	—	$	(69,328	)	$	—	$	(69,328	)
Net derivative assets	$	—	$	288,909		$	402	$	289,311

Derivative liabilities:
Interest rate contracts	$	—	$	170,917		$	—	$	170,917
Foreign exchange contracts	—		50,828			—		50,828
Credit contracts	—		122			—		122
Commodity contracts	—		41,867			—		41,867
Gross derivative liabilities	$	—	$	263,734		$	—	$	263,734
Netting adjustments ⁽²⁾	$	—	$	(110,720	)	$	—	$	(110,720	)
Net derivative liabilities	$	—	$	153,014		$	—	$	153,014


(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 provides a reconciliation of the beginning and ending balances of these equity warrants for the three and nine months ended September 30, 2019 and 2018:




($ in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,
($ in thousands)	2019		2018			2019			2018
Equity warrants
Beginning balance	$	392	$	648		$	673		$	679
Total gains (losses) included in earnings ⁽¹⁾	10		(7		)	548			161
Issuances	—		31			28			65
Settlements	—		—			(847		)	(233		)
Ending balance	$	402	$	672		$	402		$	672


(1)	Includes unrealized gains (losses) of $10 thousand and $(7) thousand for the three months ended September 30, 2019 and 2018, respectively, and $(225) thousand and $224 thousand for the nine months ended September 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 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 September 30, 2019 and December 31, 2018:




($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of September 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”)	$	—	$	—	$	43,087	$	43,087
Commercial real estate (“CRE”)	—		—		764		764
Total non-PCI impaired loans	$	—	$	—	$	43,851	$	43,851
OREO ⁽¹⁾	$	—	$	—	$	590	$	590
Investments in tax credit and other investments, net	$	—	$	—	$	830	$	830


(1)	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.




($ in thousands)	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 recognized, nonrecurring basis

The following table presents the increase (decrease) in value of assets for which a fair value adjustment has been recognized for the three and nine months ended September 30, 2019 and 2018, related to assets that were still held at those dates:




($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2019			2018			2019			2018
Non-PCI impaired loans:
Commercial:
C&I	$	(20,484	)	$	(8,508	)	$	(43,109	)	$	(7,204	)
CRE	2			50			6			61
Consumer:
Single-family residential	—			—			—			15
Home equity lines of credit (“HELOCs”)	—			(188		)	—			(262		)
Total non-PCI impaired loans	$	(20,482	)	$	(8,646	)	$	(43,103	)	$	(7,390	)
OREO ⁽¹⁾	$	(1,020	)	$	—		$	(1,023	)	$	—
Investments in tax credit and other investments, net	$	(1,703	)	$	—		$	(11,573	)	$	—

(1)

Includes losses recorded within the first 90 days after transferring a loan to OREO.

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 September 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)	September 30, 2019
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,042,281	$	3,042,281	$	—	$	—	$	3,042,281
Interest-bearing deposits with banks	$	160,423	$	—	$	160,423	$	—	$	160,423
Resale agreements ⁽¹⁾	$	860,000	$	—	$	857,935	$	—	$	857,935
Restricted equity securities, at cost	$	78,334	$	—	$	78,334	$	—	$	78,334
Loans held-for-sale	$	294	$	—	$	294	$	—	$	294
Loans held-for-investment, net	$	33,679,400	$	—	$	—	$	33,998,189	$	33,998,189
Mortgage servicing rights	$	6,380	$	—	$	—	$	8,412	$	8,412
Accrued interest receivable	$	143,804	$	—	$	143,804	$	—	$	143,804
Financial liabilities:
Demand, checking, savings and money market deposits	$	26,139,319	$	—	$	26,139,319	$	—	$	26,139,319
Time deposits	$	10,520,207	$	—	$	10,519,103	$	—	$	10,519,103
Short-term borrowings	$	47,689	$	—	$	47,689	$	—	$	47,689
FHLB advances	$	745,494	$	—	$	754,902	$	—	$	754,902
Repurchase agreements ⁽¹⁾	$	50,000	$	—	$	85,028	$	—	$	85,028
Long-term debt	$	147,033	$	—	$	145,923	$	—	$	145,923
Accrued interest payable	$	24,573	$	—	$	24,573	$	—	$	24,573




($ 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 September 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 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 September 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⁾
September 30, 2019
Derivative assets:
Equity warrants	$	402	Black-Scholes option pricing model	Equity volatility	45% — 56%	54%
				Liquidity discount	47%	47%
December 31, 2018
Derivative assets:
Equity warrants	$	673	Black-Scholes option pricing model	Equity volatility	49% — 52%	51%
				Liquidity discount	47%	47%

(1)

Weighted-average is calculated based on fair value of equity warrants as of September 30, 2019 and December 31, 2018.

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 September 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⁾
September 30, 2019
Non-PCI impaired loans	$	4,407	Discounted cash flows	Discount	4% — 12%	7%
	$	14,094	Fair value of collateral	Discount	20% — 50%	34%
	$	25,350	Fair value of collateral	Contract value	NM	NM
OREO	$	590	Fair value of property	Selling cost	8%	8%
Investments in tax credit and other investments, net	$	830	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%
	$	2,751	Fair value of collateral	Discount	15% — 50%	21%
	$	11,499	Fair value of collateral	Contract value	NM	NM
	$	1,687	Fair value of property	Selling cost	8%	8%

NM — Not meaningful.

(1)

Weighted-average is based on the relative fair value of the respective assets as of September 30, 2019 and December 31, 2018.