Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Hierarchy Tables Present Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2015:



(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2015
Assets
Available-for-sale securities:
U.S. Treasury securities	$	11,678,035	$	—	$	—	$	11,678,035
U.S. agency debentures	—		2,690,029		—		2,690,029
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations - fixed rate	—		1,399,279		—		1,399,279
Agency-issued collateralized mortgage obligations - variable rate	—		607,936		—		607,936
Equity securities	4,517		952		—		5,469
Total available-for-sale securities	11,682,552		4,698,196		—		16,380,748
Non-marketable and other securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value (1)	—		—		—		152,237
Other venture capital investments (2)	—		—		2,040		2,040
Other securities (2)	548		—		—		548
Total non-marketable and other securities (fair value accounting)	548		—		2,040		154,825
Other assets:
Interest rate swaps	—		2,768		—		2,768
Foreign exchange forward and option contracts	—		31,237		—		31,237
Equity warrant assets	—		1,937		135,168		137,105
Client interest rate derivatives	—		3,973		—		3,973
Total assets	$	11,683,100	$	4,738,111	$	137,208	$	16,710,656
Liabilities
Foreign exchange forward and option contracts	$	—	$	26,353	$	—	$	26,353
Client interest rate derivatives	—		4,384		—		4,384
Total liabilities	$	—	$	30,737	$	—	$	30,737

(1)

In accordance with the accounting standard (ASU 2015-07, Fair Value Measurement (Topic 820)), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.


(2)	Included in Level 1 and Level 3 assets are $0.4 million and $1.8 million, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2014:



(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2014
Assets
Available-for-sale securities:
U.S. Treasury securities	$	7,302,273	$	—	$	—	$	7,302,273
U.S. agency debentures	—		3,561,556		—		$	3,561,556
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations - fixed rate	—		1,884,843		—		1,884,843
Agency-issued collateralized mortgage obligations - variable rate	—		784,475		—		784,475
Equity securities	4,290		3,218		—		7,508
Total available-for-sale securities	7,306,563		6,234,092		—		13,540,655
Non-marketable and other securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value (1)	—		—		—		1,130,882
Other venture capital investments (2)	—		—		71,204		71,204
Other securities (2)	108,251		—		—		108,251
Total non-marketable and other securities (fair value accounting)	108,251		—		71,204		1,310,337
Other assets:
Interest rate swaps	—		4,609		—		4,609
Foreign exchange forward and option contracts	—		34,231		—		34,231
Equity warrant assets	—		1,906		114,698		116,604
Client interest rate derivatives	—		2,546		—		2,546
Total assets	$	7,414,814	$	6,277,384	$	185,902	$	15,008,982
Liabilities
Foreign exchange forward and option contracts	$	—	$	28,363	$	—	$	28,363
Client interest rate derivatives	—		2,748		—		2,748
Total liabilities	$	—	$	31,111	$	—	$	31,111

(1)


(2)	Included in Level 1 and Level 3 assets are $100 million and $69 million, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

Additional Information about Level 3 Assets Measured at Fair Value on a Recurring Basis

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for 2015, 2014 and 2013, respectively:



(Dollars in thousands)	Beginning Balance		Total Realized and Unrealized Gains, net Included in Income		Purchases		Sales			Issuances		Distributions and Other Settlements			Transfers Into Level 3		Transfers Out of Level 3			Ending Balance
Year ended December 31, 2015:
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	3,291	$	1,192	$	—	$	(2,356	)	$	—	$	(87	)	$	—	$	—		$	2,040
Total non-marketable and other securities (fair value accounting) (2)	3,291		1,192		—		(2,356		)	—		(87		)	—		—			2,040
Other assets:
Equity warrant assets (3)	114,698		71,402		—		(61,044		)	12,471		63			—		(2,422		)	135,168
Total assets	$	117,989	$	72,594	$	—	$	(63,400	)	$	12,471	$	(24	)	$	—	$	(2,422	)	$	137,208
Year ended December 31, 2014:
Non-marketable and other securities (fair value accounting):
Other venture capital investments	$	32,839	$	12,793	$	51,407	$	(20,362	)	$	—	$	(5,347	)	$	—	$	(126	)	$	71,204
Other securities (fair value accounting)	319,249		103,864		—		(46,840		)	—		3,863			—		(380,136		)	—
Total non-marketable and other securities (fair value accounting) (2)	352,088		116,657		51,407		(67,202		)	—		(1,484		)	—		(380,262		)	71,204
Other assets:
Equity warrant assets (3)	99,891		71,516		—		(70,875		)	15,541		345			—		(1,720		)	114,698
Total assets	$	451,979	$	188,173	$	51,407	$	(138,077	)	$	15,541	$	(1,139	)	$	—	$	(381,982	)	$	185,902
Year ended December 31, 2013:
Non-marketable and other securities (fair value accounting):
Other venture capital investments	$	127,091	$	5,745	$	2,712	$	(1,224	)	$	—	$	(97,924	)	$	—	$	(3,561	)	$	32,839
Other securities (fair value accounting)	—		222,368		—		—			—		96,881			—		—			319,249
Total non-marketable and other securities (fair value accounting) (2)	127,091		228,113		2,712		(1,224		)	—		(1,043		)	—		(3,561		)	352,088
Other assets:
Equity warrant assets (3)	66,129		22,929		—		(16,680		)	10,540		98			24,217		(7,342		)	99,891
Total assets	$	193,220	$	251,042	$	2,712	$	(17,904	)	$	10,540	$	(945	)	$	24,217	$	(10,903	)	$	451,979


(1)	Beginning balance was adjusted to conform with our adoption of the new accounting standards (ASU 2015-02), Amendments to the Consolidation Analysis (Topic 820).


(2)	Unrealized gains are recorded on the line item “gains on investment securities, net”, a component of noninterest income.


(3)	Realized and unrealized gains are recorded on the line item “gains on derivative instruments, net”, a component of noninterest income.

Unrealized Gains Included in Earnings Attributable to Level 3 Assets Held

The following table presents the amount of unrealized gains (losses) included in earnings (which is inclusive of noncontrolling interest) attributable to Level 3 assets still held at December 31, 2015 and December 31, 2014, respectively:



	Year ended December 31,
(Dollars in thousands)	2015			2014
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	(177	)	$	3,044
Other assets:
Equity warrant assets (2)	32,576			36,516
Total unrealized gains, net	$	32,399		$	39,560
Unrealized (losses) gains attributable to noncontrolling interests	$	(158	)	$	2,914


(1)	Unrealized gains are recorded on the line item “gains on investment securities, net”, a component of noninterest income.


(2)	Unrealized gains are recorded on the line item “gains on derivative instruments, net”, a component of noninterest income.

Quantitative Information About Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for certain of our Level 3 fair value measurements at December 31, 2015 and 2014. We have not included in this table our venture capital and private equity fund investments (fair value accounting) as we use net asset value per share (as obtained from the general partners of the investments) as a practical expedient to determine fair value.



(Dollars in thousands)	Fair Value		Valuation Technique	Significant Unobservable Inputs	Weighted Average
December 31, 2015:
Other venture capital investments (fair value accounting)	$	2,040	Private company equity pricing	(1)	(1)
Equity warrant assets (public portfolio)	1,786		Modified Black-Scholes option pricing model	Volatility	38.1	%
				Risk-Free interest rate	2.1
				Sales restrictions discount (2)	18.0
Equity warrant assets (private portfolio)	133,382		Modified Black-Scholes option pricing model	Volatility	36.0
				Risk-Free interest rate	1.1
				Marketability discount (3)	16.6
				Remaining life assumption (4)	45.0
December 31, 2014:
Other venture capital investments (fair value accounting)	$	71,204	Private company equity pricing	(1)	(1)
Equity warrant assets (public portfolio)	1,681		Modified Black-Scholes option pricing model	Volatility	42.6	%
				Risk-Free interest rate	1.7
				Sales restrictions discount (2)	17.8
Equity warrant assets (private portfolio)	113,017		Modified Black-Scholes option pricing model	Volatility	38.3
				Risk-Free interest rate	0.9
				Marketability discount (3)	20.0
				Remaining life assumption (4)	45.0

(1)

In determining the fair value of our other venture capital investment portfolio, we evaluate a variety of factors related to each underlying private portfolio company including, but not limited to, actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Additionally, we have ongoing communication with the portfolio companies and venture capital fund managers, to determine whether there is a material change in fair value. These factors are specific to each portfolio company and a weighted average or range of values of the unobservable inputs is not meaningful.


(2)	We adjust quoted market prices of public companies which are subject to certain sales restrictions. Sales restriction discounts generally range from 10 percent to 20 percent depending on the duration of the sales restrictions which typically range from 3 to 6 months.

(3)

Our marketability discount is applied to all private company warrants to account for a general lack of liquidity due to the private nature of the associated underlying company. The quantitative measure used is based on long-run averages and is influenced over time by various factors, including market conditions. On a quarterly basis, a sensitivity analysis is performed on our marketability discount.

(4)

We adjust the contractual remaining term of private company warrants based on our best estimate of the actual remaining life, which we determine by utilizing historical data on cancellations and exercises. At December 31, 2015, the weighted average contractual remaining term was 5.7 years, compared to our estimated remaining life of 2.6 years. On a quarterly basis, a sensitivity analysis is performed on our remaining life assumption.

Summary of Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at December 31, 2015 and 2014:



			Estimated Fair Value
(Dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3
December 31, 2015:
Financial assets:
Cash and cash equivalents	$	1,503,257	$	1,503,257	$	1,503,257	$	—	$	—
Held-to-maturity securities	8,790,963		8,758,622		—		8,758,622		—
Non-marketable securities (cost and equity method accounting) not measured at net asset value	114,795		117,172		—		—		117,172
Non-marketable securities (cost and equity method) accounting measured at net asset value (1)	250,970		364,799		—		—		—
Net commercial loans	14,763,302		14,811,588		—		—		14,811,588
Net consumer loans	1,761,155		1,737,960		—		—		1,737,960
FHLB and FRB stock	56,991		56,991		—		—		56,991
Accrued interest receivable	107,604		107,604		—		107,604		—
Financial liabilities:
Short-term FHLB advances	638,000		638,000		638,000		—		—
Federal funds purchased	135,000		135,000		135,000		—		—
Other short-term borrowings	1,900		1,900		1,900		—		—
Non-maturity deposits (2)	39,072,297		39,072,297		39,072,297		—		—
Time deposits	70,479		70,347		—		70,347		—
3.50% Senior Notes	346,667		333,648		—		333,648		—
5.375% Senior Notes	347,016		384,216		—		384,216		—
6.05% Subordinated Notes (3)	48,350		49,820		—		49,820		—
7.0% Junior Subordinated Debentures	54,669		52,905		—		52,905		—
Accrued interest payable	12,058		12,058		—		12,058		—
Off-balance sheet financial assets:
Commitments to extend credit	—		26,483		—		—		26,483
December 31, 2014:
Financial assets:
Cash and cash equivalents	$	1,796,062	$	1,796,062	$	1,796,062	$	—	$	—
Held-to-maturity securities	7,421,042		7,415,656		—		7,415,656		—
Non-marketable securities (cost and equity method accounting) not measured at net asset value	108,221		107,451		—		—		107,451
Non-marketable securities (cost and equity method) accounting measured at net asset value (1)	188,427		283,119		—		—		—
Net commercial loans	12,947,869		13,082,487		—		—		13,082,487
Net consumer loans	1,271,048		1,247,336		—		—		1,247,336
FHLB and FRB stock	53,496		53,496		—		—		53,496
Accrued interest receivable	94,180		94,180		—		94,180		—
Financial liabilities:
Other short-term borrowings	7,781		7,781		7,781		—		—
Non-maturity deposits (2)	34,215,372		34,215,372		34,215,372		—		—
Time deposits	128,127		128,107		—		128,107		—
5.375% Senior Notes	346,477		392,616		—		392,616		—
6.05% Subordinated Notes (3)	50,040		53,537		—		53,537		—
7.0% Junior Subordinated Debentures	54,845		52,990		—		52,990		—
Accrued interest payable	6,998		6,998		—		6,998		—
Off-balance sheet financial assets:
Commitments to extend credit	—		29,097		—		—		29,097


(1)	In accordance with the accounting standard (ASU 2015-07, Fair Value Measurement (Topic 820)), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.


(2)	Includes noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits.


(3)	At December 31, 2015 and 2014, included in the carrying value and estimated fair value of our 6.05% Subordinated Notes was $2.8 million and $4.6 million, respectively, related to hedge accounting associated with the notes.

Summary of Estimated Fair Values of Investments and Remaining Unfunded Commitments for Each Major Category of Investments

The following table is a summary of the estimated fair values of these investments and remaining unfunded commitments for each major category of these investments as of December 31, 2015:



(Dollars in thousands)	Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	152,237	$	152,237	$	7,049
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments (2)	85,705		85,705		4,954
Debt funds (2)	21,970		23,080		—
Other investments (2)	22,619		22,619		886
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (2)	120,676		233,395		10,636
Total	$	403,207	$	517,036	$	23,525

(1)

Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds and one of our direct venture funds. These investments represent investments in venture capital and private equity funds that invest primarily in U.S. and global technology and life science/healthcare companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $108 million and $5 million, respectively, attributable to noncontrolling interests. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of terms of the funds.

(2)

Venture capital and private equity fund investments, debt funds, and other fund investments within non-marketable securities (equity and cost method accounting) include funds that invest in or lend money to primarily U.S. and global technology and life science/healthcare companies. It is estimated that we will receive distributions from the funds over the next 10 to 13 years, depending on the age of the funds and any potential extensions of the terms of the funds. It is estimated that we will receive distributions from the funds over the next 10 to 13 years, depending on the age of the funds and any potential extensions of the terms of the funds.