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

3 Months Ended

Mar. 31, 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 March 31, 2020 and December 31, 2019:




($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2020
($ 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
AFS debt securities:
U.S. Treasury securities	$	51,428	$	—		$	—	$	51,428
U.S. government agency and U.S. government- sponsored enterprise debt securities	—		518,408			—		518,408
U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		697,948			—		697,948
Residential mortgage-backed securities	—		1,352,367			—		1,352,367
Municipal securities	—		309,626			—		309,626
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		87,114			—		87,114
Residential mortgage-backed securities	—		62,134			—		62,134
Corporate debt securities	—		10,963			—		10,963
Foreign bonds	—		284,521			—		284,521
Asset-backed securities	—		61,556			—		61,556
Collateralized loan obligations (“CLOs”)	—		259,878			—		259,878
Total AFS debt securities	$	51,428	$	3,644,515		$	—	$	3,695,943

Investments in tax credit and other investments:
Equity securities ⁽¹⁾	$	22,195	$	8,135		$	—	$	30,330
Total investments in tax credit and other investments	$	22,195	$	8,135		$	—	$	30,330

Derivative assets:
Interest rate contracts	$	—	$	605,122		$	—	$	605,122
Foreign exchange contracts	—		64,383			—		64,383
Credit contracts	—		8			—		8
Equity contracts	—		415			713		1,128
Commodity contracts	—		163,563			—		163,563
Gross derivative assets	$	—	$	833,491		$	713	$	834,204
Netting adjustments ⁽²⁾	$	—	$	(178,774	)	$	—	$	(178,774	)
Net derivative assets	$	—	$	654,717		$	713	$	655,430

Derivative liabilities:
Interest rate contracts	$	—	$	403,351		$	—	$	403,351
Foreign exchange contracts	—		55,658			—		55,658
Credit contracts	—		218			—		218
Commodity contracts	—		199,288			—		199,288
Gross derivative liabilities	$	—	$	658,515		$	—	$	658,515
Netting adjustments ⁽²⁾	$	—	$	(243,101	)	$	—	$	(243,101	)
Net derivative liabilities	$	—	$	415,414		$	—	$	415,414


(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
($ 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
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.

(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.

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 months ended March 31, 2020 and 2019:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2020		2019
Equity Contracts
Beginning balance	$	421	$	673
Total gains (losses) included in earnings ⁽¹⁾	292		(231		)
Ending balance	$	713	$	442


(1)	Includes unrealized gains (losses) of $292 thousand and $(43) thousand for the three months ended March 31, 2020 and 2019, 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 March 31, 2020 and December 31, 2019:




($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of March 31, 2020
($ 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
Impaired loans ⁽¹⁾:
Commercial:
C&I	$	—	$	—	$	28,877	$	28,877
CRE:
CRE	—		—		735		735
Total commercial	—		—		29,612		29,612
Consumer:
Residential mortgage:
HELOCs	—		—		1,798		1,798
Other consumer	—		—		2,491		2,491
Total consumer	—		—		4,289		4,289
Total impaired loans	$	—	$	—	$	33,901	$	33,901
Investments in tax credit and other investments, net	$	—	$	—	$	3,076	$	3,076
Other nonperforming assets	$	—	$	—	$	867	$	867




($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 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:
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


(1)	The Company adopted ASU 2016-13 using the prospective transition approach for PCD loans that were previously accounted for as PCI loans. Total impaired loans as of March 31, 2020 considers PCD loans, if impaired, whereas the impaired loans as of December 31, 2019 includes 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 fair value adjustment has been recognized for the three months ended March 31, 2020 and 2019, related to assets that were still held as of those dates:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2020			2019
Impaired loans:	Total Impaired Loans ⁽¹⁾			Non-PCI Impaired Loans
Commercial:
C&I	$	(21,501	)	$	(2,734	)
CRE:
CRE	(5		)	2
Total commercial	(21,506		)	(2,732		)
Consumer:
Residential mortgage:
HELOCs	(193		)	(78		)
Other consumer	2,491			—
Total consumer	2,298			(78		)
Total impaired loans	$	(19,208	)	$	(2,810	)
Investments in tax credit and other investments, net	$	150		$	(6,978	)
Other nonperforming assets	$	(300	)	$	—

(1)

The Company adopted ASU 2016-13 using the prospective transition approach for PCD loans that were previously accounted for as PCI loans. Total impaired loans during the three months ended March 31, 2020 considers PCD loans, if impaired, whereas impaired loans during the three months ended March 31, 2019 includes 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 March 31, 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)	March 31, 2020
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,080,042	$	3,080,042	$	—	$	—	$	3,080,042
Interest-bearing deposits with banks	$	293,509	$	—	$	293,509	$	—	$	293,509
Resale agreements ⁽¹⁾	$	860,000	$	—	$	867,872	$	—	$	867,872
Restricted equity securities, at cost	$	78,745	$	—	$	78,745	$	—	$	78,745
Loans held-for-sale	$	1,594	$	—	$	1,594	$	—	$	1,594
Loans held-for-investment, net	$	35,336,390	$	—	$	—	$	35,736,331	$	35,736,331
Mortgage servicing rights	$	5,711	$	—	$	—	$	7,926	$	7,926
Accrued interest receivable	$	148,294	$	—	$	148,294	$	—	$	148,294
Financial liabilities:
Demand, checking, savings and money market deposits	$	28,720,425	$	—	$	28,720,425	$	—	$	28,720,425
Time deposits	$	9,966,533	$	—	$	9,992,060	$	—	$	9,992,060
Short-term borrowings	$	66,924	$	—	$	66,924	$	—	$	66,924
FHLB advances	$	646,336	$	—	$	657,859	$	—	$	657,859
Repurchase agreements ⁽¹⁾	$	450,000	$	—	$	470,230	$	—	$	470,230
Long-term debt	$	147,169	$	—	$	152,942	$	—	$	152,942
Accrued interest payable	$	25,209	$	—	$	25,209	$	—	$	25,209




($ in thousands)	December 31, 2019
($ in thousands)	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. Out of gross repurchase agreements of $450.0 million, $0.0 million and $250.0 million as of March 31, 2020 and December 31, 2019, respectively, 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 March 31, 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⁾
March 31, 2020
Derivative assets:
Equity contracts	$	713	Black-Scholes option pricing model	Equity volatility	72% — 86%	82%
				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 March 31, 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 March 31, 2020 and December 31, 2019:




($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique(s)	Unobservable Input(s)	Range of Input(s)	Weighted- Average ⁽¹⁾
March 31, 2020
Impaired loans ⁽¹⁾	$	25,140	Discounted cash flows	Discount	4% — 15%	12%
	$	5,712	Fair value of collateral	Discount	8% — 9%	9%
	$	2,491	Fair value of collateral	Contract value	NM	NM
	$	558	Fair value of property	Selling cost	8%	8%
Other nonperforming assets	$	867	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
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%
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)	Presented on a total impaired loan basis due to the adoption of ASU 2016-13 PCD loans (formerly, PCI loans) are assessed for impairment in the same manner as non-PCD loans.

(2)

Weighted-average is based on the relative fair value of the respective assets as of March 31, 2020 and December 31, 2019.