Fair Value Accounting (Tables)

3 Months Ended

Mar. 31, 2018

Gains and Losses from Fair Value Changes Included in Consolidated Statement of Operations

For the three months ended March 31, 2018 and 2017, gains and losses from fair value changes on junior subordinated debt were as follows:



	Changes in Fair Values for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Unrealized Gain/(Loss) on Assets and Liabilities Measured at Fair Value, Net			Interest Income on Securities		Interest Expense on Junior Subordinated Debt			Total Changes Included in Current-Period Earnings			Total Changes Included in OCI
	(in thousands)
Three Months Ended March 31, 2018
Junior subordinated debt	$	1,944		$	—	$	904		$	904		$	1,466
Total	$	1,944		$	—	$	904		$	904		$	1,466
Three Months Ended March 31, 2017
Securities measured at fair value	$	(1	)	$	7	$	—		$	6		$	—
Junior subordinated debt	(1,986		)	—		(749		)	(749		)	(1,229		)
Total	$	(1,987	)	$	7	$	(749	)	$	(743	)	$	(1,229	)

Fair Value of Assets and Liabilities

The fair value of assets and liabilities measured at fair value on a recurring basis was determined using the following inputs as of the periods presented:



	Fair Value Measurements at the End of the Reporting Period Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in thousands)
March 31, 2018
Assets:
Available-for-sale
CDO	$	—	$	19,453	$	—	$	19,453
Commercial MBS issued by GSEs	—		104,973		—		104,973
Corporate debt securities	—		101,676		—		101,676
CRA investments	50,846		—		—		50,846
Preferred stock	93,318		—		—		93,318
Private label residential MBS	—		818,996		—		818,996
Residential MBS issued by GSEs	—		1,626,899		—		1,626,899
Tax-exempt	—		497,921		—		497,921
Trust preferred securities	—		28,617		—		28,617
U.S. government sponsored agency securities	—		60,290		—		60,290
U.S. treasury securities	—		2,473		—		2,473
Total AFS securities	$	144,164	$	3,261,298	$	—	$	3,405,462
Derivative assets (1)	$	—	$	5,387	$	—	$	5,387
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	54,290	$	54,290
Derivative liabilities (1)	—		44,353		—		44,353


(1)	Derivative assets and liabilities relate to interest rate swaps, see "Note 9. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by $18,063 and the net carrying value of subordinated debt is decreased by $21,193 as of March 31, 2018, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.


(2)	Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.



	Fair Value Measurements at the End of the Reporting Period Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in thousands)
December 31, 2017
Assets:
Available-for-sale
CDO	$	—	$	21,857	$	—	$	21,857
Commercial MBS issued by GSEs	—		109,077		—		109,077
Corporate debt securities	—		103,483		—		103,483
CRA investments	50,616		—		—		50,616
Preferred stock	53,196		—		—		53,196
Private label residential MBS	—		868,524		—		868,524
Residential MBS issued by GSEs	—		1,689,295		—		1,689,295
Tax-exempt	—		510,910		—		510,910
Trust preferred securities	—		28,617		—		28,617
U.S. government sponsored agency securities	—		61,462		—		61,462
U.S. treasury securities	—		2,482		—		2,482
Total AFS securities	$	103,812	$	3,395,707	$	—	$	3,499,519
Derivative assets (1)	$	—	$	3,711	$	—	$	3,711
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	56,234	$	56,234
Derivative liabilities (1)	—		55,340		—		55,340


(1)	Derivative assets and liabilities relate to interest rate swaps, see "Note 9. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by $41,919 and the net carrying value of subordinated debt is decreased by $9,959 as of December 31, 2017, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.


(2)	Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.

Change in Level 3 Liabilities Measured at Fair Value on Recurring Basis

For the three months ended March 31, 2018 and 2017, the change in Level 3 liabilities measured at fair value on a recurring basis was as follows:



	Junior Subordinated Debt
	Three Months Ended March 31,
	2018			2017
	(in thousands)
Beginning balance	$	(56,234	)	$	(50,410	)
Transfers into Level 3	—			—
Total gains (losses) for the period
Included in other comprehensive income	1,944			(1,986		)
Ending balance	$	(54,290	)	$	(52,396	)

Assets Measured at Fair Value on Nonrecurring Basis

The following table presents such assets carried on the Balance Sheet by caption and by level within the ASC 825 hierarchy:



	Fair Value Measurements at the End of the Reporting Period Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Active Markets for Similar Assets (Level 2)		Unobservable Inputs (Level 3)
	(in thousands)
As of March 31, 2018;
Impaired loans with specific valuation allowance	$	4,036	$	—	$	—	$	4,036
Impaired loans without specific valuation allowance (1)	63,639		—		—		63,639
Other assets acquired through foreclosure	30,194		—		—		30,194
As of December 31, 2017:
Impaired loans with specific valuation allowance	$	13,709	$	—	$	—	$	13,709
Impaired loans without specific valuation allowance (1)	63,607		—		—		63,607
Other assets acquired through foreclosure	28,540		—		—		28,540


(1)	Net of loan balances with charge-offs of $24.4 million and $15.6 million as of March 31, 2018 and December 31, 2017, respectively.

Estimated Fair Value of Financial Instruments

The estimated fair value of the Company’s financial instruments is as follows:



	March 31, 2018
	Carrying Amount		Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Investment securities:
HTM	$	262,304	$	—	$	255,418	$	—	$	255,418
AFS	3,405,462		144,164		3,261,298		—		3,405,462
Derivative assets	5,387		—		5,387		—		5,387
Loans, net	15,415,794		—		15,254,388		67,675		15,322,063
Accrued interest receivable	80,398		—		80,398		—		80,398
Financial liabilities:
Deposits	$	17,354,538	$	—	$	17,360,147	$	—	$	17,360,147
Customer repurchase agreements	21,676		—		21,676		—		21,676
FHLB advances	300,000		—		300,000		—		300,000
Qualifying debt	363,935		—		331,190		64,842		396,032
Derivative liabilities	44,353		—		44,353		—		44,353
Accrued interest payable	11,540		—		11,540		—		11,540



	December 31, 2017
	Carrying Amount		Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Investment securities:
HTM	$	255,050	$	—	$	256,314	$	—	$	256,314
AFS	3,499,519		103,812		3,395,707		—		3,499,519
Derivative assets	3,711		—		3,711		—		3,711
Loans, net	14,953,885		—		14,577,010		77,316		14,654,326
Accrued interest receivable	85,517		—		85,517		—		85,517
Financial liabilities:									—
Deposits	$	16,972,532	$	—	$	16,980,066	$	—	$	16,980,066
Customer repurchase agreements	26,017		—		26,017		—		26,017
FHLB advances	390,000		—		390,000		—		390,000
Qualifying debt	376,905		—		336,803		67,210		404,013
Derivative liabilities	55,340		—		55,340		—		55,340
Accrued interest payable	16,366		—		16,366		—		16,366

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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