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Fair value measurements (Tables)
9 Months Ended
Sep. 30, 2012
Assets and Liabilities Measured at Estimated Fair Value on Recurring Basis

The following tables present assets and liabilities at September 30, 2012 and December 31, 2011 measured at estimated fair value on a recurring basis:

 

     Fair value
measurements at
September 30,
2012
     Level 1 (a)      Level 2 (a)      Level 3  
     (in thousands)  

Trading account assets

   $ 526,844         55,391         471,453         —     

Investment securities available for sale:

           

U.S. Treasury and federal agencies

     56,345         —           56,345         —     

Obligations of states and political subdivisions

     33,980         —           33,980         —     

Mortgage-backed securities:

           

Government issued or guaranteed

     3,748,252         —           3,748,252         —     

Privately issued residential

     1,055,068         —           —           1,055,068   

Privately issued commercial

     10,568         —           —           10,568   

Collateralized debt obligations

     57,201         —           —           57,201   

Other debt securities

     109,405         —           109,405         —     

Equity securities

     113,059         106,789         6,270         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     5,183,878         106,789         3,954,252         1,122,837   
  

 

 

    

 

 

    

 

 

    

 

 

 

Real estate loans held for sale

     976,083         —           976,083         —     

Other assets (b)

     226,554         —           156,124         70,430   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 6,913,359         162,180         5,557,912         1,193,267   
  

 

 

    

 

 

    

 

 

    

 

 

 

Trading account liabilities

   $ 424,312         —           424,312         —     

Other liabilities (b)

     39,798         —           39,713         85   
  

 

 

    

 

 

    

 

 

    

 

 

 

1Total liabilities

   $ 464,110         —           464,025         85   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair value
measurements at
December 31,
2011
     Level 1 (a)      Level 2 (a)      Level 3  
     (in thousands)  

Trading account assets

   $ 561,834         53,165         508,669         —     

Investment securities available for sale:

           

U.S. Treasury and federal agencies

     70,723         —           70,723         —     

Obligations of states and political subdivisions

     40,269         —           40,269         —     

Mortgage-backed securities:

           

Government issued or guaranteed

     4,521,233         —           4,521,233         —     

Privately issued residential

     1,136,256         —           —           1,136,256   

Privately issued commercial

     15,029         —           —           15,029   

Collateralized debt obligations

     52,500         —           —           52,500   

Other debt securities

     176,845         —           176,845         —     

Equity securities

     215,705         205,587         10,118         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     6,228,560         205,587         4,819,188         1,203,785   
  

 

 

    

 

 

    

 

 

    

 

 

 

Real estate loans held for sale

     371,437         —           371,437         —     

Other assets (b)

     156,853         —           148,862         7,991   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 7,318,684         258,752         5,848,156         1,211,776   
  

 

 

    

 

 

    

 

 

    

 

 

 

Trading account liabilities

   $ 434,559         —           434,559         —     

Other liabilities (b)

     6,126         —           5,058         1,068   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 440,685         —           439,617         1,068   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the three months and nine months ended September 30, 2012 and 2011.
(b) Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2), commitments to sell real estate loans (Level 2) and commitments to originate real estate loans to be held for sale (Level 3).
Changes in Level 3 Assets and Liabilities Measured at Estimated Fair Value on a Recurring Basis

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended September 30, 2012 were as follows:

 

    Investment securities available for sale        
    Privately issued
residential
mortgage-backed

securities
    Privately issued
commercial
mortgage-backed

securities
    Collateralized
debt
obligations
    Other assets
and other
liabilities
 
    (in thousands)  

Balance – June 30, 2012

  $ 1,068,392      $ 12,127      $ 55,098      $ 34,051   

Total gains (losses) realized/unrealized:

       

Included in earnings

    (5,672 )(a)      —          —          84,864 (b) 

Included in other comprehensive income

    39,963 (e)      640 (e)      3,297 (e)      —     

Settlements

    (47,615     (2,199     (1,194     —     

Transfers in and/or out of Level 3 (c)

    —          —          —          (48,570 )(d) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance – September 30, 2012

  $ 1,055,068      $ 10,568      $ 57,201      $ 70,345   
 

 

 

   

 

 

   

 

 

   

 

 

 

Changes in unrealized gains (losses) included in earnings related to assets still held at September 30, 2012

  $ (5,672 )(a)    $ —        $ —        $ 63,357 (b) 
 

 

 

   

 

 

   

 

 

   

 

 

 

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended September 30, 2011 were as follows:

 

    Investment securities available for sale        
    Privately issued
residential
mortgage-backed

securities
    Privately issued
commercial
mortgage-backed

securities
    Collateralized
debt

obligations
    Other assets
and other

liabilities
 
    (in thousands)  

Balance – June 30, 2011

  $ 1,306,202      $ 17,233      $ 61,601      $ 13,171   

Total gains (losses) realized/unrealized:

       

Included in earnings

    (9,642 )(a)      —          —          13,565 (b) 

Included in other comprehensive income

    (4,030 )(e)      1,581 (e)      (9,482 )(e)      —     

Settlements

    (77,452     (1,985     (765     —     

Transfers in and/or out of Level 3 (c)

    —          —          —          (18,799 )(d) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance – September 30, 2011

  $ 1,215,078      $ 16,829      $ 51,354      $ 7,937   
 

 

 

   

 

 

   

 

 

   

 

 

 

Changes in unrealized gains (losses) included in earnings related to assets still held at September 30, 2011

  $ (9,642 )(a)    $ —        $ —        $ 5,926 (b) 
 

 

 

   

 

 

   

 

 

   

 

 

 

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the nine months ended September 30, 2012 were as follows:

 

    Investment securities available for sale        
    Privately issued
residential
mortgage-backed

securities
    Privately issued
commercial
mortgage-backed

securities
    Collateralized
debt

obligations
    Other assets  and
other

liabilities
 
    (in thousands)  

Balance – January 1, 2012

  $ 1,136,256      $ 15,029      $ 52,500      $ 6,923   

Total gains (losses) realized/unrealized:

       

Included in earnings

    (27,976 )(a)      —          —          157,381 (b) 

Included in other comprehensive income

    87,646 (e)      1,751 (e)      7,008 (e)      —     

Settlements

    (140,858     (6,212     (2,307     —     

Transfers in and/or out of Level 3 (c)

    —          —          —          (93,959 )(d) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance – September 30, 2012

  $ 1,055,068      $ 10,568      $ 57,201      $ 70,345   
 

 

 

   

 

 

   

 

 

   

 

 

 

Changes in unrealized gains (losses) included in earnings related to assets still held at September 30, 2012

  $ (27,976 )(a)    $ —        $ —        $ 70,187 (b) 
 

 

 

   

 

 

   

 

 

   

 

 

 

The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the nine months ended September 30, 2011 were as follows:

 

    Investment securities available for sale        
    Privately issued
residential
mortgage-backed

securities
    Privately issued
commercial
mortgage-backed

securities
    Collateralized
debt
obligations
    Other assets  and
other

liabilities
 
    (in thousands)  

Balance – January 1, 2011

  $ 1,435,561      $ 22,407      $ 110,756      $ 2,244   

Total gains (losses) realized/unrealized:

       

Included in earnings

    (41,713 )(a)      —          —          56,809 (b) 

Included in other comprehensive income

    95,526 (e)      99 (e)      (2,276 )(e)      —     

Purchases

    —          —          50,790        —     

Sales

    —          —          (105,643     —     

Settlements

    (274,296     (5,677     (2,273     —     

Transfers in and/or out of Level 3 (c)

    —          —          —          (51,116 )(d) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance – September 30, 2011

  $ 1,215,078      $ 16,829      $ 51,354      $ 7,937   
 

 

 

   

 

 

   

 

 

   

 

 

 

Changes in unrealized gains (losses) included in earnings related to assets still held at September 30, 2011

  $ (41,713 )(a)    $ —        $ —        $ 7,932 (b) 
 

 

 

   

 

 

   

 

 

   

 

 

 
(a) Reported as an other-than-temporary impairment loss in the consolidated statement of income or as gain (loss) on bank investment securities.

 

(b) Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of commitment issuances and expirations.

 

(c) The Company’s policy for transfers between fair value levels is to recognize the transfer as of the actual date of the event or change in circumstances that caused the transfer.

 

(d) Transfers out of Level 3 consist of interest rate locks transferred to closed loans.

 

(e) Reported as net unrealized gains on investment securities in the consolidated statement of comprehensive income.
Quantitative Information Related to Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used in the fair value measurements for Level 3 assets and liabilities at September 30, 2012:

 

     Fair value at
September 30, 2012
    

Valuation

technique

  

Unobservable

input/assumptions

   Range
(weighted-
average)

Recurring fair value measurements

           

Privately issued mortgage–backed securities

   $ 1,065,636       Discounted cash flow    Probability of default    1%-40% (18%)
         Loss severity    32%-79% (49%)

Colateralized debt obligations

     57,201       Discounted cash flow    Probability of default    3%-65% (15%)
         Loss severity    100%

Net other assets (liabilities)(a)

     70,345       Discounted cash flow    Commitment expirations    0%-73% (22%)
  

 

 

          

Total level 3 assets, net of liabilities

   $ 1,193,182            
  

 

 

          

 

(a) Other level 3 assets (liabilities) consist of commitments to originate real estate loans.
Carrying Amounts and Estimated Fair Value for Financial Instrument Assets (Liabilities)

The carrying amounts and estimated fair value for financial instrument assets (liabilities) are presented in the following table:

 

     September 30, 2012  
     Carrying
amount
    Estimated
fair value
    Level 1      Level 2     Level 3  
     (in thousands)  

Financial assets:

           

Cash and cash equivalents

   $ 1,622,928      $ 1,622,928      $ 1,548,290       $ 74,638      $ —     

Interest-bearing deposits at banks

     411,994        411,994        —           411,994        —     

Trading account assets

     526,844        526,844        55,391         471,453        —     

Investment securities

     6,624,004        6,577,450        106,789         5,192,015        1,278,646   

Loans and leases:

           

Commercial loans and leases

     16,704,575        16,482,866        —           —          16,482,866   

Commercial real estate loans

     24,970,416        24,703,443        —           175,518        24,527,925   

Residential real estate loans

     10,808,220        10,992,318        —           7,727,137        3,265,181   

Consumer loans

     11,628,744        11,512,448        —           —          11,512,448   

Allowance for credit losses

     (921,223     —          —           —          —     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Loans and leases, net

     63,190,732        63,691,075        —           7,902,655        55,788,420   

Accrued interest receivable

     244,021        244,021        —           244,021        —     

Financial liabilities:

           

Noninterest-bearing deposits

   $ (22,968,401   $ (22,968,401   $ —         $ (22,968,401   $ —     

Savings deposits and NOW accounts

     (34,663,695     (34,663,695     —           (34,663,695     —     

Time deposits

     (4,972,409     (4,999,049     —           (4,999,049     —     

Deposits at Cayman Islands office

     (1,402,753     (1,402,753     —           (1,402,753     —     

Short-term borrowings

     (592,154     (592,154     —           (592,154     —     

Long-term borrowings

     (4,969,536     (5,090,619     —           (5,090,619     —     

Accrued interest payable

     (78,591     (78,591     —           (78,591     —     

Trading account liabilities

     (424,312     (424,312     —           (424,312     —     

Other financial instruments:

           

Commitments to originate real estate loans for sale

   $ 70,345      $ 70,345      $ —         $ —        $ 70,345   

Commitments to sell real estate loans

     (36,809     (36,809     —           (36,809     —     

Other credit-related commitments

     (112,713     (112,713     —           —          (112,713

Interest rate swap agreements used for interest rate risk management

     153,220        153,220        —           153,220        —     

 

     December 31, 2011  
     Carrying
amount
    Estimated
fair value
 
     (in thousands)  

Financial assets:

    

Cash and cash equivalents

   $ 1,452,397      $ 1,452,397   

Interest-bearing deposits at banks

     154,960        154,960   

Trading account assets

     561,834        561,834   

Investment securities

     7,673,154        7,608,008   

Loans and leases:

    

Commercial loans and leases

     15,734,436        15,507,342   

Commercial real estate loans

     24,411,114        24,024,585   

Residential real estate loans

     7,923,165        7,782,935   

Consumer loans

     12,027,290        11,869,813   

Allowance for credit losses

     (908,290     —     
  

 

 

   

 

 

 

Loans and leases, net

     59,187,715        59,184,675   

Accrued interest receivable

     222,618        222,618   

Financial liabilities:

    

Noninterest-bearing deposits

   $ (20,017,883   $ (20,017,883

Savings deposits and NOW accounts

     (32,913,309     (32,913,309

Time deposits

     (6,107,530     (6,133,806

Deposits at Cayman Islands office

     (355,927     (355,927

Short-term borrowings

     (782,082     (782,082

Long-term borrowings

     (6,686,226     (6,720,174

Accrued interest payable

     (67,900     (67,900

Trading account liabilities

     (434,559     (434,559

Other financial instruments:

    

Commitments to originate real estate loans for sale

   $ 6,923      $ 6,923   

Commitments to sell real estate loans

     (3,498     (3,498

Other credit-related commitments

     (109,828     (109,828

Interest rate swap agreements used for interest rate risk management

     147,302        147,302