Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

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 September 30, 2012:



(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of September 30, 2012
Assets
Available-for-sale securities:
U.S. treasury securities	$	—	$	25,429	$	—	$	25,429
U.S. agency debentures	—		2,936,150		—		2,936,150
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	—		1,590,582		—		1,590,582
Agency-issued collateralized mortgage obligations - fixed rate	—		4,168,125		—		4,168,125
Agency-issued collateralized mortgage obligations - variable rate	—		1,939,799		—		1,939,799
Agency-issued commercial mortgage-backed securities	—		279,507		—		279,507
Municipal bonds and notes	—		100,221		—		100,221
Equity securities	7,917		—		—		7,917
Total available-for-sale securities	7,917		11,039,813		—		11,047,730
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	—		—		658,409		658,409
Other venture capital investments	—		—		118,622		118,622
Total non-marketable securities (fair value accounting)	—		—		777,031		777,031
Other assets:
Marketable securities	3,807		1,609		—		5,416
Interest rate swaps	—		9,508		—		9,508
Foreign exchange forward and option contracts	—		13,116		—		13,116
Equity warrant assets	—		5,787		64,691		70,478
Loan conversion options	—		1,240		—		1,240
Client interest rate derivatives	—		236		—		236
Total assets (1)	$	11,724	$	11,071,309	$	841,722	$	11,924,755
Liabilities
Foreign exchange forward and option contracts	$	—	$	12,476	$	—	$	12,476
Client interest rate derivatives	—		247		—		247
Total liabilities	$	—	$	12,723	$	—	$	12,723


(1)	Included in Level 1, Level 2, and Level 3 assets are $3.4 million, $1.5 million, and $689.6 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, 2011:



(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
Assets
Available-for-sale securities:
U.S. treasury securities	$	—	$	25,964	$	—	$	25,964
U.S. agency debentures	—		2,874,932		—		2,874,932
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	—		1,564,286		—		1,564,286
Agency-issued collateralized mortgage obligations - fixed rate	—		3,373,760		—		3,373,760
Agency-issued collateralized mortgage obligations - variable rate	—		2,413,378		—		2,413,378
Agency-issued commercial mortgage-backed securities	—		178,693		—		178,693
Municipal bonds and notes	—		100,498		—		100,498
Equity securities	4,535		—		—		4,535
Total available-for-sale securities	4,535		10,531,511		—		10,536,046
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	—		—		611,824		611,824
Other venture capital investments	—		—		124,121		124,121
Other investments	—		—		987		987
Total non-marketable securities (fair value accounting)	—		—		736,932		736,932
Other assets:
Marketable securities	1,410		—		—		1,410
Interest rate swaps	—		11,441		—		11,441
Foreign exchange forward and option contracts	—		18,326		—		18,326
Equity warrant assets	—		3,923		63,030		66,953
Loan conversion options	—		923		—		923
Client interest rate derivatives	—		50		—		50
Total assets (1)	$	5,945	$	10,566,174	$	799,962	$	11,372,081
Liabilities
Foreign exchange forward and option contracts	$	—	$	16,816	$	—	$	16,816
Client interest rate derivatives	—		52		—		52
Total liabilities	$	—	$	16,868	$	—	$	16,868


(1)	Included in Level 1 and Level 3 assets are $1.2 million and $647.5 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 the three and nine months ended September 30, 2012 and 2011, respectively:



(Dollars in thousands)	Beginning Balance		Total Realized and Unrealized Gains (Losses) Included in Income			Purchases		Sales			Issuances		Distributions and Other Settlements			Transfers Into Level 3		Transfers Out of Level 3			Ending Balance
Three months ended September 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	639,596	$	12,104		$	35,092	$	—		$	—	$	(28,383	)	$	—	$	—		$	658,409
Other venture capital investments	120,111		3,259			953		(5,202		)	—		479			—		(978		)	118,622
Total non-marketable securities (fair value accounting) (1)	759,707		15,363			36,045		(5,202		)	—		(27,904		)	—		(978		)	777,031
Other assets:
Equity warrant assets (2)	68,619		(800		)	—		(5,954		)	2,994		—			—		(168		)	64,691
Total assets	$	828,326	$	14,563		$	36,045	$	(11,156	)	$	2,994	$	(27,904	)	$	—	$	(1,146	)	$	841,722
Three months ended September 30, 2011
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	515,118	$	32,041		$	42,590	$	—		$	—	$	(11,623	)	$	—	$	—		$	578,126
Other venture capital investments	114,070		17,237			2,193		(9,335		)	—		(4,005		)	—		—			120,160
Other investments	995		(16		)	—		—			—		(6		)	—		—			973
Total non-marketable securities (fair value accounting) (1)	630,183		49,262			44,783		(9,335		)	—		(15,634		)	—		—			699,259
Other assets:
Equity warrant assets (2)	49,777		8,192			—		(6,427		)	2,876		—			—		—			54,418
Total assets	$	679,960	$	57,454		$	44,783	$	(15,762	)	$	2,876	$	(15,634	)	$	—	$	—		$	753,677
Nine months ended September 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	611,824	$	38,765		$	90,173	$	—		$	—	$	(82,353	)	$	—	$	—		$	658,409
Other venture capital investments	124,121		(3,868		)	8,888		(9,441		)	—		495			—		(1,573		)	118,622
Other investments	987		21			—		—			—		(1,008		)	—		—			—
Total non-marketable securities (fair value accounting) (1)	736,932		34,918			99,061		(9,441		)	—		(82,866		)	—		(1,573		)	777,031
Other assets:
Equity warrant assets (2)	63,030		8,848			—		(15,672		)	9,167		1			—		(683		)	64,691
Total assets	$	799,962	$	43,766		$	99,061	$	(25,113	)	$	9,167	$	(82,865	)	$	—	$	(2,256	)	$	841,722
Nine months ended September 30, 2011
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	391,247	$	108,032		$	119,990	$	—		$	—	$	(41,143	)	$	—	$	—		$	578,126
Other venture capital investments	111,843		22,608			12,939		(27,513		)	—		283			—		—			120,160
Other investments	981		4			—		—			—		(12		)	—		—			973
Total non-marketable securities (fair value accounting) (1)	504,071		130,644			132,929		(27,513		)	—		(40,872		)	—		—			699,259
Other assets:
Equity warrant assets (2)	43,537		21,403			—		(19,889		)	10,058		(63		)	—		(628		)	54,418
Total assets	$	547,608	$	152,047		$	132,929	$	(47,402	)	$	10,058	$	(40,935	)	$	—	$	(628	)	$	753,677


(1)	Realized and unrealized gains (losses) are recorded on the line items “gains on investment securities, net”, and “other noninterest income”, components of noninterest income.


(2)	Realized and unrealized gains (losses) 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 September 30, 2012:



	Three months ended September 30, 2012			Nine months ended September 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	12,724		$	38,916
Other venture capital investments	(963		)	4,177
Total non-marketable securities (fair value accounting) (2)	11,761			43,093
Other assets:
Equity warrant assets (3)	(2,480		)	(2,505		)
Total unrealized gains	$	9,281		$	40,588
Unrealized gains attributable to noncontrolling interests (1)	$	9,543		$	37,445


(1)	In the third quarter of 2012, for purposes of this disclosure we have revised our methodology to exclude reclassifications of previously recorded unrealized gains (losses) as a result of distributions.


(2)	Unrealized gains (losses) are recorded on the line items “gains on investment securities, net”, and “other noninterest income”, components of noninterest income.


(3)	Unrealized (losses) 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 September 30, 2012. 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 at September 30, 2012		Valuation Technique	Significant Unobservable Inputs	Weighted Average
Other venture capital investments (fair value accounting)	$	118,622	Private company equity pricing	(1)	(1)
Equity warrant assets (private portfolio)	64,691		Modifed Black-Scholes option pricing model	Volatility	49.8	%
				Risk-Free interest rate	0.3	%
				Marketability discount (2)	22.5	%
				Remaining life assumption (3)	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)

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. In the third quarter of 2012, we increased the marketability discount from 15.0 percent to 22.5 percent to reflect market conditions and trends.

(3)

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 September 30, 2012, the weighted average contractual remaining term was 6.6 years, compared to our estimated remaining life of 3.0 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 September 30, 2012 and December 31, 2011:



			Estimated Fair Value
(Dollars in thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012:
Financial assets:
Cash and cash equivalents	$	906,680	$	906,680	$	—	$	—
Non-marketable securities (cost and equity method accounting)	386,784		—		—		421,123
Net commercial loans	7,345,239		—		—		7,542,349
Net consumer loans	745,606		—		—		766,903
FHLB and FRB stock	39,301		—		—		39,301
Accrued interest receivable	62,441		—		62,441		—
Financial liabilities:
Short-term FHLB advances	215,000		215,000		—		—
Federal funds purchased	287,000		287,000		—		—
Other short-term borrowings	6,170		6,170		—		—
Non-maturity deposits (1)	17,575,816		17,575,816		—		—
Time deposits	149,250		—		149,031		—
5.375% Senior Notes	347,944		—		398,220		—
6.05% Subordinated Notes (2)	55,130		—		62,486		—
7.0% Junior Subordinated Debentures	55,240		—		52,268		—
Accrued interest payable	1,938		—		1,938		—
Off-balance sheet financial assets:
Commitments to extend credit	—		—		—		21,467
December 31, 2011:
Financial assets:
Cash and cash equivalents	$	1,114,948	$	1,114,948	$	—	$	—
Non-marketable securities (cost and equity method accounting)	267,508		—		—		290,393
Net commercial loans	6,192,578		—		—		6,336,705
Net consumer loans	687,557		—		—		627,733
FHLB and FRB stock	39,189		—		—		39,189
Accrued interest receivable	58,108		—		58,108		—
Financial liabilities:
Non-maturity deposits (1)	16,553,787		16,553,787		—		—
Time deposits	155,749		—		155,346		—
5.375% Senior Notes	347,793		—		362,786		—
6.05% Subordinated Notes (2)	55,075		—		57,746		—
5.70% Senior Notes (3)	143,969		—		145,184		—
7.0% Junior Subordinated Debentures	55,372		—		51,526		—
Other long-term debt	1,439		—		—		1,439
Accrued interest payable	6,689		—		6,689		—
Off-balance sheet financial assets:
Commitments to extend credit	—		—		—		21,232


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


(2)	At September 30, 2012 and December 31, 2011, included in the carrying value and estimated fair value of our 6.05% Subordinated Notes was $9.5 million and $8.8 million, respectively, related to the fair value of the interest rate swap associated with the notes.


(3)	At December 31, 2011, included in the carrying value and estimated fair value of our 5.70% Senior Notes was $2.6 million related to the fair value of the interest rate swap 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 September 30, 2012:



(Dollars in thousands)	Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	658,409	$	658,409	$	430,798
Non-marketable securities (equity method accounting):
Other investments (2)	54,288		55,715		6,750
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (3)	158,275		190,033		60,809
Total	$	870,972	$	904,157	$	498,357

(1)

Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds, one of our direct venture funds and one other private equity fund. These investments represent investments in venture capital and private equity funds that invest primarily in U.S. and global technology and life sciences companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $581.9 million and $420.0 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)

Other investments within non-marketable securities (equity method accounting) include investments in debt funds and venture capital and private equity fund investments that invest in or lend money to primarily U.S. and global technology and life sciences companies. 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.

(3)

Venture capital and private equity fund investments within non-marketable securities (cost method accounting) include investments in venture capital and private equity fund investments that invest primarily in U.S. and global technology and life sciences companies. 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 the terms of the funds.

- Definition

Tabular disclosure of the amount of gains or losses for the period included in earnings or resulted in a change to net assets, have arisen from the use of significant unobservable inputs (level 3) to measure the fair value of assets, liabilities, and financial instruments classified in shareholders' equity.

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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-Subparagraph b-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Accounting Standards Codification

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-Name Statement of Financial Accounting Standard (FAS)

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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Reference 11: http://www.xbrl.org/2003/role/presentationRef

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- Definition

Tabular disclosure of the fair value of investees that calculate net asset value per share (including by unit, membership interest, or other equity (ownership interest) unit measure) (alternative investments), whether measured at fair value on a recurring or nonrecurring basis, by major category of assets and liabilities (as defined), including, for example, (i) fair value measurements at the reporting date, (ii) the level within the fair value hierarchy in which the fair value measurements fall, (iii) a reconciliation of beginning and ending balances for those alternative investments that are measured at fair value using unobservable inputs (Level 3 - fair value hierarchy fair value measurement inputs), (iv) the inputs and valuation techniques used to measure fair value, (v) a discussion of changes to valuation techniques and inputs, if any, during the period, (vi) a description of the nature and risk associated with the alternative investments, and (vii) a discussion of the probability that any of the alternative investments are to be sold.

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