Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 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 tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of June 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 June 30, 2012
Assets
Available-for-sale securities:
U.S. treasury securities	$	-	$	25,599	$	-	$	25,599
U.S. agency debentures		-		2,640,124		-		2,640,124
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		-		1,713,799		-		1,713,799
Agency-issued collateralized mortgage obligations - fixed rate		-		3,804,211		-		3,804,211
Agency-issued collateralized mortgage obligations - variable rate		-		2,108,449		-		2,108,449
Agency-issued commercial mortgage-backed securities		-		228,080		-		228,080
Municipal bonds and notes		-		99,694		-		99,694
Equity securities		995		-		-		995
Total available-for-sale securities		995		10,619,956		-		10,620,951
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments		-		-		639,596		639,596
Other venture capital investments		-		-		120,111		120,111
Total non-marketable securities (fair value accounting)		-		-		759,707		759,707
Other assets:
Marketable securities		1,042		3,694		-		4,736
Interest rate swaps		-		9,331		-		9,331
Foreign exchange forward and option contracts		-		20,582		-		20,582
Equity warrant assets		-		5,786		68,619		74,405
Loan conversion options		-		1,569		-		1,569
Client interest rate derivatives		-		57		-		57
Total assets (1)	$	2,037	$	10,660,975	$	828,326	$	11,491,338
Liabilities
Foreign exchange forward and option contracts	$	-	$	15,361	$	-	$	15,361
Client interest rate derivatives		-		59		-		59
Total liabilities	$	-	$	15,420	$	-	$	15,420

(1) Included in Level 1, Level 2, and Level 3 assets are $0.9 million, $3.5 million, and $671.9 million, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

The following fair value hierarchy tables present 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 six months ended June 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 June 30, 2012:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	620,356	$	14,557	$	33,365	$	-	$	-	$	(28,682)	$	-	$	-	$	639,596
Other venture capital investments		127,951		(3,540)		211		(3,932)		-		16		-		(595)		120,111
Other investments		1,002		-		-		-		-		(1,002)		-		-		-
Total non-marketable securities (fair value accounting) (1)		749,309		11,017		33,576		(3,932)		-		(29,668)		-		(595)		759,707
Other assets:
Equity warrant assets (2)		65,217		5,853		-		(6,075)		3,873		-				(249)		68,619
Total assets	$	814,526	$	16,870	$	33,576	$	(10,007)	$	3,873	$	(29,668)	$	-	$	(844)	$	828,326
Three months ended June 30, 2011:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	464,377	$	32,423	$	37,335	$	-	$	-	$	(19,017)	$	-	$	-	$	515,118
Other venture capital investments		108,525		660		4,639		(4,042)		-		4,288		-		-		114,070
Other investments		995		-		-		-		-		-		-		-		995
Total non-marketable securities (fair value accounting) (1)		573,897		33,083		41,974		(4,042)		-		(14,729)		-		-		630,183
Other assets:
Equity warrant assets (2)		46,260		10,246		-		(9,924)		3,558		(1)		-		(362)		49,777
Total assets	$	620,157	$	43,329	$	41,974	$	(13,966)	$	3,558	$	(14,730)	$	-	$	(362)	$	679,960
Six months ended June 30, 2012:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	611,824	$	26,661	$	55,081	$	-	$	-	$	(53,970)	$	-	$	-	$	639,596
Other venture capital investments		124,121		(7,127)		7,935		(4,239)		-		16		-		(595)		120,111
Other investments		987		21		-		-		-		(1,008)		-		-		-
Total non-marketable securities (fair value accounting) (1)		736,932		19,555		63,016		(4,239)		-		(54,962)		-		(595)		759,707
Other assets:
Equity warrant assets (2)		63,030		9,648		-		(9,718)		6,173		1		-		(515)		68,619
Total assets	$	799,962	$	29,203	$	63,016	$	(13,957)	$	6,173	$	(54,961)	$	-	$	(1,110)	$	828,326
Six months ended June 30, 2011:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	391,247	$	75,991	$	77,400	$	-	$	-	$	(29,520)	$	-	$	-	$	515,118
Other venture capital investments		111,843		5,371		10,746		(18,178)		-		4,288		-		-		114,070
Other investments		981		20		-		-		-		(6)		-		-		995
Total non-marketable securities (fair value accounting) (1)		504,071		81,382		88,146		(18,178)		-		(25,238)		-		-		630,183
Other assets:
Equity warrant assets (2)		43,537		13,211		-		(13,462)		7,182		(63)		-		(628)		49,777
Total assets	$	547,608	$	94,593	$	88,146	$	(31,640)	$	7,182	$	(25,301)	$	-	$	(628)	$	679,960

(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 June 30, 2012:

	Three months ended  June  30, 2012		Six months ended  June 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	(9,872)	$	(16,986)
Other venture capital investments		10,819		8,208
Other investments		-		21
Total non-marketable securities (fair value accounting) (1)		947		(8,757)
Other assets:
Equity warrant assets (2)		2,888		3,392
Total unrealized gains	$	3,835	$	(5,365)
Unrealized gains (losses) attributable to noncontrolling interests	$	457	$	(9,425)

(1) Unrealized gains (losses) are recorded on the line items “gains on investment securities, net”, and “other noninterest income”, components 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 June 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 June 30, 2012		Valuation Technique	Significant Unobservable Inputs	Weighted  Average
Other venture capital investments (fair value accounting)	$	120,111	Private company equity pricing	(1)	(1)
Equity warrant assets (private portfolio)		68,619	Modifed Black-Scholes option	Volatility	51.2%
			pricing model	Risk-Free interest rate	0.4%
				Marketability discount (2)	15.0%
				Remaining life assumption (3)	40.0%

(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, such as market conditions. On a quarterly basis, a sensitivity analysis is performed on our marketability discount.

(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 June 30, 2012, the weighted average contractual remaining term was 6.5 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 information presented herein is based on pertinent information available to us as of June 30, 2012 and December 31, 2011. The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at June 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)
June 30, 2012:
Financial assets:
Cash and cash equivalents	$	1,411,725	$	1,411,725	$	-	$	-
Non-marketable securities (cost and equity method accounting)		372,605		-		-		407,262
Net commercial loans		6,968,693		-		-		7,145,552
Net consumer loans		722,893		-		-		743,208
FHLB and FRB stock		39,301		-		-		39,301
Accrued interest receivable		62,359		-		62,359		-
Financial liabilities:
Other short-term borrowings		5,880		5,880		-		-
Non-maturity deposits (1)		17,900,604		17,900,604		-		-
Time deposits		168,208		-		167,917		-
5.375% Senior Notes		347,893		-		380,961		-
6.05% Subordinated Notes (2)		55,054		-		60,411		-
7.0% Junior Subordinated Debentures		55,285		-		51,897		-
Accrued interest payable		6,496		-		6,496		-
Off-balance sheet financial assets:
Commitments to extend credit		-		-		-		22,343
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 June 30, 2012 and December 31, 2011, included in the carrying value and estimated fair value of our 6.05% Subordinated Notes was $9.3 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 June 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)	$	639,596	$	639,596	$	377,037
Non-marketable securities (equity method accounting):
Other investments (2)		51,102		52,185		7,750
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (3)		153,618		185,335		67,988
Total	$	844,316	$	877,116	$	452,775

(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 $562.6 million and $365.2 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.