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Fair Value Measurement and Fair Value of Financial Instruments | 3 Months Ended
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Mar. 31, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurement and Fair Value of Financial Instruments | Fair Value Measurement and Fair Value of Financial Instruments Fair Value Determination Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value of financial instruments, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing an asset or a liability. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy noted below is based on the quality and reliability of the information used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to data lacking transparency. The fair value of the Company’s assets and liabilities is classified and disclosed in one of the following three categories:
• | Level 1 | — | Valuation is based on quoted prices for identical instruments traded in active markets.
• | Level 2 | — | Valuation is based on quoted prices for similar instruments traded in active markets; quoted prices for identical or similar instruments traded in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.
• | Level 3 | — | Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.
The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable, and the significance of those inputs in the fair valuation measurement. The Company’s assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurements. Level 3 Assets and Liabilities Valuation Process The Company generally determines the fair value of Level 3 assets and liabilities by using internal valuation methodologies, which primarily include discounted cash flows techniques that require both observable and unobservable inputs. Unobservable inputs (such as volatility and liquidity discount) are generally derived from historic performance of similar instruments or determined from previous market trades in similar instruments. Such inputs can be derived from similar portfolios with known historic experience or recent trades where particular unobservable inputs may be implied. The Company compares each unobservable input to historic experience and other third-party data where available. The models developed under internal valuation methodologies are subject to review according to the Company’s risk management policies and procedures, which include model validation. Model validation assesses the adequacy and appropriateness of the model, including reviewing its supporting model documentation and key components such as inputs, logic, processing components and output results. Validation also includes ensuring significant unobservable model inputs are appropriate given observable market transactions or other market data within the same or similar asset classes. The Company has ongoing monitoring procedures in place for Level 3 assets and liabilities that use internal valuation methodologies, which include but are not limited to, the following:
• | review of valuation results against expectations, including review of significant or unusual value fluctuations; and
• | quarterly analysis related to market data, where available.
Assets and Liabilities Measured at Fair Value on a Recurring Basis The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities on a recurring basis, as well as the general classification of these instruments pursuant to the valuation hierarchy. Available-for-Sale Investment Securities — When available, the Company uses quoted market prices to determine the fair value of available-for-sale investment securities, which are classified as Level 1. Level 1 available-for-sale investment securities are primarily comprised of U.S. Treasury securities. The fair value of other available-for-sale investment securities is generally determined by independent external pricing service providers who have experience in valuing these securities or by the average quoted market prices obtained from independent external brokers. In obtaining such valuation information from third parties, the Company reviewed the methodologies used to develop the resulting fair value. The available-for-sale investment securities valued using such methods are classified as Level 2. Equity Securities — Equity securities were comprised of mutual funds as of both March 31, 2018 and December 31, 2017. The Company uses Net Asset Value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2. Interest Rate Swaps and Options — The Company enters into interest rate swap and option contracts with institutional counterparties to hedge against interest rate swap and option products offered to bank customers. These products allow borrowers to lock in attractive intermediate and long-term interest rates by entering into an interest rate swap or option contract with the Company, resulting in the customer obtaining a synthetic fixed rate loan. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against certificates of deposit issued. This product allows the Company to lock in attractive floating rate funding. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The fair value of the interest rate options, which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (rise above) the strike rate of the floors (caps). In addition, to comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, model-derived credit spreads. As of March 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of these interest rate contracts and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative portfolios. As a result, the Company classifies these derivative instruments as Level 2 due to the observable nature of the significant inputs utilized. Foreign Exchange Spot and Forwards — The Company enters into short-term foreign exchange contracts to purchase/sell foreign currencies at set rates in the future. These contracts economically hedge against foreign exchange rate fluctuations. The Company also enters into contracts with institutional counterparties to hedge against foreign exchange products offered to bank customers. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. The Company assumes minimal foreign exchange rate risk because the contracts with the customer and the institutional party mirror each other. The fair value is determined at each reporting period based on changes in the foreign exchange rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts are classified as Level 2. During the three months ended March 31, 2018, the Company entered into foreign currency forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-US Dollar (“USD”) functional currency subsidiary in China. These foreign currency forward contracts were designated as net investment hedges. A s of December 31, 2017, foreign exchange forward contracts were used to economically hedge the Company’s net investment in East West Bank (China) Limited. The fair value of foreign currency forward contracts is valued by comparing the contracted foreign exchange rate to the current market foreign exchange rate. Key inputs of the current market exchange rate include forward rates and the interest rate curves of the domestic and foreign currency. Interest rate forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2. Credit Risk Participation Agreements (“RPAs”) — The Company has entered into RPAs with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Accordingly, RPAs fall within Level 2. Equity warrants — The Company has obtained warrants to purchase preferred and common stock of technology and life sciences companies as part of the loan origination process. As of March 31, 2018 and December 31, 2017, the warrants included on the Consolidated Financial Statements were from public and private companies. The Company valued these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. For the private company warrants that are expected to be exercised under known merger and acquisition (“M&A”) events associated with the portfolio company, the estimated fair value has been further adjusted based on non-public information considering the most likely outcome from the M&A events, where applicable. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a sensitivity analysis on the option volatility and liquidity discount assumptions is performed. Commodity Options — The Company enters into energy commodity contracts in the form of options with its commercial loan customers to allow them to hedge against the risk of fluctuation in energy commodity prices. The fair value of the commodity contract is determined using the Black’s option pricing model utilizing expectation of future commodity price and volatility. The future commodity contract price is derived from observable inputs such as dealer quotes. The Company classifies these instruments as Level 2 due to the observable nature of the significant inputs utilized. The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017:
($ in thousands) |  | Assets (Liabilities) Measured at Fair Value on a Recurring Basis as of March 31, 2018
| Fair Value Measurements |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Available-for-sale investment securities (1): |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 651,830 |  |  | $ | 651,830 |  |  | $ | — |  |  | $ | — |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 233,016 |  |  | — |  |  | 233,016 |  |  | — |
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 339,834 |  |  | — |  |  | 339,834 |  |  | — |
Residential mortgage-backed securities |  | 989,453 |  |  | — |  |  | 989,453 |  |  | — |
Municipal securities |  | 74,076 |  |  | — |  |  | 74,076 |  |  | — |
Non-agency residential mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 8,404 |  |  | — |  |  | 8,404 |  |  | — |
Corporate debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 35,858 |  |  | — |  |  | 35,858 |  |  | — |
Foreign bonds: |  |  |  |  |  |  |  |
Investment grade |  | 478,945 |  |  | — |  |  | 478,945 |  |  | — |
Total available-for-sale investment securities |  | $ | 2,811,416 |  |  | $ | 651,830 |  |  | $ | 2,159,586 |  |  | $ | — |
Investments in tax credit and other investments: |  |  |  |  |  |  |  |  |
Equity securities with readily determinable fair value (2) |  | $ | 30,987 |  |  | $ | 20,489 |  |  | $ | 10,498 |  |  | $ | — |
Total investments in tax credit and other investments |  | $ | 30,987 |  |  | $ | 20,489 |  |  | $ | 10,498 |  |  | $ | — |
Derivative assets(3): |  |  |  |  |  |  |  |
Interest rate swaps and options |  | $ | 51,933 |  |  | $ | — |  |  | $ | 51,933 |  |  | $ | — |
Foreign exchange spot and forwards |  | 6,087 |  |  | — |  |  | 6,087 |  |  | — |
RPAs |  | 1 |  |  | — |  |  | 1 |  |  | — |
Equity warrants |  | 1,513 |  |  | — |  |  | 582 |  |  | 931 |
Commodity options |  | 297 |  |  | — |  |  | 297 |  |  | — |
Total derivative assets |  | $ | 59,831 |  |  | $ | — |  |  | $ | 58,900 |  |  | $ | 931 |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate swaps (3) |  | $ | 8,251 |  |  | $ | — |  |  | $ | 8,251 |  |  | $ | — |
Foreign exchange forwards (1) |  | 1,154 |  |  | — |  |  | 1,154 |  |  | — |
Interest rate swaps and options (3) |  | 72,893 |  |  | — |  |  | 72,893 |  |  | — |
Foreign exchange spot and forwards (3) |  | 4,066 |  |  | — |  |  | 4,066 |  |  | — |
RPAs (3) |  | 21 |  |  | — |  |  | 21 |  |  | — |
Commodity options (3) |  | 288 |  |  | — |  |  | 288 |  |  | — |
Total derivative liabilities |  | $ | 86,673 |  |  | $ | — |  |  | $ | 86,673 |  |  | $ | — |
(1) | Changes in fair value of these financial instruments are recorded through other comprehensive income.
(2) | Equity securities with readily determinable fair value were comprised of mutual funds as of March 31, 2018. These securities are held at NAV and changes in fair value are recorded through net income.
(3) Changes in fair value of these financial instruments are recorded through net income.
($ in thousands) |  | Assets (Liabilities) Measured at Fair Value on a Recurring Basis as of December 31, 2017
| Fair Value Measurements |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Available-for-sale investment securities (1): |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 640,280 |  |  | $ | 640,280 |  |  | $ | — |  |  | $ | — |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 203,392 |  |  | — |  |  | 203,392 |  |  | — |
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 318,957 |  |  | — |  |  | 318,957 |  |  | — |
Residential mortgage-backed securities |  | 1,190,271 |  |  | — |  |  | 1,190,271 |  |  | — |
Municipal securities |  | 99,982 |  |  | — |  |  | 99,982 |  |  | — |
Non-agency residential mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 9,117 |  |  | — |  |  | 9,117 |  |  | — |
Corporate debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 37,003 |  |  | — |  |  | 37,003 |  |  | — |
Foreign bonds: |  |  |  |  |  |  |  |
Investment grade |  | 486,408 |  |  | — |  |  | 486,408 |  |  | — |
Other securities |  | 31,342 |  |  | 20,735 |  |  | 10,607 |  |  | — |
Total available-for-sale investment securities |  | $ | 3,016,752 |  |  | $ | 661,015 |  |  | $ | 2,355,737 |  |  | $ | — |
Derivative assets (2): |  |  |  |  |  |  |  |
Interest rate swaps and options |  | $ | 58,633 |  |  | $ | — |  |  | $ | 58,633 |  |  | $ | — |
Foreign exchange spot and forwards |  | 5,840 |  |  | — |  |  | 5,840 |  |  | — |
RPAs |  | 1 |  |  | — |  |  | 1 |  |  | — |
Equity warrants |  | 1,672 |  |  | — |  |  | 993 |  |  | 679 |
Total derivative assets |  | $ | 66,146 |  |  | $ | — |  |  | $ | 65,467 |  |  | $ | 679 |
Derivative liabilities (2): |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 6,799 |  |  | $ | — |  |  | $ | 6,799 |  |  | $ | — |
Interest rate swaps and options |  | 57,958 |  |  | — |  |  | 57,958 |  |  | — |
Foreign exchange spot and forwards |  | 10,170 |  |  | — |  |  | 10,170 |  |  | — |
RPAs |  | 8 |  |  | — |  |  | 8 |  |  | — |
Total derivative liabilities |  | $ | 74,935 |  |  | $ | — |  |  | $ | 74,935 |  |  | $ | — |
(1) | Changes in fair value of these financial instruments are recorded through other comprehensive income.
(2) | Changes in fair value of these financial instruments are recorded through net income.
At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. As of March 31, 2018 and December 31, 2017, the only assets measured on a recurring basis that were classified as Level 3 were equity warrants issued by private companies. The following table presents a reconciliation of the beginning and ending balances for these warrants for the three months ended March 31, 2018:
($ in thousands) |  | Three Months Ended March 31, 2018
Equity warrants |  |
Beginning balance |  | $ | 679 |
Total gains for the period included in earnings (1): |  | 244 |
Issuances |  | 8 |
Ending balance |  | $ | 931 |
(1) | Unrealized gains of warrant income are included in Ancillary loan fees and other income on the Consolidated Statement of Income.
Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair value of the assets and liabilities become unobservable or observable in the current marketplace. The Company’s policy, with respect to transfers between levels of the fair value hierarchy, is to recognize transfers into and out of each level as of the end of the reporting period. There were no transfers of assets and liabilities measured on a recurring basis into and out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2018 and 2017. The following table presents quantitative information about significant unobservable inputs used in the valuation of assets measured on a recurring basis classified as Level 3 as of March 31, 2018. Significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets or liabilities. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets or liabilities would be impacted by a predetermined percentage change.
($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Technique |  | Unobservable Input(s) |  | Weighted- Average
Derivative assets: |  |  |  |  |  |  |  |
Equity warrants |  | $ | 931 |  |  | Black-Scholes option pricing model |  | Volatility |  | 48%
|  |  |  |  |  | Liquidity discount |  | 47%
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. The adjustments to fair value generally require the assets to be recorded at the lower of cost or fair value, or assessed for impairment. Assets measured at fair value on a nonrecurring basis include certain non-purchased credit impaired (“non-PCI”) loans that were impaired, OREO and loans held-for-sale. These fair value adjustments result from impairment on certain non-PCI loans, application of fair value less costs to sell on OREO or lower of cost or fair value on loans held-for-sale. Non-PCI Impaired Loans — The Company typically adjusts the carrying amount of impaired loans when there is evidence of probable loss and when the expected fair value of the loan is less than its carrying amount. Impaired loans with specific reserves are classified as Level 3 assets. The following two methods are used to derive the fair value of impaired loans:
• | Discounted cash flow valuation techniques generally consist of developing an estimate of future cash flows that are expected to occur over the life of the loan and then discounting those cash flows.
• | The Company establishes a specific reserve for an impaired loan based on the fair value of the underlying collateral (which may take the form of real estate, inventory, equipment, contracts or guarantees). The fair value of the underlying collateral is generally based on third party appraisals (or internal evaluation if a third party appraisal is not required by regulations), which utilize one or more valuation techniques (income, market and/or cost approaches).
Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment, which are recorded at estimated fair value less the costs to sell at the time of foreclosure and at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3. The following tables present the carrying amounts of assets included on the Consolidated Balance Sheet that had fair value changes measured on a nonrecurring basis as of March 31, 2018 and December 31, 2017:
|  | Assets Measured at Fair Value on a Nonrecurring Basis as of March 31, 2018
($ in thousands) |  | Fair Value Measurements |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Non-PCI impaired loans: |  |  |  |  |  |  |  |  |  |  |  |
Commercial lending: |  |  |  |  |  |  |  |
Commercial and industrial (“C&I”) |  | $ | 29,403 |  |  | $ | — |  |  | $ | — |  |  | $ | 29,403 |
Commercial real estate (“CRE”) |  | 5,171 |  |  | — |  |  | — |  |  | 5,171 |
Consumer lending: |  |  |  |  |  |  |  |
Single-family residential |  | 2,600 |  |  | — |  |  | — |  |  | 2,600 |
Total non-PCI impaired loans |  | $ | 37,174 |  |  | $ | — |  |  | $ | — |  |  | $ | 37,174 |
|  | Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2017
($ in thousands) |  | Fair Value Measurements |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Non-PCI impaired loans: |  |  |  |  |  |  |  |  |  |  |  |
Commercial lending: |  |  |  |  |  |  |  |
C&I |  | $ | 31,404 |  |  | $ | — |  |  | $ | — |  |  | $ | 31,404 |
CRE |  | 2,667 |  |  | — |  |  | — |  |  | 2,667 |
Construction and land |  | 3,973 |  |  | — |  |  | — |  |  | 3,973 |
Consumer lending: |  |  |  |  |  |  |  |
Single-family residential |  | 144 |  |  | — |  |  | — |  |  | 144 |
Total non-PCI impaired loans |  | $ | 38,188 |  |  | $ | — |  |  | $ | — |  |  | $ | 38,188 |
OREO |  | $ | 9 |  |  | $ | — |  |  | $ | — |  |  | $ | 9 |
The following table presents the fair value adjustments of assets measured on a nonrecurring basis recognized during the three months ended and included on the Consolidated Balance Sheet as of March 31, 2018 and 2017:
|  | Three Months Ended March 31,
($ in thousands) |  | 2018 |  | 2017
Non-PCI impaired loans: |  |  |  |
Commercial lending: |  |  |  |
C&I |  | $ | 13,899 |  |  | $ | 32 |
CRE |  | 95 |  |  | (64 | )
Consumer lending: |  |  |  |
Single-family residential |  | (15 | ) |  | 82 |
Other consumer |  | — |  |  | (1 | )
Total non-PCI impaired loans |  | $ | 13,979 |  |  | $ | 49 |
OREO |  | $ | — |  |  | $ | (285 | )
The following table presents the quantitative information about the significant unobservable inputs used in the valuation of assets measured on a nonrecurring basis classified as Level 3 as of March 31, 2018 and December 31, 2017:
($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range of Input(s) |  | Weighted-Average
March 31, 2018 |  |  |  |  |  |  |  |  |  |  |
Non-PCI impaired loans |  | $ | 28,596 |  |  | Discounted cash flows |  | Discount |  | 4% — 7% |  | 5%
|  | $ | 3,114 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8%
|  | $ | 4,849 |  |  | Fair value of collateral |  | Discount |  | 15% — 50% |  | 39%
|  | $ | 615 |  |  | Fair value of collateral |  | Contract value |  | NM |  | NM
December 31, 2017 |  |  |  |  |  |  |  |  |  |
Non-PCI impaired loans |  | $ | 22,802 |  |  | Discounted cash flows |  | Discount |  | 4% — 10% |  | 6%
|  | $ | 9,773 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8%
|  | $ | 3,207 |  |  | Fair value of collateral |  | Discount |  | 20% — 32% |  | 29%
|  | $ | 2,406 |  |  | Fair value of collateral |  | Contract value |  | NM |  | NM
OREO |  | $ | 9 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8%
NM — Not meaningful. Disclosures about Fair Value of Financial Instruments The following tables present the fair value estimates for financial instruments as of March 31, 2018 and December 31, 2017, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in Note 4 — Fair Value Measurement and Fair Value of Financial Instruments. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable, accrued interest payable and mortgage servicing rights, which are included in Other assets. These financial assets and liabilities are measured at amortized cost basis on the Company’s Consolidated Balance Sheet. During the first quarter of 2018, the Company adopted ASU 2016-01 and has updated its valuation methods as necessary to conform to an “exit price” concept as required by ASU 2016-01.
($ in thousands) |  | March 31, 2018
| Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 2,314,938 |  |  | $ | 2,314,938 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,314,938 |
Interest-bearing deposits with banks |  | $ | 478,871 |  |  | $ | — |  |  | $ | 478,871 |  |  | $ | — |  |  | $ | 478,871 |
Resale agreements (1) |  | $ | 1,050,000 |  |  | $ | — |  |  | $ | 1,026,415 |  |  | $ | — |  |  | $ | 1,026,415 |
Restricted equity securities |  | $ | 73,787 |  |  | $ | — |  |  | $ | 73,787 |  |  | $ | — |  |  | $ | 73,787 |
Loans held-for-sale |  | $ | 46,181 |  |  | $ | — |  |  | $ | 46,181 |  |  | $ | — |  |  | $ | 46,181 |
Loans held-for-investment, net |  | $ | 29,257,594 |  |  | $ | — |  |  | $ | — |  |  | $ | 29,503,038 |  |  | $ | 29,503,038 |
Mortgage servicing rights |  | $ | 7,659 |  |  | $ | — |  |  | $ | — |  |  | $ | 12,626 |  |  | $ | 12,626 |
Accrued interest receivable |  | $ | 127,905 |  |  | $ | — |  |  | $ | 127,905 |  |  | $ | — |  |  | $ | 127,905 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand, checking, savings and money market deposits |  | $ | 26,407,708 |  |  | $ | — |  |  | $ | 26,407,708 |  |  | $ | — |  |  | $ | 26,407,708 |
Time deposits |  | $ | 6,201,069 |  |  | $ | — |  |  | $ | 6,177,010 |  |  | $ | — |  |  | $ | 6,177,010 |
Short-term borrowings |  | $ | 30,277 |  |  | $ | — |  |  | $ | 30,277 |  |  | $ | — |  |  | $ | 30,277 |
FHLB advances |  | $ | 324,451 |  |  | $ | — |  |  | $ | 335,788 |  |  | $ | — |  |  | $ | 335,788 |
Repurchase agreements (1) |  | $ | 50,000 |  |  | $ | — |  |  | $ | 114,260 |  |  | $ | — |  |  | $ | 114,260 |
Long-term debt |  | $ | 166,640 |  |  | $ | — |  |  | $ | 172,521 |  |  | $ | — |  |  | $ | 172,521 |
Accrued interest payable |  | $ | 12,686 |  |  | $ | — |  |  | $ | 12,686 |  |  | $ | — |  |  | $ | 12,686 |
(1) | Resale and repurchase agreements are reported net pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of March 31, 2018, $400.0 million out of $450.0 million of repurchase agreements were eligible for netting against resale agreements.
($ in thousands) |  | December 31, 2017
| Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 2,174,592 |  |  | $ | 2,174,592 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,174,592 |
Interest-bearing deposits with banks |  | $ | 398,422 |  |  | $ | — |  |  | $ | 398,422 |  |  | $ | — |  |  | $ | 398,422 |
Resale agreements (1) |  | $ | 1,050,000 |  |  | $ | — |  |  | $ | 1,035,158 |  |  | $ | — |  |  | $ | 1,035,158 |
Restricted equity securities |  | $ | 73,521 |  |  | $ | — |  |  | $ | 73,521 |  |  | $ | — |  |  | $ | 73,521 |
Loans held-for-sale |  | $ | 85 |  |  | $ | — |  |  | $ | 85 |  |  | $ | — |  |  | $ | 85 |
Loans held-for-investment, net |  | $ | 28,688,590 |  |  | $ | — |  |  | $ | — |  |  | $ | 28,956,349 |  |  | $ | 28,956,349 |
Branch assets held-for-sale |  | $ | 91,318 |  |  | $ | 5,143 |  |  | $ | 10,970 |  |  | $ | 78,132 |  |  | $ | 94,245 |
Mortgage servicing rights |  | $ | 7,771 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,324 |  |  | $ | 11,324 |
Accrued interest receivable |  | $ | 121,719 |  |  | $ | — |  |  | $ | 121,719 |  |  | $ | — |  |  | $ | 121,719 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand, checking, savings and money market deposits |  | $ | 25,974,314 |  |  | $ | — |  |  | $ | 25,974,314 |  |  | $ | — |  |  | $ | 25,974,314 |
Time deposits |  | $ | 5,640,749 |  |  | $ | — |  |  | $ | 5,626,855 |  |  | $ | — |  |  | $ | 5,626,855 |
Branch liability held-for-sale |  | $ | 605,111 |  |  | $ | — |  |  | $ | — |  |  | $ | 643,937 |  |  | $ | 643,937 |
FHLB advances |  | $ | 323,891 |  |  | $ | — |  |  | $ | 335,901 |  |  | $ | — |  |  | $ | 335,901 |
Repurchase agreements (1) |  | $ | 50,000 |  |  | $ | — |  |  | $ | 104,830 |  |  | $ | — |  |  | $ | 104,830 |
Long-term debt |  | $ | 171,577 |  |  | $ | — |  |  | $ | 171,673 |  |  | $ | — |  |  | $ | 171,673 |
Accrued interest payable |  | $ | 10,724 |  |  | $ | — |  |  | $ | 10,724 |  |  | $ | — |  |  | $ | 10,724 |
(1) | Resale and repurchase agreements are reported net pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of December 31, 2017, $400.0 million out of $450.0 million of repurchase agreements were eligible for netting against resale agreements.

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- References No definition available. + Details
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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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