Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2016
 

Commission file number 000-24939


 EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
 
95-4703316
(I.R.S. Employer Identification No.)
 
 
 
135 North Los Robles Ave., 7th Floor, Pasadena, California
 (Address of principal executive offices)
 
91101
(Zip Code)


Registrant’s telephone number, including area code:
(626) 768-6000
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
Yes x No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
 
Number of shares outstanding of the issuer’s common stock on the latest practicable date: 144,103,150 shares as of July 31, 2016.
 




TABLE OF CONTENTS
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2



Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-Q (“Form 10-Q”) contain or incorporate statements that East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company” or “EWBC”) believes are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. 
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to:

the Company’s ability to compete effectively against other financial institutions in its banking markets;
changes in the commercial and consumer real estate markets;
changes in the Company’s costs of operation, compliance and expansion;
changes in the U.S. economy, including inflation, employment levels, rate of growth and general business conditions;
changes in government interest rate policies;
changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation (“FDIC”), the U.S. Securities and Exchange Commission (“SEC”) and the Consumer Financial Protection Bureau;
changes in the economy of and monetary policy in the People’s Republic of China;
changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on critical accounting policies and assumptions;
changes in the equity and debt securities markets;
future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;
fluctuations of the Company’s stock price;
fluctuations in foreign currency exchange rates;
success and timing of the Company’s business strategies;
ability of the Company to adopt and successfully integrate new technologies into its business in a strategic manner;
impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions;
impact of potential federal tax increases and spending cuts;
impact of adverse judgments or settlements in litigation;
impact of regulatory enforcement actions;
changes in the Company’s ability to receive dividends from its subsidiaries;
impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions;
impact of natural or man-made disasters or calamities or conflicts;
continuing consolidation in the financial services industry;
the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;
impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Company’s business, business practices and cost of operations;
impact of adverse changes to the Company’s credit ratings from the major credit rating agencies;
impact of failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused;
adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;

3



the effect of the current low interest rate environment or changes in interest rates on the Company’s net interest income and net interest margin;
the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin; and
a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment (“OTTI”) on securities held in the Company’s available-for-sale investment securities portfolio.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s annual report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 26, 2016 (the “Company’s 2015 Form 10-K”), under the heading “ITEM 1A. RISK FACTORS” and the information set forth under “ITEM 1A. RISK FACTORS” in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.


4



PART I — FINANCIAL INFORMATION

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except shares)
 
 
 
June 30, 2016
 
December 31, 2015
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
1,592,796

 
$
1,360,887

Short-term investments
 
229,979

 
299,916

Securities purchased under resale agreements (“resale agreements”)
 
1,850,000

 
1,600,000

Available-for-sale investment securities, at fair value
 
3,240,332

 
3,773,226

Held-to-maturity investment security, at cost (fair value of $158,279 in 2016)
 
159,208

 

Loans held for sale
 
51,290

 
31,958

Loans held-for-investment (net of allowance for loan losses of $266,768 in 2016 and $264,959 in 2015)
 
23,969,599

 
23,378,789

Investment in Federal Home Loan Bank (“FHLB”) stock, at cost
 
18,158

 
28,770

Investment in Federal Reserve Bank stock, at cost
 
55,216

 
54,932

Investments in qualified affordable housing partnerships, net
 
179,657

 
193,978

Premises and equipment (net of accumulated depreciation of $106,919 in 2016 and $100,060 in 2015)
 
163,423

 
166,993

Goodwill
 
469,433

 
469,433

Other assets
 
973,121

 
992,040

TOTAL
 
$
32,952,212

 
$
32,350,922

LIABILITIES
 
 

 
 

Customer deposits:
 
 

 
 

Noninterest-bearing
 
$
9,487,180

 
$
8,656,805

Interest-bearing
 
18,730,063

 
18,819,176

Total deposits
 
28,217,243

 
27,475,981

Short-term borrowings
 
29,499

 

FHLB advances
 
320,526

 
1,019,424

Securities sold under repurchase agreements (“repurchase agreements”)
 
200,000

 

Long-term debt
 
196,204

 
206,084

Accrued expenses and other liabilities
 
691,830

 
526,483

Total liabilities
 
29,655,302

 
29,227,972

COMMITMENTS AND CONTINGENCIES (Note 10)
 


 


STOCKHOLDERS’ EQUITY
 
 
 
 
Common stock, $0.001 par value, 200,000,000 shares authorized; 164,535,706 and 164,246,517 shares issued in 2016 and 2015, respectively.
 
164

 
164

Additional paid-in capital
 
1,712,572

 
1,701,295

Retained earnings
 
2,025,142

 
1,872,594

Treasury stock at cost — 20,433,561 shares in 2016 and 20,337,284 shares in 2015.
 
(439,256
)
 
(436,162
)
Accumulated other comprehensive loss (“AOCI”), net of tax
 
(1,712
)
 
(14,941
)
Total stockholders’ equity
 
3,296,910

 
3,122,950

TOTAL
 
$
32,952,212

 
$
32,350,922

 



See accompanying Notes to Consolidated Financial Statements.

5



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data, shares in thousands)
(Unaudited)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
INTEREST AND DIVIDEND INCOME
 
 
 
 
 
 

 
 

Loans receivable, including fees
 
$
254,331

 
$
234,049

 
$
507,873

 
$
475,615

Investment securities
 
12,852

 
9,484

 
24,045

 
19,668

Resale agreements
 
7,968

 
4,680

 
14,645

 
9,529

Investment in FHLB and Federal Reserve Bank stock
 
602

 
2,306

 
1,397

 
3,542

Due from banks and short-term investments
 
3,112

 
4,926

 
7,077

 
10,352

Total interest and dividend income
 
278,865

 
255,445

 
555,037

 
518,706

INTEREST EXPENSE
 
 
 
 
 
 

 
 

Customer deposits
 
20,362

 
18,195

 
39,659

 
35,158

Short-term borrowings
 
169

 
18

 
178

 
18

FHLB advances
 
1,292

 
1,049

 
2,792

 
2,082

Repurchase agreements
 
2,196

 
7,533

 
4,122

 
15,939

Long-term debt
 
1,262

 
1,158

 
2,498

 
2,300

Total interest expense
 
25,281

 
27,953

 
49,249

 
55,497

Net interest income before provision for credit losses

253,584

 
227,492

 
505,788

 
463,209

Provision for credit losses
 
6,053

 
3,494

 
7,493

 
8,481

Net interest income after provision for credit losses
 
247,531

 
223,998

 
498,295

 
454,728

NONINTEREST INCOME
 
 
 
 
 
 

 
 

Branch fees
 
10,353

 
9,791

 
20,575

 
19,175

Letters of credit fees and foreign exchange income
 
10,943

 
8,825

 
20,496

 
17,531

Ancillary loan fees
 
4,285

 
2,812

 
7,862

 
5,468

Wealth management fees
 
2,778

 
4,757

 
5,829

 
9,936

Derivative commission income
 
3,364

 
2,733

 
6,630

 
7,763

Changes in FDIC indemnification asset and receivable/payable
 

 
(6,668
)
 

 
(15,090
)
Net gains on sales of loans
 
2,882

 
5,280

 
4,809

 
14,831

Net gains on sales of available-for-sale investment securities
 
2,836

 
5,554

 
6,678

 
9,958

Other fees and operating income
 
6,823

 
7,509

 
11,898

 
15,147

Total noninterest income
 
44,264

 
40,593

 
84,777

 
84,719

NONINTEREST EXPENSE
 
 
 
 
 
 

 
 

Compensation and employee benefits
 
73,287

 
62,860

 
145,124

 
127,113

Occupancy and equipment expense
 
15,748

 
15,185

 
30,163

 
30,628

Amortization of tax credit and other investments
 
14,006

 
2,997

 
28,161

 
9,296

Amortization of premiums on deposits acquired
 
2,050

 
2,337

 
4,154

 
4,728

Deposit insurance premiums and regulatory assessments
 
5,473

 
3,341

 
10,891

 
8,997

Deposit related expenses
 
2,273

 
2,412

 
4,593

 
4,864

Other real estate owned (“OREO”) expense (income)
 
1,023

 
(5,081
)
 
1,551

 
(6,107
)
Legal expense
 
4,346

 
4,134

 
7,353

 
11,004

Data processing
 
3,295

 
2,377

 
5,983

 
4,994

Consulting expense
 
5,981

 
2,182

 
14,433

 
4,613

Repurchase agreements’ extinguishment costs
 

 
6,625

 

 
6,625

Other operating expense
 
21,397

 
20,801

 
43,079

 
41,445

Total noninterest expense
 
148,879

 
120,170

 
295,485

 
248,200

INCOME BEFORE INCOME TAXES
 
142,916

 
144,421

 
287,587

 
291,247

INCOME TAX EXPENSE
 
39,632

 
45,673

 
76,787

 
92,472

NET INCOME
 
$
103,284

 
$
98,748

 
$
210,800

 
$
198,775

EARNINGS PER SHARE (“EPS”)
 
 
 
 
 
 
 
 
BASIC
 
$
0.72

 
$
0.69

 
$
1.46

 
$
1.38

DILUTED
 
$
0.71

 
$
0.68

 
$
1.45

 
$
1.38

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
 
 
 
 
 
 
 
 
BASIC
 
144,101

 
143,846

 
144,029

 
143,751

DILUTED
 
145,078

 
144,480

 
144,973

 
144,408

DIVIDENDS DECLARED PER COMMON SHARE
 
$
0.20

 
$
0.20

 
$
0.40

 
$
0.40

 



See accompanying Notes to Consolidated Financial Statements.

6



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Net income
 
$
103,284

 
$
98,748

 
$
210,800

 
$
198,775

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Net change in unrealized gains (losses) on available-for-sale investment securities
 
4,984

 
(8,125
)
 
17,900

 
1,193

Foreign currency translation adjustments
 
(4,638
)
 

 
(4,671
)
 

Other comprehensive income (loss)
 
346

 
(8,125
)
 
13,229

 
1,193

COMPREHENSIVE INCOME
 
$
103,630

 
$
90,623

 
$
224,029

 
$
199,968

 



See accompanying Notes to Consolidated Financial Statements.

7



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
($ in thousands, except share data)
(Unaudited)
 
 
 
Common Stock and Additional Paid-in Capital
 
Retained
Earnings
 
Treasury
Stock
 
AOCI,
net of tax
 
Total
Stockholders’
Equity
 
 
Shares
 
Amount
 
 
 
 
BALANCE, JANUARY 1, 2015
 
143,582,229

 
$
1,677,931

 
$
1,604,141

 
$
(430,198
)
 
$
4,237

 
$
2,856,111

Net income
 

 

 
198,775

 

 

 
198,775

Other comprehensive income
 

 

 

 

 
1,193

 
1,193

Stock compensation costs
 

 
7,652

 

 

 

 
7,652

Tax benefit from stock compensation plans, net
 

 
3,196

 

 

 

 
3,196

Net activity of common stock pursuant to various stock compensation plans and agreements
 
266,807

 
1,769

 

 
(5,787
)
 

 
(4,018
)
Common stock dividends
 

 

 
(57,961
)
 

 

 
(57,961
)
BALANCE, JUNE 30, 2015
 
143,849,036

 
$
1,690,548

 
$
1,744,955

 
$
(435,985
)
 
$
5,430

 
$
3,004,948

BALANCE, JANUARY 1, 2016
 
143,909,233

 
$
1,701,459

 
$
1,872,594

 
$
(436,162
)
 
$
(14,941
)
 
$
3,122,950

Net income
 

 

 
210,800

 

 

 
210,800

Other comprehensive income
 

 

 

 

 
13,229

 
13,229

Stock compensation costs
 

 
9,210

 

 

 

 
9,210

Tax benefit from stock compensation plans, net
 

 
1,005

 

 

 

 
1,005

Net activity of common stock pursuant to various stock compensation plans and agreements
 
192,912

 
1,062

 

 
(3,094
)
 

 
(2,032
)
Common stock dividends
 

 

 
(58,252
)
 

 

 
(58,252
)
BALANCE, JUNE 30, 2016
 
144,102,145

 
$
1,712,736

 
$
2,025,142

 
$
(439,256
)
 
$
(1,712
)
 
$
3,296,910

 



See accompanying Notes to Consolidated Financial Statements.

8



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
 
 
 
Six Months Ended June 30,
 
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 

 
 

Net income
 
$
210,800

 
$
198,775

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
55,192

 
30,801

(Accretion) of discount and amortization of premiums, net
 
(29,960
)
 
(29,504
)
Changes in FDIC indemnification asset and receivable/payable
 

 
15,090

Stock compensation costs
 
9,210

 
7,652

Deferred tax expenses
 
4,357

 
10,056

Tax benefit from stock compensation plans, net
 
(1,005
)
 
(3,196
)
Provision for credit losses
 
7,493

 
8,481

Net gains on sales of loans
 
(4,809
)
 
(14,831
)
Net gains on sales of available-for-sale investment securities
 
(6,678
)
 
(9,958
)
Net gains on sales of OREO and premises and equipment
 
(2,435
)
 
(9,041
)
Originations and purchases of loans held for sale
 
(3,364
)
 
(442
)
Proceeds from sales and paydowns/payoffs in loans held for sale
 
4,794

 
1,863

Repurchase agreements’ extinguishment costs
 

 
6,625

Net payments to FDIC shared-loss agreements
 

 
(1,331
)
Net change in accrued interest receivable and other assets
 
(4,582
)
 
76,621

Net change in accrued expenses and other liabilities
 
32,317

 
3,145

Other net operating activities
 
(27
)
 
(1,346
)
Total adjustments
 
60,503

 
90,685

Net cash provided by operating activities
 
271,303

 
289,460

CASH FLOWS FROM INVESTING ACTIVITIES
 
 

 
 

Net (increase) decrease in:
 
 

 
 

Loans receivable
 
(113,126
)
 
(993,413
)
Short-term investments
 
65,113

 
63,876

Investments in qualified affordable housing partnerships, tax credit and other investments
 
(44,672
)
 
(31,977
)
Purchases of:
 
 

 
 

Resale agreements
 
(1,100,000
)
 
(1,345,000
)
Available-for-sale investment securities
 
(693,406
)
 
(1,221,706
)
Loans receivable (including loan participations)
 
(933,820
)
 
(365,552
)
Premises and equipment
 
(6,485
)
 
(2,662
)
Proceeds from sales of:
 
 

 
 

Available-for-sale investment securities
 
864,743

 
473,062

Loans receivable (including loan participations)
 
398,010

 
1,020,236

Premises and equipment
 
7,276

 
4,345

Paydowns and maturities of resale agreements
 
1,050,000

 
1,175,000

Repayments, maturities and redemptions of available-for-sale investment securities
 
443,641

 
396,809

Redemption of FHLB stock
 
10,614

 
13,084

Other net investing activities
 
2,431

 
15,269

Net cash used in investing activities
 
(49,681
)
 
(798,629
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 

 
 

Net increase in:
 
 

 
 

Deposits
 
752,849

 
1,519,447

Short-term borrowings
 
30,064

 
3,271

Proceeds from:
 
 

 
 

Issuance of common stock pursuant to various stock plans and agreements
 
1,062

 
1,769

Payments for:
 
 

 
 

Repayment of FHLB advances
 
(700,000
)
 

Repayment of long-term debt
 
(10,000
)
 
(10,000
)
Extinguishment of repurchase agreements
 

 
(106,625
)
Repurchase of vested shares due to employee tax liability
 
(3,094
)
 
(5,787
)
Cash dividends
 
(58,152
)
 
(58,073
)
Tax benefit from stock compensation plans, net
 
1,005

 
3,196

Net cash provided by financing activities
 
13,734

 
1,347,198

Effect of exchange rate changes on cash and cash equivalents
 
(3,447
)
 

NET INCREASE IN CASH AND CASH EQUIVALENTS
 
231,909

 
838,029

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
 
1,360,887

 
1,039,885

CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
1,592,796

 
$
1,877,914

 

See accompanying Notes to Consolidated Financial Statements.

9



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
 
 
 
Six Months Ended June 30,
 
 
2016
 
2015
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
 
Cash paid during the period for:
 
 

 
 

Interest
 
$
50,044

 
$
55,036

Income tax payments
 
$
6,359

 
$
19,174

Noncash investing and financing activities:
 
 

 
 

Loans transferred to loans held for sale, net
 
$
575,804

 
$
1,156,180

Transfers to OREO
 
$
731

 
$
4,629

Loans to facilitate sale of OREO
 
$

 
$
1,750

Held-to-maturity investment security retained from securitization of loans
 
$
160,135

 
$

Dividends payable
 
$
100

 
$
112

Unsettled purchases of available-for-sale investment securities
 
$
57,711

 
$

Unsettled purchases of loans receivable
 
$
106,114

 
$

 



See accompanying Notes to Consolidated Financial Statements.

10



EAST WEST BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1 BASIS OF PRESENTATION
 
The unaudited interim Consolidated Financial Statements in this Form 10-Q include the accounts of East West and its subsidiaries, East West Bank and subsidiaries (referred to herein as “East West Bank” or the “Bank”) and East West Insurance Services, Inc. Intercompany transactions and balances have been eliminated in consolidation. As of June 30, 2016, East West has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, the Trusts are not consolidated into the Company.

The unaudited interim Consolidated Financial Statements presented in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), applicable guidelines prescribed by regulatory authorities, and general practices within the banking industry, reflect all adjustments that, in the opinion of management, are necessary for fair statement of the interim period financial statements. Certain prior year balances and notes have been reclassified to conform to current period presentation.

The current period’s results of operations are not necessarily indicative of results that may be expected for any other interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the financial statements are issued for inclusion in the accompanying financial statements. The unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto, included in the Company’s 2015 Form 10-K.


NOTE 2CURRENT ACCOUNTING DEVELOPMENTS  

NEW ACCOUNTING PRONOUNCEMENTS ADOPTED 

In February 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis that changes the analysis a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amended guidance 1) modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities; 2) eliminates the presumption that a general partner should consolidate a limited partnership; 3) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and 4) provides a scope exception from consolidation guidance for reporting entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a7 of the Investment Company Act of 1940 for registered money market funds. The Company adopted this amended guidance in the first quarter of 2016 and the adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 simplifies the presentation of debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts. The Company adopted this guidance retrospectively in the first quarter of 2016. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2015-05 amends ASC 350-40 and requires the Company to determine whether a cloud computing arrangement contains a software license. If the arrangement contains a software license, the Company should account for the fees related to the software license element consistent with how the acquisitions of other software licenses are accounted for under ASC 350-40. If the arrangement does not contain a software license, the Company should account for the arrangement as a service contract. The Company adopted this guidance prospectively to all arrangements entered into or materially modified in the first quarter of 2016. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.
 

11



RECENT ACCOUNTING PRONOUNCEMENTS
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new guidance replaces existing revenue recognition guidance for contracts to provide goods or services to customers and amends existing guidance related to recognition of gains and losses on the sale of certain nonfinancial assets such as real estate.  ASU 2014-09 clarifies the principles for recognizing revenue and replaces nearly all existing revenue recognition guidance in U.S. GAAP. Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. ASU 2014-09 as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-12, is effective for interim and annual periods beginning after December 15, 2017 and is applied on either a modified retrospective or full retrospective basis. Early adoption is permitted for interim and annual periods beginning after December 15, 2016. The Company’s preliminary analysis suggests that the adoption of this accounting guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements. However, there are many aspects of the new accounting guidance that are still being interpreted and the FASB has recently issued updates to certain aspects of guidance. The results of our materiality analysis may change based on the conclusion reached as to the application of the new guidance.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires equity investments, except those accounted for under the equity method of accounting or consolidated, to be measured at fair value with changes recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost less impairment, whereby impairment is based on a qualitative assessment. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost and changes the presentation of financial assets and financial liabilities on the Consolidated Balance Sheet or in the footnotes. If an entity has elected the fair value option to measure liabilities, the new accounting guidance requires the portion of the change in the fair value of a liability resulting from credit risk to be presented in other comprehensive income. The Company has not elected to measure any of its liabilities at fair value. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted except for certain specific changes under the fair value option guidance. To adopt the amendments, the Company is required to make a cumulative-effect adjustment to the consolidated balance sheet as of the beginning of the fiscal year in which the guidance is effective. However, the amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the adoption date. The Company is currently evaluating the impact on its Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability in the accounting for lease transactions. ASU 2016-02 requires lessees to recognize all leases longer than twelve months on the Consolidated Balance Sheet as lease assets and lease liabilities and quantitative and qualitative disclosures regarding key information about leasing arrangements. Lessor accounting is largely unchanged. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with an option to early adopt. The Company is currently evaluating the impact on its Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship provided that all other hedge accounting criteria in ASC 815 continue to be met. This clarification applies to both cash flow and fair value hedging relationships. ASU 2016-05 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years with an option to early adopt. The Company has an option to adopt the amendments of this ASU either on a prospective basis or modified retrospective basis. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments that requires an entity to use a four step decision model when assessing contingent call (put) options that can accelerate the payment of principal on debt instruments to determine whether they are clearly and closely related to their debt hosts. ASU 2016-06 will be effective for interim and annual reporting periods beginning after December 15, 2016 and must be implemented using a modified retrospective basis. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements.


12



In March 2016, the FASB issued ASU 2016-07, Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting, to eliminate the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting. The amendments in ASU 2016-07 also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in AOCI at the date the investment becomes qualified for use of the equity method. ASU 2016-07 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years and should be applied prospectively. Early adoption is not permitted. The Company is currently evaluating the impact on its Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 also eliminated certain guidance in ASC 718 on when awards cease to be within the scope of ASC 718 and instead become subject to other U.S. GAAP requirements. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments to introduce a new approach based on expected losses to estimate credit losses on certain types of financial instruments, which modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new “expected credit loss” impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loans and lease losses and requires disclosure of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). ASU 2016-13 is effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Earlier adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact on its Consolidated Financial Statements.


NOTE 3 FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
 
In determining fair value, 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 the asset or 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 in active markets; quoted prices for identical or similar instruments 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.

In determining the appropriate hierarchy levels, the Company performs an analysis of the assets and liabilities that are subject to fair value disclosure. 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.


13



The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015:
 
 
 
 
 
 
 
 
 
 
 
Assets (Liabilities) Measured at Fair Value on a Recurring Basis
as of June 30, 2016
($ 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)
Available-for-sale investment securities:
 
 

 
 

 
 

 
 

U.S. Treasury securities
 
$
488,560

 
$
488,560

 
$

 
$

U.S. government agency and U.S. government sponsored enterprise debt securities
 
703,929

 

 
703,929

 

U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
 
 

 
 

 
 

 
 

Commercial mortgage-backed securities
 
308,364

 

 
308,364

 

Residential mortgage-backed securities
 
1,058,901

 

 
1,058,901

 

Municipal securities
 
153,903

 

 
153,903

 

Non-agency residential mortgage-backed securities:
 
 

 
 

 
 

 
 

Investment grade
 
55,975

 

 
55,975

 

Corporate debt securities:
 
 

 
 

 
 

 
 

Investment grade
 
416,864

 

 
416,864

 

Non-investment grade
 
8,408

 

 
8,408

 

Other securities
 
45,428

 
36,496

 
8,932

 

Total available-for-sale investment securities
 
$
3,240,332

 
$
525,056

 
$
2,715,276

 
$

 
 
 
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
$
1,732

 
$

 
$
1,732

 
$

Interest rate swaps and options
 
$
157,035

 
$

 
$
157,035

 
$

Foreign exchange contracts
 
$
10,078

 
$

 
$
10,078

 
$

 
 
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps on certificates of deposit
 
$
(810
)
 
$

 
$
(810
)
 
$

Interest rate swaps and options
 
$
(159,776
)
 
$

 
$
(159,776
)
 
$

Foreign exchange contracts
 
$
(8,634
)
 
$

 
$
(8,634
)
 
$

Credit risk participation agreements (“RPAs”)
 
$
(12
)
 
$

 
$
(12
)
 
$

 
 
 
 
 
 
 
 
 
 

14



 
 
 
Assets (Liabilities) Measured at Fair Value on a Recurring Basis
as of December 31, 2015
($ 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)
Available-for-sale investment securities:
 
 

 
 

 
 

 
 

U.S. Treasury securities
 
$
998,515

 
$
998,515

 
$

 
$

U.S. government agency and U.S. government sponsored enterprise debt securities
 
768,849

 

 
768,849

 

U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
 
 

 
 

 
 

 
 

Commercial mortgage-backed securities
 
351,662

 

 
351,662

 

Residential mortgage-backed securities
 
997,396

 

 
997,396

 

Municipal securities
 
175,649

 

 
175,649

 

Non-agency residential mortgage-backed securities:
 
 

 
 

 
 

 
 

Investment grade
 
62,393

 

 
62,393

 

Corporate debt securities:
 
 

 
 

 
 

 
 

Investment grade
 
364,713

 

 
364,713

 

Non-investment grade
 
9,642

 

 
9,642

 

Other securities
 
44,407

 
35,635

 
8,772

 

Total available-for-sale investment securities
 
$
3,773,226

 
$
1,034,150

 
$
2,739,076

 
$

 
 
 
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
$
2,365

 
$

 
$
2,365

 
$

Interest rate swaps and options
 
$
67,215

 
$

 
$
67,215

 
$

Foreign exchange contracts
 
$
10,254

 
$

 
$
10,254

 
$

 
 
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps on certificates of deposit
 
$
(5,213
)
 
$

 
$
(5,213
)
 
$

Interest rate swaps and options
 
$
(67,325
)
 
$

 
$
(67,325
)
 
$

Foreign exchange contracts
 
$
(9,350
)
 
$

 
$
(9,350
)
 
$

RPAs
 
$
(4
)
 
$

 
$
(4
)
 
$

 
 
 
 
 
 
 
 
 


15



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. There were no assets or liabilities measured using significant unobservable inputs (Level 3) on a recurring basis for the three and six months ended June 30, 2016. The following table presents a reconciliation of the beginning and ending balances for major asset and liability categories measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2015:
 
 
 
 
 
 
 
 
 
($ in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2015
 
Corporate
Debt
Securities:
Non-Investment
 Grade
 
Embedded Derivative 
Liabilities
 
Corporate
Debt
Securities:
Non-Investment
 Grade
 
Embedded
Derivative 
Liabilities
Beginning balance
 
$

 
$
(3,412
)
 
$
6,528

 
$
(3,392
)
Total gains (losses) for the period:
 
 
 
 
 
 

 
 

Included in earnings (1)
 

 

 
960

 
(20
)
Included in other comprehensive income (2)
 

 

 
922

 

Sales and settlements:
 
 
 
 
 
 

 
 

Sales
 

 

 
(7,219
)
 

Settlements
 

 
3,412

 
(98
)
 
3,412

Transfers in and/or out of Level 3
 

 

 
(1,093
)
 

Ending balance
 
$

 
$

 
$

 
$

Change in unrealized losses included in earnings relating to assets and liabilities held for the period
 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
(1)
Net gains or losses (realized and unrealized) of corporate debt securities and embedded derivative liabilities are included in Net gains on sales of available-for-sale investment securities and Other operating expense, respectively, on the Consolidated Statements of Income.
(2)
Unrealized gains or losses on available-for-sale investment securities are reported in Other comprehensive income, net of tax, on the Consolidated Statements of Comprehensive Income.

Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair values 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 measured on a recurring basis in and out of Level 1, Level 2, or Level 3 for the three and six months ended June 30, 2016, and three months ended June 30, 2015. During the six months ended June 30, 2015, the Company transferred $1.1 million of pooled trust preferred securities measured on a recurring basis out of Level 3 into Level 2 due to increased market liquidity and price observability.

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 impairments recognized during the period on certain non-PCI impaired loans, application of fair value less cost to sell on OREO and application of lower of cost or market (“LOCOM”) valuation on loans held for sale.


16



The following tables present the carrying amounts of all assets that were still held as of June 30, 2016 and December 31, 2015 for which a nonrecurring fair value measurement was recorded:
 
 
 
 
 
 
 
 
 
 
 
Assets Measured at Fair Value on a Nonrecurring Basis
as of June 30, 2016
($ 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 real estate (“CRE”)
 
$
21,443

 
$

 
$

 
$
21,443

Commercial and industrial (“C&I”)
 
50,362

 

 

 
50,362

Residential
 
15,957

 

 

 
15,957

Consumer
 
1,531

 

 

 
1,531

Total non-PCI impaired loans
 
$
89,293

 
$

 
$

 
$
89,293

OREO
 
$
3,647

 
$

 
$

 
$
3,647

Loans held for sale
 
$
27,895

 
$

 
$
27,895

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets Measured at Fair Value on a Nonrecurring Basis
as of December 31, 2015
($ 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:
 
 

 
 

 
 

 
 

CRE
 
$
17,252

 
$

 
$

 
$
17,252

C&I
 
35,558

 

 

 
35,558

Residential
 
16,472

 

 

 
16,472

Consumer
 
1,180

 

 

 
1,180

Total non-PCI impaired loans
 
$
70,462

 
$

 
$

 
$
70,462

OREO
 
$
4,929

 
$

 
$

 
$
4,929

Loans held for sale
 
$
29,238

 
$

 
$
29,238

 
$

 
 
 
 
 
 
 
 
 

The following table presents fair value adjustments of certain assets measured on a nonrecurring basis recognized during the three and six months ended and still held as of June 30, 2016 and 2015:
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
($ in thousands)
 
2016
 
2015
 
2016
 
2015
Non-PCI impaired loans:
 
 
 
 
 
 

 
 

CRE
 
$
(261
)
 
$
(445
)
 
$
1,908

 
$
(905
)
C&I
 
(4,693
)
 
(6,454
)
 
(9,149
)
 
(9,303
)
Residential
 
(4
)
 
(216
)
 
27

 
(341
)
Consumer
 
(2
)
 
(1
)
 
14

 
(1
)
Total non-PCI impaired loans
 
$
(4,960
)
 
$
(7,116
)
 
$
(7,200
)
 
$
(10,550
)
OREO
 
$
(1,073
)
 
$
(200
)
 
$
(1,529
)
 
$
(258
)
Loans held for sale
 
$

 
$
(517
)
 
$
(2,351
)
 
$
(517
)
 
 
 
 
 
 
 
 
 


17



The following table presents quantitative information about significant unobservable inputs used in the valuation of assets measured on a nonrecurring basis classified as Level 3 as of June 30, 2016 and December 31, 2015:
 
($ in thousands)
 
Fair Value
Measurements
(Level 3)
 
Valuation
Technique(s)
 
Unobservable
Input(s)
 
Range of Inputs
 
Weighted 
Average
June 30, 2016
 
 

 
 
 
 
 
 
 
 
Non-PCI impaired loans
 
$
48,169

 
Discounted cash flow
 
Discount rate
 
0%  84%
 
20%
 
 
$
41,124

 
Market comparables
 
Discount rate (1)
 
0%  100%
 
18%
OREO
 
$
3,647

 
Appraisal
 
Selling cost
 
8%
 
8%
December 31, 2015
 
 
 
 
 
 
 
 
 
 
Non-PCI impaired loans
 
$
27,522

 
Discounted cash flow
 
Discount rate
 
0%  87%
 
30%
 
 
$
42,940

 
Market comparables
 
Discount rate (1)
 
0%  100%
 
17%
OREO
 
$
4,929

 
Appraisal
 
Selling cost
 
8%
 
8%
 
 
 
 
 
 
 
 
 
 
 
(1)
Discount rate is adjusted for factors such as liquidation cost of collateral and selling cost.

The following tables present the carrying and fair values per the fair value hierarchy of certain financial instruments, excluding those measured at fair value on a recurring basis, as of June 30, 2016 and December 31, 2015:
 
($ in thousands)
 
June 30, 2016
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
 
Estimated
Fair Value
Financial assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,592,796

 
$
1,592,796

 
$

 
$

 
$
1,592,796

Short-term investments
 
$
229,979

 
$

 
$
229,979

 
$

 
$
229,979

Resale agreements (1)
 
$
1,850,000

 
$

 
$
1,850,427

 
$

 
$
1,850,427

Held-to-maturity investment security
 
$
159,208

 
$

 
$

 
$
158,279

 
$
158,279

Loans held for sale
 
$
51,290

 
$

 
$
51,290

 
$

 
$
51,290

Loans receivable, net
 
$
23,969,599

 
$

 
$

 
$
23,928,765

 
$
23,928,765

Investment in FHLB stock
 
$
18,158

 
$

 
$
18,158

 
$

 
$
18,158

Investment in Federal Reserve Bank stock
 
$
55,216

 
$

 
$
55,216

 
$

 
$
55,216

Accrued interest receivable
 
$
86,503

 
$

 
$
86,503

 
$

 
$
86,503

Financial liabilities:
 
 

 
 

 
 

 
 

 
 

Customer deposit accounts:
 
 

 
 

 
 

 
 

 
 

Demand, savings and money market deposits
 
$
22,484,884

 
$

 
$
22,484,884

 
$

 
$
22,484,884

Time deposits
 
$
5,732,359

 
$

 
$
5,736,110

 
$

 
$
5,736,110

Short-term borrowings
 
$
29,499

 
$

 
$
29,499

 
$

 
$
29,499

FHLB advances
 
$
320,526

 
$

 
$
332,595

 
$

 
$
332,595

Repurchase agreements (1)
 
$
200,000

 
$

 
$
268,353

 
$

 
$
268,353

Accrued interest payable
 
$
8,053

 
$

 
$
8,053

 
$

 
$
8,053

Long-term debt
 
$
196,204

 
$

 
$
196,826

 
$

 
$
196,826

 
(1)
Resale and repurchase agreements are reported net pursuant to ASC 210-20-45, Balance Sheet Offsetting. As of June 30, 2016, $250.0 million out of $450.0 million of repurchase agreements was eligible for netting against resale agreements.


18



 
 
 
December 31, 2015
($ in thousands)
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
 
Estimated
Fair Value
Financial assets:
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
1,360,887

 
$
1,360,887

 
$

 
$

 
$
1,360,887

Short-term investments
 
$
299,916

 
$

 
$
299,916

 
$

 
$
299,916

Resale agreements (1)
 
$
1,600,000

 
$

 
$
1,533,961

 
$

 
$
1,533,961

Loans held for sale
 
$
31,958

 
$

 
$
31,958

 
$

 
$
31,958

Loans receivable, net
 
$
23,378,789

 
$

 
$

 
$
23,000,817

 
$
23,000,817

Investment in FHLB stock
 
$
28,770

 
$

 
$
28,770

 
$

 
$
28,770

Investment in Federal Reserve Bank stock
 
$
54,932

&#