Fair value measurements

6 Months Ended

Jun. 30, 2011

Fair value measurements [Abstract]

Fair value measurements

12. Fair value measurements

GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has not made any fair value elections at June 30, 2011.

     Pursuant to GAAP, 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. A three-level hierarchy exists in GAAP for fair value measurements based upon the inputs to the valuation of an asset or liability.

• Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.

• Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

• Level 3 — Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability.

     When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation. The following is a description of the valuation methodologies used for the Company’s assets and liabilities that are measured on a recurring basis at estimated fair value.

Trading account assets and liabilities

Trading account assets and liabilities consist primarily of interest rate swap agreements and foreign exchange contracts with customers who require such services with offsetting positions with third parties to minimize the Company’s risk with respect to such transactions. The Company generally determines the fair value of its derivative trading account assets and liabilities using externally developed pricing models based on market observable inputs and therefore classifies such valuations as Level 2. Mutual funds held in connection with deferred compensation arrangements have been classified as Level 1 valuations. Valuations of investments in municipal and other bonds can generally be obtained through reference to quoted prices in less active markets for the same or similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2.

Investment securities available for sale

The majority of the Company’s available-for-sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. Certain investments in mutual funds and equity securities are actively traded and therefore have been classified as Level 1 valuations.

     Trading activity in privately issued mortgage-backed securities has been limited. The markets for such securities were generally characterized by a sharp reduction of non-agency mortgage-backed securities issuances, a significant reduction in trading volumes and wide bid-ask spreads. Although estimated prices were generally obtained for such securities, the Company was significantly restricted in the level of market observable assumptions used in the valuation of its privately issued mortgage-backed securities portfolio. Specifically, market assumptions regarding credit adjusted cash flows and liquidity influences on discount rates were difficult to observe at the individual bond level. Because of the inactivity in the markets and the lack of observable valuation inputs, the Company has classified the valuation of privately issued mortgage-backed securities as Level 3.

     GAAP provides guidance for estimating fair value when the volume and level of trading activity for an asset or liability have significantly decreased. The Company has concluded that there has been a significant decline in the volume and level of activity in the market for privately issued mortgage-backed securities. Therefore, the Company supplemented its determination of fair value for many of its privately issued mortgage-backed securities by obtaining pricing indications from two independent sources at June 30, 2011 and December 31, 2010. However, the Company could not readily ascertain that the basis of such valuations could be ascribed to orderly and observable trades in the market for privately issued residential mortgage-backed securities. As a result, the Company also performed internal modeling to estimate the cash flows and fair value of privately issued residential mortgage-backed securities with an amortized cost basis of $1.4 billion at June 30, 2011 and $1.5 billion at December 31, 2010. The Company’s internal modeling techniques included discounting estimated bond-specific cash flows using assumptions about cash flows associated with loans underlying each of the bonds, including estimates about the timing and amount of credit losses and prepayments. In estimating those cash flows, the Company used assumptions as to future delinquency, defaults, further home price depreciation and loss rates. Differences between internal model valuations and external pricing indications were generally considered to be reflective of the lack of liquidity in the market for privately issued mortgage-backed securities given the nature of the cash flow modeling performed in the Company’s assessment of value. To determine the point within the range of potential values that was most representative of fair value under current market conditions for each of the bonds, the Company computed values based on judgmentally applied weightings of the internal model valuations and the indications obtained from the average of the two independent pricing sources. Weightings applied to internal model valuations generally ranged from zero to 40% depending on bond structure and collateral type, with prices for bonds in non-senior tranches generally receiving lower weightings on the internal model results and senior bonds receiving a higher model weighting. At June 30, 2011, weighted-average reliance on internal model pricing for the bonds modeled was 34% with a 66% average weighting placed on the values provided by the independent sources. The Company concluded its estimate of fair value for the $1.4 billion of privately issued residential mortgage-backed securities to approximate $1.2 billion, which implies a weighted-average market yield based on reasonably likely cash flows of 7.6%. Other valuations of privately issued residential mortgage-backed securities were determined by reference to independent pricing sources without adjustment.

     Included in collateralized debt obligations are securities backed by trust preferred securities issued by financial institutions and other entities. Given the severe disruption in the credit markets and the wide disparity in observable trade information, the Company could not obtain pricing indications for many of these securities from its two primary independent pricing sources. The Company, therefore, performed internal modeling to estimate the cash flows and fair value of its portfolio of securities backed by trust preferred securities at June 30, 2011 and December 31, 2010. The modeling techniques included discounting estimated cash flows using bond-specific assumptions about defaults, deferrals and prepayments of the trust preferred securities underlying each bond. The estimation of cash flows included assumptions as to future collateral defaults and related loss severities. The resulting cash flows were then discounted by reference to market yields observed in the single-name trust preferred securities market. At June 30, 2011, the total amortized cost and fair value of securities backed by trust preferred securities issued by financial institutions and other entities was $44 million and $62 million, respectively, and at December 31, 2010 were $95 million and $111 million, respectively. Privately issued mortgage-backed securities and securities backed by trust preferred securities issued by financial institutions and other entities constituted all of the available-for-sale investment securities classified as Level 3 valuations as of June 30, 2011 and December 31, 2010.

Real estate loans held for sale

The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of real estate loans held for sale. The carrying value of hedged real estate loans held for sale includes changes in estimated fair value during the hedge period. Typically, the Company attempts to hedge real estate loans held for sale from the date of close through the sale date. The fair value of hedged real estate loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans with similar characteristics and, accordingly, such loans have been classified as a Level 2 valuation.

Commitments to originate real estate loans for sale and commitments to sell real estate loans

The Company enters into various commitments to originate real estate loans for sale and commitments to sell real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell real estate loans to certain government-sponsored entities and other parties. The fair valuations of commitments to sell real estate loans generally result in a Level 2 classification. The estimated fair value of commitments to originate real estate loans for sale are adjusted to reflect the Company’s anticipated commitment expirations. Estimated commitment expirations are considered a significant unobservable input, which results in a Level 3 classification. The Company includes the expected net future cash flows related to the associated servicing of the loan in the fair value measurement of a derivative loan commitment. The estimated value ascribed to the expected net future servicing cash flows is also considered a significant unobservable input contributing to the Level 3 classification of commitments to originate real estate loans for sale.

Interest rate swap agreements used for interest rate risk management

The Company utilizes interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain portions of its portfolios of earning assets and interest-bearing liabilities. The Company generally determines the fair value of its interest rate swap agreements using externally developed pricing models based on market observable inputs and therefore classifies such valuations as Level 2. The Company has considered counterparty credit risk in the valuation of its interest rate swap assets and has considered its own credit risk in the valuation of its interest rate swap liabilities.

     The following tables present assets and liabilities at June 30, 2011 and December 31, 2010 measured at estimated fair value on a recurring basis:

	Fair value
	measurements at
	June 30,
	2011		Level 1 (a)		Level 2 (a)		Level 3
			(in thousands)
Trading account assets	$	502,986		57,523		445,463		—
Investment securities available for sale:
U.S. Treasury and federal agencies		112,953		—		112,953		—
Obligations of states and political subdivisions		67,491		—		67,491		—
Mortgage-backed securities:
Government issued or guaranteed		3,023,018		—		3,023,018		—
Privately issued residential		1,306,202		—		—		1,306,202
Privately issued commercial		17,233		—		—		17,233
Collateralized debt obligations		61,601		—		—		61,601
Other debt securities		195,536		—		195,536		—
Equity securities		106,455		84,676		21,779		—
		4,890,489		84,676		3,420,777		1,385,036
Real estate loans held for sale		414,643		—		414,643		—
Other assets (b)		122,230		—		108,672		13,558
Total assets	$	5,930,348		142,199		4,389,555		1,398,594
Trading account liabilities	$	366,483		—		366,483		—
Other liabilities (b)		7,021		—		6,634		387
Total liabilities	$	373,504		—		373,117		387

	Fair value
	measurements at
	December 31,
	2010		Level 1 (a)		Level 2 (a)		Level 3
			(in thousands)
Trading account assets	$	523,834		53,032		470,802		—
Investment securities available for sale:
U.S. Treasury and federal agencies		63,434		—		63,434		—
Obligations of states and political subdivisions		60,425		—		60,425		—
Mortgage-backed securities:
Government issued or guaranteed		3,306,241		—		3,306,241		—
Privately issued residential		1,435,561		—		—		1,435,561
Privately issued commercial		22,407		—		—		22,407
Collateralized debt obligations		110,756		—		—		110,756
Other debt securities		298,900		—		298,900		—
Equity securities		115,768		106,872		8,896		—
		5,413,492		106,872		3,737,896		1,568,724
Real estate loans held for sale		544,567		—		544,567		—
Other assets (b)		114,666		—		111,839		2,827
Total assets	$	6,596,559		159,904		4,865,104		1,571,551
Trading account liabilities	$	333,222		—		333,222		—
Other liabilities (b)		3,607		—		3,024		583
Total liabilities	$	336,829		—		336,246		583

(a)	There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during the three months and six months ended June 30, 2011 and 2010.
(b)	Comprised predominantly of interest rate swap agreements used for interest rate risk management (Level 2), commitments to sell real estate loans (Level 2) and commitments to originate real estate loans to be held for sale (Level 3).

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

	Investment securities available for sale
	Privately issued			Privately issued
	residential			commercial			Collateralized			Other assets
	mortgage-backed			mortgage-backed			debt			and other
	securities			securities			obligations			liabilities
				(in thousands)
Balance — March 31, 2011	$	1,391,878		$	20,467		$	114,265		$	16,147
Total gains (losses) realized/unrealized:
Included in earnings		(24,530	)(a)		—			—			22,800	(b)
Included in other comprehensive income		38,471			(1,400	)		3,372			—
Purchases		—			—			50,790			—
Sales		—			—			(105,643	)		—
Settlements		(99,617	)		(1,834	)		(1,183	)		—
Transfers in and/or out of Level 3 (c)		—			—			—			(25,776	)
Balance — June 30, 2011	$	1,306,202		$	17,233		$	61,601		$	13,171
Changes in unrealized gains (losses) included in earnings related to assets still held at June 30, 2011	$	(24,530	)(a)	$	—		$	—		$	10,252	(b)

     The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the three months ended June 30, 2010 were as follows:

	Investment securities available for sale
	Privately issued			Privately issued
	residential			commercial			Collateralized			Other			Other assets
	mortgage-backed			mortgage-backed			debt			debt			and other
	securities			securities			obligations			securities			liabilities
				(in thousands)
Balance — March 31, 2010	$	1,664,341		$	25,125		$	125,755		$	455		$	8,171
Total gains (losses) realized/unrealized:
Included in earnings		(7,896	)(a)		—			(2,491	)(a)		—			29,828	(b)
Included in other comprehensive income		40,794			4,021			(5,088	)		—			—
Settlements		(99,206	)		(2,503	)		(136	)		—			—
Transfers in and/or out of Level 3 (c)		—			—			—			(455	)		(17,156	)
Balance — June 30, 2010	$	1,598,033		$	26,643		$	118,040		$	—		$	20,843
Changes in unrealized gains (losses) included in earnings related to assets still held at June 30, 2010	$	(7,896	)(a)	$	—		$	(2,491	)(a)	$	—		$	20,097	(b)

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

	Investment securities available for sale
	Privately issued			Privately issued
	residential			commercial			Collateralized			Other assets
	mortgage-backed			mortgage-backed			debt			and other
	securities			securities			obligations			liabilities
				(in thousands)
Balance — January 1, 2011	$	1,435,561		$	22,407		$	110,756		$	2,244
Total gains (losses) realized/unrealized:
Included in earnings		(32,071	)(a)		—			—			43,244	(b)
Included in other comprehensive income		99,556			(1,482	)		7,206			—
Purchases		—			—			50,790			—
Sales		—			—			(105,643	)		—
Settlements		(196,844	)		(3,692	)		(1,508	)		—
Transfers in and/or out of Level 3 (c)		—			—			—			(32,317	)
Balance — June 30, 2011	$	1,306,202		$	17,233		$	61,601		$	13,171
Changes in unrealized gains (losses) included in earnings related to assets still held at June 30, 2011	$	(32,071	)(a)	$	—		$	—		$	13,139	(b)

     The changes in Level 3 assets and liabilities measured at estimated fair value on a recurring basis during the six months ended June 30, 2010 were as follows:

	Investment securities available for sale
	Privately issued			Privately issued
	residential			commercial			Collateralized						Other assets
	mortgage-backed			mortgage-backed			debt			Other			and other
	securities			securities			obligations			debt securities			liabilities
	(in thousands)
Balance – January 1, 2010	$	2,064,904		$	25,166		$	115,346		$	420		$	(80	)
Total gains (losses) realized/unrealized:
Included in earnings		(34,343	)(a)		—			(2,846	)(a)		—			47,850	(b)
Included in other comprehensive income		115,248			6,094			5,807			35			—
Settlements		(192,528	)		(4,617	)		(267	)		—			—
Transfers in and/or out of Level 3 (c)		(355,248	)(d)		—			—			(455	)		(26,927	)
Balance – June 30, 2010	$	1,598,033		$	26,643		$	118,040		$	—		$	20,843
Changes in unrealized gains (losses) included in earnings related to assets still held at June 30, 2010	$	(34,343	)(a)	$	—		$	(2,846	)(a)	$	—		$	20,598	(b)

(a)	Reported as an other-than-temporary impairment loss in the consolidated statement of income or as gain (loss) on bank investment securities.
(b)	Reported as mortgage banking revenues in the consolidated statement of income and includes the fair value of commitment issuances and expirations.
(c)	The Company’s policy for transfers between fair value levels is to recognize the transfer as of the actual date of the event or change in circumstances that caused the transfer.
(d)	As a result of the Company’s adoption of new accounting rules governing the consolidation of variable interest entities, effective January 1, 2010 the Company derecognized $355 million of available-for-sale investment securities previously classified as Level 3 measurements.

     The Company is required, on a nonrecurring basis, to adjust the carrying value of certain assets or provide valuation allowances related to certain assets using fair value measurements. The more significant of those assets follow.

Loans

Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2, unless significant adjustments have been made to the valuation that are not readily observable by market participants. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Loans subject to nonrecurring fair value measurement were $478 million at June 30, 2011 ($324 million and $154 million of which were classified as Level 2 and Level 3, respectively) and $664 million at June 30, 2010 ($378 million and $286 million of which were classified as Level 2 and Level 3, respectively). Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on June 30, 2011 were decreases of $61 million and $91 million for the three- and six-month periods ended June 30, 2011, respectively. Changes in fair value recognized for partial charge-offs of loans and loan impairment reserves on loans held by the Company on June 30, 2010 were decreases of $64 million and $125 million for the three- and six-month periods ended June 30, 2010, respectively.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and are generally measured at the lower of cost or fair value less costs to sell. The fair value of the real property is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace, and the related nonrecurring fair value measurement adjustments have generally been classified as Level 2. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were $50 million and $127 million at June 30, 2011 and June 30, 2010, respectively. Reflecting further declines in residential real estate and residential development projects subsequent to foreclosure, changes in fair value recognized for those foreclosed assets held by the Company at June 30, 2011 were $13 million and $15 million for the three months and six months ended June 30, 2011, respectively. Changes in fair value recognized for those foreclosed assets held by the Company at June 30, 2010 were $16 million and $21 million for the three months and six months ended June 30, 2010, respectively.

Disclosures of fair value of financial instruments

With the exception of marketable securities, certain off-balance sheet financial instruments and one-to-four family residential mortgage loans originated for sale, the Company’s financial instruments are not readily marketable and market prices do not exist. The Company, in attempting to comply with the provisions of GAAP that require disclosures of fair value of financial instruments, has not attempted to market its financial instruments to potential buyers, if any exist. Since negotiated prices in illiquid markets depend greatly upon the then present motivations of the buyer and seller, it is reasonable to assume that actual sales prices could vary widely from any estimate of fair value made without the benefit of negotiations. Additionally, changes in market interest rates can dramatically impact the value of financial instruments in a short period of time. Additional information about the assumptions and calculations utilized follows.

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

	June 30, 2011						December 31, 2010
	Carrying			Calculated			Carrying			Calculated
	amount			estimate			amount			estimate
	(in thousands)
Financial assets:
Cash and cash equivalents	$	1,332,915		$	1,332,915		$	933,755		$	933,755
Interest-bearing deposits at banks		2,275,450			2,275,450			101,222			101,222
Trading account assets		502,986			502,986			523,834			523,834
Agreements to resell securities		380,000			380,000			—			—
Investment securities		6,492,265			6,416,075			7,150,540			7,051,454
Loans and leases:
Commercial loans and leases		15,040,892			14,827,062			13,390,610			13,135,569
Commercial real estate loans		24,263,726			23,979,139			21,183,161			20,840,346
Residential real estate loans		6,970,921			6,809,347			5,928,056			5,699,028
Consumer loans		12,265,690			11,962,056			11,488,555			11,178,583
Allowance for credit losses		(907,589	)		—			(902,941	)		—
Loans and leases, net		57,633,640			57,577,604			51,087,441			50,853,526
Accrued interest receivable		212,357			212,357			202,182			202,182
Financial liabilities:
Noninterest-bearing deposits	$	(18,598,828	)	$	(18,598,828	)	$	(14,557,568	)	$	(14,557,568	)
Savings deposits and NOW accounts		(32,400,035	)		(32,400,035	)		(27,824,630	)		(27,824,630	)
Time deposits		(7,678,799	)		(7,713,421	)		(5,817,170	)		(5,865,779	)
Deposits at Cayman Islands office		(551,553	)		(551,553	)		(1,605,916	)		(1,605,916	)
Short-term borrowings		(567,144	)		(567,144	)		(947,432	)		(947,432	)
Long-term borrowings		(7,128,916	)		(7,280,296	)		(7,840,151	)		(7,937,397	)
Accrued interest payable		(89,182	)		(89,182	)		(71,954	)		(71,954	)
Trading account liabilities		(366,483	)		(366,483	)		(333,222	)		(333,222	)
Other financial instruments:
Commitments to originate real estate loans for sale	$	13,171		$	13,171		$	2,244		$	2,244
Commitments to sell real estate loans		(4,139	)		(4,139	)		12,178			12,178
Other credit-related commitments		(99,959	)		(99,959	)		(74,426	)		(74,426	)
Interest rate swap agreements used for interest rate risk management		106,177			106,177			96,637			96,637

     The following assumptions, methods and calculations were used in determining the estimated fair value of financial instruments.

Cash and cash equivalents, interest-bearing deposits at banks, agreements to resell securities, short-term borrowings, accrued interest receivable and accrued interest payable

Due to the nature of cash and cash equivalents and the near maturity of interest-bearing deposits at banks, agreements to resell securities, short-term borrowings, accrued interest receivable and accrued interest payable, the Company estimated that the carrying amount of such instruments approximated estimated fair value.

Investment securities

Estimated fair values of investments in readily marketable securities were generally based on quoted market prices. Investment securities that were not readily marketable were assigned amounts based on estimates provided by outside parties or modeling techniques that relied upon discounted calculations of projected cash flows or, in the case of other investment securities, which include capital stock of the Federal Reserve Bank of New York and the Federal Home Loan Bank of New York, at an amount equal to the carrying amount.

Loans and leases

In general, discount rates used to calculate values for loan products were based on the Company’s pricing at the respective period end. A higher discount rate was assumed with respect to estimated cash flows associated with nonaccrual loans. Projected loan cash flows were adjusted for estimated credit losses. However, such estimates made by the Company may not be indicative of assumptions and adjustments that a purchaser of the Company’s loans and leases would seek.

Deposits

Pursuant to GAAP, the estimated fair value ascribed to noninterest-bearing deposits, savings deposits and NOW accounts must be established at carrying value because of the customers’ ability to withdraw funds immediately. Time deposit accounts are required to be revalued based upon prevailing market interest rates for similar maturity instruments. As a result, amounts assigned to time deposits were based on discounted cash flow calculations using prevailing market interest rates based on the Company’s pricing at the respective date for deposits with comparable remaining terms to maturity.

     The Company believes that deposit accounts have a value greater than that prescribed by GAAP. The Company feels, however, that the value associated with these deposits is greatly influenced by characteristics of the buyer, such as the ability to reduce the costs of servicing the deposits and deposit attrition which often occurs following an acquisition.

Long-term borrowings

The amounts assigned to long-term borrowings were based on quoted market prices, when available, or were based on discounted cash flow calculations using prevailing market interest rates for borrowings of similar terms and credit risk.

Commitments to originate real estate loans for sale and commitments to sell real estate loans

The Company enters into various commitments to originate real estate loans for sale and commitments to sell real estate loans. Such commitments are considered to be derivative financial instruments and, therefore, are carried at estimated fair value on the consolidated balance sheet. The estimated fair values of such commitments were generally calculated by reference to quoted market prices for commitments to sell real estate loans to certain government-sponsored entities and other parties.

Interest rate swap agreements used for interest rate risk management

The estimated fair value of interest rate swap agreements used for interest rate risk management represents the amount the Company would have expected to receive or pay to terminate such agreements.

Other commitments and contingencies

As described in note 13, in the normal course of business, various commitments and contingent liabilities are outstanding, such as loan commitments, credit guarantees and letters of credit. The Company’s pricing of such financial instruments is based largely on credit quality and relationship, probability of funding and other requirements. Loan commitments often have fixed expiration dates and contain termination and other clauses which provide for relief from funding in the event of significant deterioration in the credit quality of the customer. The rates and terms of the Company’s loan commitments, credit guarantees and letters of credit are competitive with other financial institutions operating in markets served by the Company. The Company believes that the carrying amounts, which are included in other liabilities, are reasonable estimates of the fair value of these financial instruments.

     The Company does not believe that the estimated information presented herein is representative of the earnings power or value of the Company. The preceding analysis, which is inherently limited in depicting fair value, also does not consider any value associated with existing customer relationships nor the ability of the Company to create value through loan origination, deposit gathering or fee generating activities.

     Many of the estimates presented herein are based upon the use of highly subjective information and assumptions and, accordingly, the results may not be precise. Management believes that fair value estimates may not be comparable between financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made. Furthermore, because the disclosed fair value amounts were estimated as of the balance sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.