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Fair Value Measurements
9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair value represents the estimated price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept). Following is a description of the valuation methodologies used for the Corporation’s more significant instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
Investment securities available for sale
Where quoted prices are available in an active market, investment securities are classified in Level 1 of the fair value hierarchy. Level 1 investment securities primarily include U.S. Treasury and exchange-traded debt and equity securities. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy. Examples of these investment securities include obligations of state and political subdivisions ("municipal securities"), mortgage-related securities and other debt securities. Lastly, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, securities are classified within Level 3 of the fair value hierarchy. To validate the fair value estimates, assumptions, and controls, the Corporation looks to transactions for similar instruments and utilizes independent pricing provided by third party vendors or brokers and relevant market indices. While none of these sources are solely indicative of fair value, they serve as directional indicators for the appropriateness of the Corporation’s fair value estimates. The Corporation has determined that the fair value measures of its investment securities are classified predominantly within Level 1 or 2 of the fair value hierarchy. See Note 6 for additional disclosure regarding the Corporation’s investment securities.
Derivative financial instruments (interest rate-related instruments)
The Corporation has used, and may again use in the future, interest rate swaps to manage its interest rate risk. In addition, the Corporation offers customer interest rate-related instruments (swaps and caps) to service our customers’ needs, for which the Corporation simultaneously enters into offsetting derivative financial instruments (i.e., mirror interest rate-related instruments) with third parties to manage its interest rate risk associated with these financial instruments. The valuation of the Corporation’s derivative financial instruments is determined using discounted cash flow analysis on the expected cash flows of each derivative and, also includes a nonperformance / credit risk component (credit valuation adjustment). See Note 11 for additional disclosure regarding the Corporation’s derivative financial instruments.
The discounted cash flow analysis component in the fair value measurement reflects the contractual terms of the derivative financial instruments, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. More specifically, the fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments), with the variable cash payments (or receipts) based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Likewise, the fair values of interest rate options (i.e., interest rate caps) are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (or rise above) the strike rate of the floors (or caps), with the variable interest rates used in the calculation of projected receipts on the floor (or cap) based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.
The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative financial instruments for the effect of nonperformance risk, the Corporation has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the FASB’s fair value measurement guidance, the Corporation made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.
While the Corporation has determined that the majority of the inputs used to value its derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions as of September 30, 2015, and December 31, 2014, and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. Therefore, the Corporation has determined that the fair value measures of its derivative financial instruments in their entirety are classified within Level 2 of the fair value hierarchy.
Derivative financial instruments (foreign currency exchange forwards)
The Corporation provides foreign currency exchange services to customers. In addition, the Corporation may enter into a foreign currency exchange forward to mitigate the exchange rate risk attached to the cash flows of a loan or as an offsetting contract to a forward entered into as a service to our customer. The valuation of the Corporation’s foreign currency exchange forwards is determined using quoted prices of foreign currency exchange forwards with similar characteristics, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate, and are classified in Level 2 of the fair value hierarchy. See Note 11 for additional disclosures regarding the Corporation’s foreign currency exchange forwards.
Derivative financial instruments (mortgage derivatives)
Mortgage derivatives include interest rate lock commitments to originate residential mortgage loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors. The Corporation relies on an internal valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups.
The Corporation also relies on an internal valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Corporation would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available. While there are Level 2 and 3 inputs used in the valuation models, the Corporation has determined that the majority of the inputs significant in the valuation of both of the mortgage derivatives fall within Level 3 of the fair value hierarchy. See Note 11 for additional disclosure regarding the Corporation’s mortgage derivatives.
Following is a description of the valuation methodologies used for the Corporation’s more significant instruments measured on a nonrecurring basis at the lower of amortized cost or estimated fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
Loans Held for Sale
Loans held for sale, which consist generally of current production of certain fixed-rate, first-lien residential mortgage loans, are carried at the lower of cost or estimated fair value. The estimated fair value was based on what secondary markets are currently offering for portfolios with similar characteristics, which the Corporation classifies as a Level 2 nonrecurring fair value measurement.
Impaired Loans
The Corporation considers a loan impaired when it is probable that the Corporation will be unable to collect all amounts due according to the original contractual terms of the note agreement, including both principal and interest. Management has determined that commercial and consumer loan relationships that have nonaccrual status or have had their terms restructured in a troubled debt restructuring meet this impaired loan definition. For individually evaluated impaired loans, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note. See Note 7 for additional information regarding the Corporation’s impaired loans.
Mortgage servicing rights
 
Mortgage servicing rights do not trade in an active, open market with readily observable prices. While sales of mortgage servicing rights do occur, the precise terms and conditions typically are not readily available to allow for a “quoted price for similar assets” comparison. Accordingly, the Corporation utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of its mortgage servicing rights. The valuation model incorporates prepayment assumptions to project mortgage servicing rights cash flows based on the current interest rate scenario, which is then discounted to estimate an expected fair value of the mortgage servicing rights. The valuation model considers portfolio characteristics of the underlying mortgages, contractually specified servicing fees, prepayment assumptions, discount rate assumptions, delinquency rates, late charges, other ancillary revenue, costs to service, and other economic factors. The Corporation periodically reviews and assesses the underlying inputs and assumptions used in the model. In addition, the Corporation compares its fair value estimates and assumptions to observable market data for mortgage servicing rights, where available, and to recent market activity and actual portfolio experience. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the fair value hierarchy. The Corporation uses the amortization method (i.e., lower of amortized cost or estimated fair value measured on a nonrecurring basis), not fair value measurement accounting, for its mortgage servicing rights assets. See Note 8 for additional disclosure regarding the Corporation’s mortgage servicing rights.

The table below presents the Corporation’s investment securities available for sale and derivative financial instruments measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014, aggregated by the level in the fair value hierarchy within which those measurements fall.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
 
 
Fair Value Measurements Using
 
September 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
($ in Thousands)
Assets:
 
 
 
 
 
 
 
Investment securities available for sale:
 
 
 
 
 
 
 
U.S. Treasury securities
$
1,002

 
$
1,002

 
$

 
$

Municipal securities
427,701

 

 
427,701

 

Residential mortgage-related securities:
 
 
 
 
 
 
 
Government-sponsored enterprise (GSE)
3,088,923

 

 
3,088,923

 

Private-label
1,746

 

 
1,746

 

GSE commercial mortgage-related securities
1,877,581

 

 
1,877,581

 

Other securities (debt and equity)
6,703

 
3,503

 
3,000

 
200

Total investment securities available for sale
$
5,403,656

 
$
4,505

 
$
5,398,951

 
$
200

Derivatives (trading and other assets)
$
49,251

 
$

 
$
46,667

 
$
2,584

Liabilities:
 
 
 
 
 
 
 
Derivatives (trading and other liabilities)
$
50,714

 
$

 
$
48,732

 
$
1,982

 
 
 
Fair Value Measurements Using
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
($ in Thousands)
Assets:
 
 
 
 
 
 
 
Investment securities available for sale:
 
 
 
 
 
 
 
U.S. Treasury securities
$
998

 
$
998

 
$

 
$

Municipal securities
582,679

 

 
582,679

 

Residential mortgage-related securities:
 
 
 
 
 
 
 
GSE
3,730,789

 

 
3,730,789

 

Private-label
2,294

 

 
2,294

 

GSE commercial mortgage-related securities
1,073,893

 

 
1,073,893

 

Other securities (debt and equity)
6,159

 
2,959

 
3,000

 
200

Total investment securities available for sale
$
5,396,812

 
$
3,957

 
$
5,392,655

 
$
200

Derivatives (trading and other assets)
$
43,164

 
$

 
$
41,217

 
$
1,947

Liabilities:
 
 
 
 
 
 
 
Derivatives (trading and other liabilities)
$
45,818

 
$

 
$
43,383

 
$
2,435


The table below presents a rollforward of the balance sheet amounts for the year ended December 31, 2014 and the nine months ended September 30, 2015, for financial instruments measured on a recurring basis and classified within Level 3 of the fair value hierarchy.
 
Investment Securities
Available for Sale
 
Derivative Financial
Instruments
($ in Thousands)
Balance December 31, 2013
$
299

 
$
1,717

Total net losses included in income:
 
 
 
Mortgage derivative loss

 
(2,205
)
Sales of investment securities
(99
)
 

Balance December 31, 2014
$
200

 
$
(488
)
Total net gains included in income:
 
 
 
Mortgage derivative gain

 
1,090

Balance September 30, 2015
$
200

 
$
602


For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2015, the Corporation utilized the following valuation techniques and significant unobservable inputs.
Derivative financial instruments (mortgage derivative – interest rate lock commitments to originate residential mortgage loans held for sale)
The significant unobservable input used in the fair value measurement of the Corporation’s mortgage derivative interest rate lock commitments (“IRLC”) is the closing ratio, which represents the percentage of loans currently in a lock position which management estimates will ultimately close. The closing ratio calculation takes into consideration historical data and loan-level data, particularly the change in the current interest rates from the time of initial rate lock. The closing ratio is periodically reviewed for reasonableness and reported to the Mortgage Risk Management Committee. At September 30, 2015, the closing ratio was 87%.
Impaired loans
For individually evaluated impaired loans, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note, resulting in average discounts of 10% to 20%.
Mortgage servicing rights
The discounted cash flow analyses that generate expected market prices utilize the observable characteristics of the mortgage servicing rights portfolio, as well as certain unobservable valuation parameters. The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are the weighted average constant prepayment rate and weighted average discount rate, which were 13.4% and 9.6% at September 30, 2015, respectively. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.
These parameter assumptions fall within a range that the Corporation, in consultation with an independent third party, believes purchasers of servicing would apply to such portfolios sold into the current secondary servicing market. Discussions are held with members from management to reconcile the fair value estimates and the key assumptions used by the respective parties in arriving at those estimates. The Mortgage Risk Management Committee is responsible for providing control over the valuation methodology and key assumptions. To assess the reasonableness of the fair value measurement, the Corporation also compares the fair value and constant prepayment rate to a value calculated by an independent third party on an annual basis.
The table below presents the balances of the Corporation’s loans held for sale, impaired loans, and mortgage servicing rights measured at fair value on a nonrecurring basis as of September 30, 2015 and December 31, 2014, aggregated by the level in the fair value hierarchy within which those measurements fall.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
 
 
 
Fair Value Measurements Using
 
September 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
($ in Thousands)
Assets:
 
 
 
 
 
 
 
Loans held for sale
$
106,276

 
$

 
$
106,276

 
$

Impaired loans (1)
72,661

 

 

 
72,661

Mortgage servicing rights
67,794

 

 

 
67,794

 
 
 
Fair Value Measurements Using
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
($ in Thousands)
Assets:
 
 
 
 
 
 
 
Loans held for sale
$
156,423

 
$

 
$
156,423

 
$

Impaired loans (1)
83,956

 

 

 
83,956

Mortgage servicing rights
66,342

 

 

 
66,342

(1)
Represents individually evaluated impaired loans, net of the related allowance for loan losses.
Certain nonfinancial assets measured at fair value on a nonrecurring basis include other real estate owned (upon initial recognition or subsequent impairment), nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other nonfinancial long-lived assets measured at fair value for impairment assessment.
During the first nine months of 2015 and the full year 2014, certain other real estate owned, upon initial recognition, was re-measured and reported at fair value through a charge off to the allowance for loan losses based upon the estimated fair value of the other real estate owned, less estimated selling costs. The fair value of other real estate owned, upon initial recognition or subsequent impairment, was estimated using appraised values, which the Corporation classifies as a Level 2 nonrecurring fair value measurement. Other real estate owned measured at fair value upon initial recognition totaled approximately $6 million for the first nine months of 2015 and $21 million for the year ended December 31, 2014. In addition to other real estate owned measured at fair value upon initial recognition, the Corporation also recorded write-downs to the balance of other real estate owned for subsequent impairment of less than $1 million and $2 million to asset losses, net for the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively.
Fair Value of Financial Instruments:
Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments.
 
September 30, 2015
 
Carrying Amount
 
Fair Value
 
Fair Value Measurements Using
Level 1
 
Level 2
 
Level 3
 
($ in Thousands)
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
303,701

 
$
303,701

 
$
303,701

 
$

 
$

Interest-bearing deposits in other financial institutions
70,023

 
70,023

 
70,023

 

 

Federal funds sold and securities purchased under agreements to resell
36,490

 
36,490

 
36,490

 

 

Investment securities held to maturity
604,799

 
613,372

 

 
613,372

 

Investment securities available for sale
5,403,656

 
5,403,656

 
4,505

 
5,398,951

 
200

FHLB and Federal Reserve Bank stocks
160,871

 
160,871

 

 
160,871

 

Loans held for sale
105,144

 
106,276

 

 
106,276

 

Loans, net
18,262,237

 
18,435,809

 

 

 
18,435,809

Bank owned life insurance
580,289

 
580,289

 

 
580,289

 

Accrued interest receivable
70,977

 
70,977

 
70,977

 

 

Interest rate-related instruments
42,593

 
42,593

 

 
42,593

 

Foreign currency exchange forwards
1,159

 
1,159

 

 
1,159

 

Interest rate lock commitments to originate residential mortgage loans held for sale
2,584

 
2,584

 

 

 
2,584

Purchased options (time deposit)
2,915

 
2,915

 

 
2,915

 

Financial liabilities:
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand, savings, interest-bearing demand, and money market deposits
$
18,936,600

 
$
18,936,600

 
$

 
$

 
$
18,936,600

Brokered CDs and other time deposits
1,621,795

 
1,632,811

 

 
1,632,811

 

Short-term funding
1,022,335

 
1,022,335

 

 
1,022,335

 

Long-term funding
2,679,542

 
2,740,335

 

 
2,740,335

 

Accrued interest payable
6,888

 
6,888

 
6,888

 

 

Interest rate-related instruments
44,857

 
44,857

 

 
44,857

 

Foreign currency exchange forwards
960

 
960

 

 
960

 

Forward commitments to sell residential mortgage loans
1,982

 
1,982

 

 

 
1,982

Standby letters of credit (1)
3,164

 
3,164

 

 
3,164

 

Written options (time deposit)
2,915

 
2,915

 

 
2,915

 


 
December 31, 2014
 
Carrying Amount
 
Fair Value
 
Fair Value Measurements Using
Level 1
 
Level 2
 
Level 3
 
($ in Thousands)
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
444,113

 
$
444,113

 
$
444,113

 
$

 
$

Interest-bearing deposits in other financial institutions
571,924

 
571,924

 
571,924

 

 

Federal funds sold and securities purchased under agreements to resell
16,030

 
16,030

 
16,030

 

 

Investment securities held to maturity
404,455

 
413,067

 

 
413,067

 

Investment securities available for sale
5,396,812

 
5,396,812

 
3,957

 
5,392,655

 
200

FHLB and Federal Reserve Bank stocks
189,107

 
189,107

 

 
189,107

 

Loans held for sale
154,935

 
156,423

 

 
156,423

 

Loans, net
17,327,544

 
17,427,647

 

 

 
17,427,647

Bank owned life insurance
574,154

 
574,154

 

 
574,154

 

Accrued interest receivable
67,573

 
67,573

 
67,573

 

 

Interest rate-related instruments
33,023

 
33,023

 

 
33,023

 

Foreign currency exchange forwards
2,140

 
2,140

 

 
2,140

 

Interest rate lock commitments to originate residential mortgage loans held for sale
1,947

 
1,947

 

 

 
1,947

Purchased options (time deposit)
6,054

 
6,054

 

 
6,054

 

Financial liabilities:
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand, savings, interest-bearing demand, and money market deposits
$
17,192,049

 
$
17,192,049

 
$

 
$

 
$
17,192,049

Brokered CDs and other time deposits
1,571,455

 
1,571,455

 

 
1,571,455

 

Short-term funding
1,068,288

 
1,068,288

 

 
1,068,288

 

Long-term funding
3,930,117

 
3,975,605

 

 
3,975,605

 

Accrued interest payable
9,530

 
9,530

 
9,530

 

 

Interest rate-related instruments
35,372

 
35,372

 

 
35,372

 

Foreign currency exchange forwards
1,957

 
1,957

 

 
1,957

 

Standby letters of credit (1)
3,542

 
3,542

 

 
3,542

 

Forward commitments to sell residential mortgage loans
2,435

 
2,435

 

 

 
2,435

Written options (time deposit)
6,054

 
6,054

 

 
6,054

 

 
(1)
The commitment on standby letters of credit was $317 million and $353 million at September 30, 2015 and December 31, 2014, respectively. See Note 13 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.
Cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold and securities purchased under agreements to resell, and accrued interest receivable – For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment securities (held to maturity and available for sale) – The fair value of investment securities is based on quoted prices in active markets, or if quoted prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.
FHLB and Federal Reserve Bank stocks – The carrying amount is a reasonable fair value estimate for the Federal Reserve Bank and Federal Home Loan Bank stocks given their “restricted” nature (i.e., the stock can only be sold back to the respective institutions (Federal Home Loan Bank or Federal Reserve Bank) or another member institution at par).
Loans held for sale – The fair value estimation process for the loans held for sale portfolio is segregated by loan type and is based on what secondary markets are currently offering for portfolios with similar characteristics.
Loans, net – The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Corporation believes are consistent with liquidity discounts in the market place. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, real estate construction, commercial real estate (owner occupied and investor), lease financing, residential mortgage, home equity, other installment, and credit cards. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also included other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.
Bank owned life insurance – The fair value of bank owned life insurance approximates the carrying amount, because upon liquidation of these investments, the Corporation would receive the cash surrender value which equals the carrying amount.
Deposits – The fair value of deposits with no stated maturity such as noninterest-bearing demand deposits, savings, interest-bearing demand deposits, and money market deposits, is equal to the amount payable on demand as of the balance sheet date. The fair value of Brokered CDs and other time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. However, if the estimated fair value of Brokered CDs and other time deposits is less than the carrying value, the carrying value is reported as the fair value.
Accrued interest payable and short-term funding – For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Long-term funding – Rates currently available to the Corporation for debt with similar terms and remaining maturities are used to estimate the fair value of existing long-term funding.
Interest rate-related instruments – The fair value of interest rate-related instruments is determined using discounted cash flow analysis on the expected cash flows of each derivative. The Corporation also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.
Foreign currency exchange forwards – The fair value of the Corporation’s foreign currency exchange forwards is determined using quoted prices of foreign currency exchange forwards with similar characteristics, with consideration given to the nature of the quote and the relationship of recently evidenced market activity to the fair value estimate.
Standby letters of credit – The fair value of standby letters of credit represent deferred fees arising from the related off-balance sheet financial instruments. These deferred fees approximate the fair value of these instruments and are based on several factors, including the remaining terms of the agreement and the credit standing of the customer.
Interest rate lock commitments to originate residential mortgage loans held for sale – The Corporation relies on an internal valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes grouping the interest rate lock commitments by interest rate and terms, applying an estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups.
Forward commitments to sell residential mortgage loans – The Corporation relies on an internal valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Corporation would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available.
Purchased and written options – The fair value of the Corporation’s purchased and written options is determined using quoted prices of the underlying stocks.
Limitations – Fair value estimates are made at a specific point in time, based on relevant market information and other information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.