Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at September 30, 2013 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustments⁽¹⁾		Total Fair Value
Assets:
Mortgage-Related Securities Available for Sale:
GSE certificates	$	--	$	26,720	$	--	$	--	$	26,720
GSE CMOs		--		62,203		--				62,203
Private label CMOs		--		12,255		--				12,255

Total mortgage-related securities	$	--	$	101,178	$	--	$	--	$	101,178

Other Securities Available for Sale:
GSE debentures	$	--	$	--	$	--	$	--	$	--
Municipal bonds		--		1,165		--		--		1,165
Capital trust notes		--		14,820		20,982		--		35,802
Preferred stock		88,359		26,872		--		--		115,231
Common stock		49,780		2,547		--		--		52,327

Total other securities	$	138,139	$	45,404	$	20,982	$	--	$	204,525

Total securities available for sale	$	138,139	$	146,582	$	20,982	$	--	$	305,703

Other Assets:
Loans held for sale	$	--	$	281,289	$	--	$	--	$	281,289
Mortgage servicing rights		--		--		228,105		--		228,105
Interest rate lock commitments						6,190		--		6,190
Derivative assets-other⁽²⁾		3,276		13,532		--		(12,961)		3,847
Liabilities:
Derivative liabilities	$	--	$	(11,743)	$	--	$	9,512	$	(2,231)

(1)	Includes cash collateral received and pledged.

(2)	Includes $1.5 million to purchase Treasury options.


	Fair Value Measurements at December 31, 2012 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Netting Adjustments		Total Fair Value
Assets:
Mortgage-Related Securities Available for Sale:
GSE certificates	$	--	$	92,679	$	--	$	--	$	92,679
GSE CMOs		--		67,160		--		--		67,160
Private label CMOs		--		17,416		--		--		17,416

Total mortgage-related securities	$	--	$	177,255	$	--	$	--	$	177,255

Other Securities Available for Sale:
GSE debentures	$	--	$	--	$	--	$	--	$	--
Municipal bonds		--		46,296		--		--		46,296
Capital trust notes		--		19,866		18,569		--		38,435
Preferred stock		124,734		284		--		--		125,018
Common stock		39,682		2,580		--		--		42,262

Total other securities	$	164,416	$	69,026	$	18,569	$	--	$	252,011

Total securities available for sale	$	164,416	$	246,281	$	18,569	$	--	$	429,266

Other Assets:
Loans held for sale	$	--	$	1,204,370	$	--	$	--	$	1,204,370
Mortgage servicing rights		--		--		144,520		--		144,520
Interest rate lock commitments		--		--		21,446		--		21,446
Derivative assets-other⁽¹⁾		5,939		2,910		--		(4,730)		4,119
Liabilities:
Derivative liabilities	$	(2,303)	$	(5,808)	$	--	$	4,730	$	(3,381)

(1)	Includes $5.3 million to purchase Treasury options.

Difference between Fair Value Option and Unpaid Principal Balance

The following table reflects the difference between the fair value carrying amount of loans held for sale for which the Company has elected the fair value option, and the unpaid principal balance:

September 30, 2013

December 31, 2012

(in thousands)

Fair Value
Carrying
Amount

Aggregate
Unpaid
Principal

Fair Value
Carrying Amount
Less Aggregate
Unpaid Principal

Fair Value
Carrying
Amount

Aggregate
Unpaid Principal

Fair Value
Carrying Amount
Less Aggregate
Unpaid Principal

Loans held for sale

$281,289

$270,361

$10,928

$1,204,370

$1,159,071

$45,299

Changes in Fair Value of Loans Held For Sale

For loans held for sale and mortgage servicing rights, the changes in fair value related to initial measurement and the subsequent changes in fair value included in earnings are shown for the periods indicated, below:


	Gain (Loss) Included in Mortgage Banking Income from Changes in Fair Value⁽¹⁾
	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands)	2013				2012				2013				2012
Loans held for sale		$	6,892			$	46,915			$	(7,873	)		$	80,589
Mortgage servicing rights			(5,579	)			(42,114	)			10,187				(80,153	)

Total gain		$	1,313			$	4,801			$	2,314			$	436

(1)	Does not include the effect of hedging activities.

Rollforward of Financial Instruments Classified in Level Three of Valuation Hierarchy

The following tables present, for the nine months ended September 30, 2013 and 2012, a roll-forward of the balance sheet amounts (including changes in fair value) for financial instruments classified in Level 3 of the valuation hierarchy:


(in thousands)	Fair Value			Total Realized/Unrealized Gains/(Losses) Recorded in							Issuances			Settlements			Transfers				Fair Value			Change in Unrealized Gains/ (Losses) Related to
(in thousands)	January 1, 2013			Income/ Loss				Comprehensive (Loss) Income			Issuances			Settlements			to/(from) Level 3				at Sept. 30, 2013			Instruments Held at September 30, 2013
Available-for-sale capital securities		$	18,569		$	--			$	2,413		$	--		$	--		$	--			$	20,982		$	2,413
Mortgage servicing rights			144,520			10,187				--			73,398			--			--				228,105			54,437
Interest rate lock commitments			21,446			(15,256	)			--			--			--			--				6,190			6,190

(in thousands)	Fair Value			Total Realized/Unrealized Gains/(Losses) Recorded in							Issuances			Settlements			Transfers				Fair Value			Change in Unrealized Gains/ (Losses) Related to
(in thousands)	January 1, 2012			Income/ Loss				Comprehensive (Loss) Income			Issuances			Settlements			to/(from) Level 3				at Sept. 30, 2012			Instruments Held at September 30, 2012
Available-for-sale capital securities and preferred stock		$	18,078		$	--			$	2,351		$	--		$	--		$	(3,054	)		$	17,375		$	2,222
Mortgage servicing rights			116,416			(80,153	)			--			85,977			--			--				122,240			(29,890	)
Interest rate lock commitments			15,633			40,446				--			--			--			--				56,079			55,304

Significant Unobservable Inputs used in Fair Value Measurement

For Level 3 assets and liabilities measured at fair value on a recurring basis as of September 30, 2013, the significant unobservable inputs used in the fair value measurements were as follows:

(dollars in thousands)

Fair Value at
Sept. 30, 2013

Valuation Technique

Significant Unobservable Inputs

Significant
Unobservable
Input Value

Capital Trust Notes

20,982

Discounted Cash Flow

Weighted Average Discount Rate ⁽¹⁾

4.84%

Mortgage Servicing Rights

228,105

Discounted Cash Flow

Weighted Average Constant Prepayment Rate ⁽²⁾

9.10

Weighted Average Discount Rate

10.50

Interest Rate Lock Commitments

6,190

Pricing Model

Weighted Average Closing Ratio

76.19

(1)	Derived from multiple interest rate scenarios that incorporate a spread to the London Interbank Offered Rate swap curve and market volatility.

(2)	Represents annualized loan repayment rate assumptions.

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

The following tables present assets and liabilities that were measured at fair value on a non-recurring basis as of September 30, 2013 and December 31, 2012, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at September 30, 2013 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain impaired loans		$--		$ --		$56,917		$56,917
Other assets ⁽¹⁾		--		20,519		--		20,519

Total		$--		$20,519		$56,917		$77,436

(1)	Represents the fair value of OREO, based on the appraised value of the collateral subsequent to its initial classification as OREO.


	Fair Value Measurements at December 31, 2012 Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain impaired loans		$--		$ --		$76,704		$76,704
Other assets ⁽¹⁾		--		22,664		--		22,664

Total		$--		$22,664		$76,704		$99,368

(1)	Represents the fair value of OREO, based on the appraised value of the collateral subsequent to its initial classification as OREO.

Summary of Carrying Values, Estimated Fair Values and Fair Value Measurement Levels of Financial Instruments

The following tables summarize the carrying values, estimated fair values, and the fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at September 30, 2013 and December 31, 2012:


	September 30, 2013
							Fair Value Measurement Using
(in thousands)	Carrying Value			Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents		$	1,253,562		$	1,253,562		$	1,253,562			$	--			$	--
Securities held to maturity			6,777,715			6,627,256			--				6,621,991				5,265
FHLB stock⁽¹⁾			552,830			552,830			--				552,830				--
Loans, net			32,142,277			32,140,712			--				--				32,140,712
Financial Liabilities:
Deposits		$	25,309,350		$	25,356,713		$	18,168,697	⁽²⁾		$	7,188,016	⁽³⁾		$	--
Borrowed funds			14,565,442			15,674,839			--				15,674,839				--

(1)	Carrying value and estimated fair value are at cost.

(2)	NOW and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)	Certificates of deposit.


	December 31, 2012
							Fair Value Measurement Using
(in thousands)	Carrying Value			Estimated Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents		$	2,427,258		$	2,427,258		$	2,427,258			$	--			$	--
Securities held to maturity			4,484,262			4,705,960			--				4,648,766				57,194
FHLB stock⁽¹⁾			469,145			469,145			--				469,145				--
Loans, net			31,580,636			31,977,472			--				--				31,977,472
Mortgage servicing rights			193			193			--				--				193
Financial Liabilities:
Deposits		$	24,877,521		$	24,909,496		$	15,756,607	⁽²⁾		$	9,152,889	⁽³⁾		$	--
Borrowed funds			13,430,191			14,935,580			--				14,935,580				--

(1)	Carrying value and estimated fair value are at cost.

(2)	NOW and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)	Certificates of deposit.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items and (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures; (2) for items included in the income statement: (a) a description of how interest and dividends are measured and where they are reported in the income statement; (b) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) qualitative information about the reasons for the changes and (ii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

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