Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

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 June 30, 2014 and December 31, 2013, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2014 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	$	--	$	21,712	$	--		$ --		$	21,712
GSE CMOs		--		59,362		--		--			59,362
Private label CMOs		--		9,465		--		--			9,465

Total mortgage-related securities	$	--	$	90,539	$	--		$ --		$	90,539

Other Securities Available for Sale:
Municipal bonds	$	--	$	1,075	$	--		$ --		$	1,075
Capital trust notes		--		11,931		--		--			11,931
Preferred stock		95,105		27,679		--		--			122,784
Common stock		16,916		1,802		--		--			18,718

Total other securities	$	112,021	$	42,487	$	--		$ --		$	154,508

Total securities available for sale	$	112,021	$	133,026	$	--		$ --		$	245,047

Other Assets:
Loans held for sale	$	--	$	308,895	$	--		$ --		$	308,895
Mortgage servicing rights		--		--		228,815		--			228,815
Interest rate lock commitments		--		--		3,892		--			3,892
Derivative assets-other ⁽²⁾		2,699		4,982		--		(4,324	)		3,357
Liabilities:
Derivative liabilities	$	(570)	$	(5,154)	$	--		$4,687		$	(1,037)

(1)	Includes cash collateral received from, and paid to, counterparties.

(2)	Includes $2.6 million to purchase Treasury options.


	Fair Value Measurements at December 31, 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	$	--	$	25,200	$	--		$ --	$	25,200
GSE CMOs		--		60,819		--		--		60,819
Private label CMOs		--		10,202		--		--		10,202

Total mortgage-related securities	$	--	$	96,221	$	--		$ --	$	96,221

Other Securities Available for Sale:
Municipal bonds	$	--	$	1,026	$	--		$ --	$	1,026
Capital trust notes		--		11,798		--		--		11,798
Preferred stock		89,942		26,297		--		--		116,239
Common stock		52,740		2,714		--		--		55,454

Total other securities	$	142,682	$	41,835	$	--		$ --	$	184,517

Total securities available for sale	$	142,682	$	138,056	$	--		$ --	$	280,738

Other Assets:
Loans held for sale	$	--	$	306,915	$	--		$ --	$	306,915
Mortgage servicing rights		--		--		241,018		--		241,018
Interest rate lock commitments		--		--		258		--		258
Derivative assets-other ⁽¹⁾		1,267		5,155		--		(4,848)		1,574
Liabilities:
Derivative liabilities	$	(590)	$	(7,422)	$	--		$ 7,624	$	(388)

(1)	Includes cash collateral received from, and paid to, counterparties.

(2)	Includes $1.3 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:

June 30, 2014

December 31, 2013

(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

$308,895

$298,154

$10,741

$306,915

$303,805

$3,110

Changes in Fair Value of Loans Held For Sale

The following table presents the changes in fair value related to initial measurement, and the subsequent changes in fair value included in earnings, for loans held for sale and MSRs for the periods indicated:


	Gain (Loss) Included in Mortgage Banking Income from Changes in Fair Value ⁽¹⁾
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands)	2014			2013			2014			2013
Loans held for sale	$	5,267		$	(24,437	)	$	6,934		$	(14,765	)
Mortgage servicing rights		(16,364	)		19,038			(26,186	)		15,766

Total (loss) gain	$	(11,097	)	$	(5,399	)	$	(19,252	)	$	1,001

(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 six months ended June 30, 2014 and 2013, 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, 2014		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements		to/(from) Level 3		at June 30, 2014			Instruments Held at June 30, 2014
Mortgage servicing rights		$241,018		$(26,186	)		$ --		$13,983		$ --		$ --		$228,815			$ (492	)
Interest rate lock commitments		258		3,634			--		--		--		--		3,892			3,892

(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 June 30, 2013			Instruments Held at June 30, 2013
Available-for-sale capital securities		$ 18,569		$ --			$1,324		$ --		$ --		$ --		$ 19,893			$ 1,324
Mortgage servicing rights		144,520		15,766			--		54,673		--		--		214,959			47,848
Interest rate lock commitments		21,446		(28,099	)		--		--		--		--		(6,653	)		(6,541	)

Significant Unobservable Inputs used in Fair Value Measurement

For Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2014, the significant unobservable inputs used in the fair value measurements were as follows:


(dollars in thousands)	Fair Value at June 30, 2014		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Mortgage Servicing Rights		$228,815	Discounted Cash Flow	Weighted Average Constant Prepayment Rate ⁽¹⁾	8.70%

				Weighted Average Discount Rate	10.00

Interest Rate Lock Commitments		3,892	Pricing Model	Weighted Average Closing Ratio	74.31

(1)	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 June 30, 2014 and December 31, 2013, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2014 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		$--		$ --		$19,164		$19,164
Other assets ⁽¹⁾		--		22,893		--		22,893

Total		$--		$22,893		$19,164		$42,057

(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, 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		$--		$ --		$47,535		$47,535
Other assets ⁽¹⁾		--		19,810		--		19,810

Total		$--		$19,810		$47,535		$67,345

(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 fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at June 30, 2014 and December 31, 2013:


	June 30, 2014
							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		$	668,950		$	668,950		$	668,950			$	--			$	--
Securities held to maturity			7,547,911			7,622,751			--				7,614,289				8,462
FHLB stock ⁽¹⁾			571,708			571,708			--				571,708				--
Loans, net			34,702,395			35,256,509			--				--				35,256,509
Financial Liabilities:
Deposits		$	27,352,469		$	27,373,609		$	20,633,293	⁽²⁾		$	6,740,316	⁽³⁾		$	--
Borrowed funds			15,301,666			16,300,287			--				16,300,287				--

(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, 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		$	644,550		$	644,550		$	644,550			$	--			$	--
Securities held to maturity			7,670,282			7,445,244			--				7,438,091				7,153
FHLB stock ⁽¹⁾			561,390			561,390			--				561,390				--
Loans, net			32,727,507			32,628,361			--				--				32,628,361
Financial Liabilities:
Deposits		$	25,660,992		$	25,712,388		$	18,728,896	⁽²⁾		$	6,983,492	⁽³⁾		$	--
Borrowed funds			15,105,002			16,058,931			--				16,058,931				--

(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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