Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

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, 2016 and December 31, 2015, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at September 30, 2016
(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	$	—		$	7,827		$	—	$	—		$	7,827

Total mortgage-related securities	$	—		$	7,827		$	—	$	—		$	7,827

Other Securities Available for Sale:
Municipal bonds	$	—		$	799		$	—	$	—		$	799
Capital trust notes		—			6,976			—		—			6,976
Preferred stock		98,874			29,105			—		—			127,979
Mutual funds and common stock		—			17,564			—		—			17,564

Total other securities	$	98,874		$	54,444		$	—	$	—		$	153,318

Total securities available for sale	$	98,874		$	62,271		$	—	$	—		$	161,145

Other Assets:
Loans held for sale	$	—		$	701,398		$	—	$	—		$	701,398
Mortgage servicing rights		—			—			191,419		—			191,419
Interest rate lock commitments		—			—			6,934		—			6,934
Derivative assets-other ⁽²⁾		4,591			2,942			—		(2,864	)		4,669
Liabilities:
Derivative liabilities	$	(424	)	$	(5,175	)	$	—	$	5,386		$	(213	)

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

(2)	Includes $2.7 million to purchase Treasury options.


	Fair Value Measurements at December 31, 2015
(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	$	—		$	53,852		$	—	$	—		$	53,852

Total mortgage-related securities	$	—		$	53,852		$	—	$	—		$	53,852

Other Securities Available for Sale:
Municipal bonds	$	—		$	795		$	—	$	—		$	795
Capital trust notes		—			6,964			—		—			6,964
Preferred stock		96,641			28,731			—		—			125,372
Mutual funds and common stock		—			17,272			—		—			17,272

Total other securities	$	96,641		$	53,762		$	—	$	—		$	150,403

Total securities available for sale	$	96,641		$	107,614		$	—	$	—		$	204,255

Other Assets:
Loans held for sale	$	—		$	367,221		$	—	$	—		$	367,221
Mortgage servicing rights		—			—			243,389		—			243,389
Interest rate lock commitments		—			—			2,526		—			2,526
Derivative assets-other ⁽²⁾		1,875			1,342			—		(1,024	)		2,193
Liabilities:
Derivative liabilities	$	(1,539	)	$	(2,783	)	$	—	$	3,986		$	(336	)

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

(2)	Includes $1.9 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, 2016						December 31, 2015
(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	$	701,398	$	679,454	$	21,944	$	367,221	$	359,587	$	7,634

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 September 30,						For the Nine Months Ended September 30,
(in thousands)	2016			2015			2016			2015
Loans held for sale	$	9,644		$	6,328		$	28,687		$	10,714
Mortgage servicing rights		(8,917	)		(27,760	)		(83,155	)		(35,092	)

Total gain (loss)	$	727		$	(21,432	)	$	(54,468	)	$	(24,378	)

(1)	Does not include the effect of hedging activities, which is included in “Other non-interest income.”

Rollforward of Financial Instruments Classified in Level Three of Valuation Hierarchy

The following tables present, for the nine months ended September 30, 2016 and 2015, 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 January 1, 2016		Total Realized/Unrealized (Losses)/Gains Recorded in									Transfers to/(from) Level 3		Fair Value at Sept. 30, 2016		Change in Unrealized
(in thousands)	Fair Value January 1, 2016		(Loss)/ Income			Comprehensive (Loss) Income		Issuances		Settlements		Transfers to/(from) Level 3		Fair Value at Sept. 30, 2016		(Losses)/Gains Related to Instruments Held at September 30, 2016
Mortgage servicing rights	$	243,389	$	(83,155	)	$	—	$	31,185	$	—	$	—	$	191,419	$	(58,546	)
Interest rate lock commitments		2,526		4,408			—		—		—		—		6,934		6,934

(in thousands)	Fair Value January 1, 2015		Total Realized/Unrealized (Losses)/Gains Recorded in									Transfers to/(from) Level 3		Fair Value at Sept. 30, 2015		Change in Unrealized
(in thousands)	Fair Value January 1, 2015		(Loss)/ Income			Comprehensive (Loss) Income		Issuances		Settlements		Transfers to/(from) Level 3		Fair Value at Sept. 30, 2015		(Losses)/Gains Related to Instruments Held at September 30, 2015
Mortgage servicing rights	$	227,297	$	(35,092	)	$	—	$	40,217	$	—	$	—	$	232,422	$	8,941
Interest rate lock commitments		4,397		847			—		—		—		—		5,244		5,244

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, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

(dollars in thousands)

Fair Value at
Sept. 30, 2016

Valuation Technique

Significant Unobservable Inputs

Significant
Unobservable
Input Value

Mortgage servicing rights

191,419

Discounted Cash Flow

Weighted Average Constant Prepayment Rate ⁽¹⁾

11.25

Weighted Average Discount Rate

10.02

Interest rate lock commitments

6,934

Discounted Cash Flow

Weighted Average Closing Ratio

79.86

(1)	Represents annualized loan repayment rate assumptions.

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

The following tables present assets and liabilities that were measured at fair value on a non-recurring basis as of September 30, 2016 and December 31, 2015, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at September 30, 2016 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 ⁽¹⁾	$	—	$	—	$	11,447	$	11,447
Other assets ⁽²⁾		—		—		4,155		4,155

Total	$	—	$	—	$	15,602	$	15,602

(1)	Represents the fair value of certain impaired loans, based on the value of the collateral.

(2)	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, 2015 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 ⁽¹⁾	$	—	$	—	$	3,930	$	3,930
Other assets ⁽²⁾		—		—		7,982		7,982

Total	$	—	$	—	$	11,912	$	11,912

(1)	Represents the fair value of certain impaired loans, based on the value of the collateral.

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

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

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 September 30, 2016 and December 31, 2015:


	September 30, 2016
					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	$	771,782	$	771,782	$	771,782		$	—		$	—
Securities held to maturity		3,651,925		3,893,086		—			3,892,670			416
FHLB stock ⁽¹⁾		586,355		586,355		—			586,355			—
Loans, net		39,671,237		40,099,680		—			—			40,099,680
Financial Liabilities:
Deposits	$	29,139,599	$	29,156,152	$	21,755,869	⁽²⁾	$	7,400,283	⁽³⁾	$	—
Borrowed funds		14,001,809		14,057,006		—			14,057,006			—

(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, 2015
					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	$	537,674	$	537,674	$	537,674		$	—		$	—
Securities held to maturity		5,969,390		6,108,529		—			6,107,697			832
FHLB stock ⁽¹⁾		663,971		663,971		—			663,971			—
Loans, net		38,011,995		38,245,434		—			—			38,245,434
Financial Liabilities:
Deposits	$	28,426,758	$	28,408,915	$	23,114,271	⁽²⁾	$	5,294,644	⁽³⁾	$	—
Borrowed funds		15,748,405		15,685,616		—			15,685,616			—

(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 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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