Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

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 for the periods indicated, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at September 30, 2017
(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	$	—		$	1,960,352		$	—	$	—		$	1,960,352
GSE CMOs		—			550,177			—		—			550,177

Total mortgage-related securities	$	—		$	2,510,529		$	—	$	—		$	2,510,529

Other Securities Available for Sale:
U.S Treasury Obligations	$	199,875		$	—		$	—	$	—		$	199,875
GSE debentures		—			90,834			—		—			90,834
Corporate bonds		—			86,137			—		—			86,137
Municipal bonds		—			70,367			—		—			70,367
Capital trust notes		—			40,767			—		—			40,767
Preferred stock		15,339			—			—		—			15,339
Mutual funds and common stock		—			17,178			—		—			17,178

Total other securities	$	215,214		$	305,283		$	—	$	—		$	520,497

Total securities available for sale	$	215,214		$	2,815,812		$	—	$	—		$	3,031,026

Other Assets:
Loans held for sale	$	—		$	104,938		$	—	$	—		$	104,938
Mortgage servicing rights		—			—			2,782		—			2,782
Interest rate lock commitments		—			—			269		—			269
Derivative assets-other ⁽²⁾		157			836			—		(674	)		319
Liabilities:
Derivative liabilities	$	(144	)	$	(1,322	)	$	—	$	1,248		$	(218	)

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

(2)	Includes $144 thousand to purchase Treasury options.


	Fair Value Measurements at December 31, 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	$	—		$	7,326		$	—	$	—		$	7,326

Total mortgage-related securities	$	—		$	7,326		$	—	$	—		$	7,326

Other Securities Available for Sale:
Municipal bonds	$	—		$	631		$	—	$	—		$	631
Capital trust notes		—			7,243			—		—			7,243
Preferred stock		42,724			29,260			—		—			71,984
Mutual funds and common stock		—			17,097			—		—			17,097

Total other securities	$	42,724		$	54,231		$	—	$	—		$	96,955

Total securities available for sale	$	42,724		$	61,557		$	—	$	—		$	104,281

Other Assets:
Loans held for sale	$	—		$	409,152		$	—	$	—		$	409,152
Mortgage servicing rights		—			—			228,099		—			228,099
Interest rate lock commitments		—			—			982		—			982
Derivative assets-other ⁽²⁾		2,611			16,829			—		(17,861	)		1,579
Liabilities:
Derivative liabilities	$	(6,009	)	$	(17,719	)	$	—	$	16,588		$	(7,140	)

(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, 2017						December 31, 2016
(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	$	104,938	$	102,236	$	2,702	$	409,152	$	408,928	$	224

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)	2017			2016 ⁽²⁾			2017			2016 ⁽²⁾
Loans held for sale	$	464		$	(1,020	)	$	1,059		$	2,782
Mortgage servicing rights		(9,743	)		(8,917	)		(20,092	)		(76,998	)

Total loss	$	(9,279	)	$	(9,937	)	$	(19,033	)	$	(74,216	)

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

(2)	The presentation of the amounts for the three and nine months ended September 30, 2016 has been modified to conform to the presentation for the three and nine months ended September 30, 2017.

Rollforward of Financial Instruments Classified in Level Three of Valuation Hierarchy

The following tables present, for the nine months ended September 30, 2017 and 2016, 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, 2017		Total Realized/Unrealized Gains/(Losses) Recorded in					Issuances		Settlements			Transfers to/(from) Level 3		Fair Value at September 30, 2017		Change in Unrealized Gains/ (Losses) Related to Instruments Held at September 30, 2017
(in thousands)	Fair Value January 1, 2017		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements			Transfers to/(from) Level 3		Fair Value at September 30, 2017
Mortgage servicing rights	$	228,099	$	(34,544	)	$	—	$	18,054	$	(208,827	)	$	—	$	2,782	$	(182	)
Interest rate lock commitments		982		(713	)		—		—		—			—		269		269

(in thousands)	Fair Value January 1, 2016		Total Realized/Unrealized Gains/(Losses) Recorded in					Issuances		Settlements			Transfers to/(from) Level 3		Fair Value at September 30, 2016		Change in Unrealized Gains/ (Losses) Related to Instruments Held at September 30, 2016
(in thousands)	Fair Value January 1, 2016		Income/ (Loss)			Comprehensive (Loss) Income		Issuances		Settlements			Transfers to/(from) Level 3		Fair Value 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

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, 2017, the significant unobservable inputs used in the fair value measurements were as follows:


(dollars in thousands)	Fair Value at September 30, 2017	Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value
Mortgage servicing rights	$2,782	Discounted Cash Flow	Weighted Average Constant Prepayment Rate ⁽¹⁾		9.89	%
			Weighted Average Discount Rate		12.00
Interest rate lock commitments	269	Discounted Cash Flow	Weighted Average Closing Ratio		69.88

(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, 2017 and December 31, 2016, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at September 30, 2017 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⁾	$	—	$	—	$	42,581	$	42,581
Other assets ⁽²⁾		—		—		1,493		1,493

Total	$	—	$	—	$	44,074	$	44,074

(1)	Represents the fair value of 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, 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⁾	$	—	$	—	$	15,635	$	15,635
Other assets ⁽²⁾		—		—		5,684		5,684

Total	$	—	$	—	$	21,319	$	21,319

(1)	Represents the fair value of impaired loans, based on the value of the collateral, primarily taxi medallion loans.

(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 the dates indicated:


	September 30, 2017
					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	$	3,277,427	$	3,277,427	$	3,277,427		$	—		$	—
FHLB stock ⁽¹⁾		579,474		579,474		—			579,474			—
Loans, net		37,452,219		37,671,152		—			—			37,671,152
Financial Liabilities:
Deposits	$	28,893,197	$	28,869,413	$	20,090,624	⁽²⁾	$	8,778,789	⁽³⁾	$	—
Borrowed funds		12,363,602		12,277,697		—			12,277,697			—

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

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

(3)	Certificates of deposit.


	December 31, 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	$	557,850	$	557,850	$	557,850		$	—		$	—
Securities held to maturity		3,712,776		3,813,959		200,220			3,613,739			—
FHLB stock ⁽¹⁾		590,934		590,934		—			590,934			—
Loans, net		39,308,016		39,416,469		—			—			39,416,469
Financial Liabilities:
Deposits	$	28,887,903	$	28,888,064	$	21,310,733	⁽²⁾	$	7,577,331	⁽³⁾	$	—
Borrowed funds		13,673,379		13,633,943		—			13,633,943			—

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

(2)	Interest-bearing checking 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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