Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

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, 2018 and December 31, 2017, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2018
	Quoted Prices
	in Active			Significant
	Markets for			Other			Significant
	Identical			Observable			Unobservable
	Assets			Inputs			Inputs			Netting		Total
(in thousands)	(Level 1)			(Level 2)			(Level 3)			Adjustments⁽¹⁾		Fair Value
Assets:
Mortgage-Related Debt Securities Available for Sale:
GSE certificates		$	--		$	1,923,416		$	--		$ --		$	1,923,416
GSE CMOs			--			659,772			--		--			659,772

Total mortgage-related debt securities		$	--		$	2,583,188		$	--		$ --		$	2,583,188

Other Debt Securities Available for Sale:
U. S. Treasury securities		$	199,696		$	--		$	--		$ --		$	199,696
GSE debentures			--			554,649			--		--			554,649
Asset-backed securities			--			280,798			--		--			280,798
Municipal bonds			--			67,605			--		--			67,605
Corporate bonds			--			388,093			--		--			388,093
Capital trust notes			--			48,854			--		--			48,854

Total other debt securities		$	199,696		$	1,339,999		$	--		$ --		$	1,539,695

Total debt securities available for sale		$	199,696		$	3,923,187		$	--		$ --		$	4,122,883

Equity securities:
Preferred stock		$	15,108		$	--		$	--		$ --		$	15,108
Mutual funds and common stock			--			16,658			--		--			16,658

Total equity securities		$	15,108		$	16,658		$	--		$ --		$	31,766

Total securities		$	214,804		$	3,939,845		$	--		$ --		$	4,154,649

Other Assets:
Mortgage servicing rights		$	--		$	--		$	2,505		$ --		$	2,505


	Fair Value Measurements at December 31, 2017
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Netting		Total
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Adjustments⁽¹⁾		Fair Value
Assets:
Mortgage-Related Securities Available for Sale:
GSE certificates	$	--	$	2,068,842	$	--		$ --	$	2,068,842
GSE CMOs				549,904						549,904

Total mortgage-related securities	$	--	$	2,618,746	$	--		$ --	$	2,618,746

Other Securities Available for Sale:
U. S. Treasury Obligations	$	199,898	$	--	$	--		$ --	$	199,898
GSE debentures		--		473,258		--		--		473,258
Municipal bonds		--		70,120		--		--		70,120
Corporate bonds		--		90,775		--		--		90,775
Capital trust notes		--		46,096		--		--		46,096
Preferred stock		15,434		--		--		--		15,434
Mutual funds and common stock		--		17,100		--		--		17,100

Total other securities	$	215,332	$	697,349	$	--		$ --	$	912,681

Total securities available for sale	$	215,332	$	3,316,095	$	--		$ --	$	3,531,427

Other Assets:
Loans held for sale	$	--	$	35,258	$	--		$ --	$	35,258
Mortgage servicing rights		--		--		2,729		--		2,729

(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:

June 30, 2018

December 31, 2017

Fair Value

Aggregate

Carrying Amount

Fair Value

Aggregate

Carrying Amount

(in thousands)

Carrying
Amount

Unpaid
Principal

Less Aggregate
Unpaid Principal

Carrying
Amount

Unpaid
Principal

Less Aggregate
Unpaid Principal

Loans held for sale

$--

$35,258

$34,563

$695

Changes in Fair Value of MSRs

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from the initial measurement and subsequent changes in fair value are recognized in earnings. The following table presents the changes in fair value related to initial measurement, and the subsequent changes in fair value included in earnings, for MSRs for the periods indicated:


	(Loss) Gain Included in
	Income from Changes in Fair Value ⁽¹⁾
	For the Three Months						For the Six Months Ended
	Ended June 30,						June 30,
(in thousands)	2018			2017			2018			2017
Mortgage servicing rights	$	(70	)		$	(30,988)	$	(224	)		$	(68,081)

(1)	Included in “Non-interest income.”

Rollforward of Financial Instruments Classified in Level Three of Valuation Hierarchy

The following tables present, for the six months ended June 30, 2018 and 2017, a roll-forward of the balance sheet amounts (including changes in fair value) for financial instruments classified in Level 3 of the valuation hierarchy:

Total Realized/Unrealized

Change in

Gains/(Losses) Recorded in

Unrealized

Gains/(Losses)

Fair Value

Transfers

Fair Value

Related to

January 1,

Income/

Comprehensive

to/(from)

at June 30,

Instruments Held at

(in thousands)

2018

(Loss)

(Loss) Income

Issuances

Settlements

Level 3

2018

June 30, 2018

Mortgage servicing rights

$2,729

$(224)

$--

$2,505

$(224)

Total Realized/Unrealized

Change in

Gains/(Losses) Recorded in

Unrealized

Gains/(Losses)

Fair Value

Transfers

Fair Value

Related to

January 1,

Income/

Comprehensive

to/(from)

at June 30,

Instruments Held at

(in thousands)

2017

(Loss)

(Loss) Income

Issuances

Settlements

Level 3

2017

June 30, 2017

Mortgage servicing rights

$228,099

$(19,496)

$--

$11,983

$--

$220,586

$(10,348)

Interest rate lock commitments

982

1,027

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, 2018, the significant unobservable inputs used in the fair value measurements were as follows:

(dollars in thousands)

Fair Value at
June 30, 2018

Valuation Technique

Significant Unobservable Inputs

Significant
Unobservable
Input Value

Mortgage servicing rights

$2,505

Discounted Cash Flow

Weighted Average Constant

Prepayment Rate ⁽¹⁾

10.66

Weighted Average Discount Rate

12.00

(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 June 30, 2018 and December 31, 2017, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2018 Using
	Quoted Prices in
	Active Markets for			Significant Other			Significant
	Identical Assets			Observable Inputs			Unobservable Inputs			Total Fair
(in thousands)	(Level 1)			(Level 2)			(Level 3)			Value
Certain impaired loans ⁽¹⁾		$	--		$	--		$	42,738		$	42,738
Other assets			--			--			--			--

Total		$	--		$	--		$	42,738		$	42,738

(1)	Represents the fair value of impaired loans based on the value of the collateral and repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets.


	Fair Value Measurements at December 31, 2017 Using
	Quoted Prices in
	Active Markets for			Significant Other			Significant
	Identical Assets			Observable Inputs			Unobservable Inputs			Total Fair
(in thousands)	(Level 1)			(Level 2)			(Level 3)			Value
Certain impaired loans ⁽¹⁾		$	--		$	--		$	45,837		$	45,837
Other assets ⁽²⁾			--			--			4,357			4,357

Total		$	--		$	--		$	50,194		$	50,194

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

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

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 June 30, 2018 and December 31, 2017:


	June 30, 2018
					Fair Value Measurement Using
					Quoted Prices in			Significant
					Active Markets			Other			Significant
					for Identical			Observable			Unobservable
	Carrying		Estimated		Assets			Inputs			Inputs
(in thousands)	Value		Fair Value		(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash and cash equivalents	$	2,204,397	$	2,204,397	$	2,204,397		$	--		$	--
FHLB stock ⁽¹⁾		653,075		653,075		--			653,075			--
Loans, net		39,287,173		38,834,022		--			--			38,834,022
Financial Liabilities:
Deposits	$	29,555,845	$	29,503,131	$	19,249,326	⁽²⁾	$	10,253,805	⁽³⁾	$	--
Borrowed funds		13,793,839		13,649,155		--			13,649,155			--

(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, 2017
					Fair Value Measurement Using
					Quoted Prices in			Significant
					Active Markets			Other			Significant
					for Identical			Observable			Unobservable
	Carrying		Estimated		Assets			Inputs			Inputs
(in thousands)	Value		Fair Value		(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash and cash equivalents	$	2,528,169	$	2,528,169	$	2,528,169		$	--		$	--
FHLB stock ⁽¹⁾		603,819		603,819		--			603,819			--
Loans, net		38,265,183		38,254,538		--			--			38,254,538
Financial Liabilities:
Deposits	$	29,102,163	$	29,044,852	$	20,458,517	⁽²⁾	$	8,586,335	⁽³⁾	$	--
Borrowed funds		12,913,679		12,780,653		--			12,780,653			--

(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.