Fair Value Measurements (Tables)

9 Months Ended

Sep. 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 September 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 September 30, 2014 Using
	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	$	--		$	20,692		$	--	$	--		$	20,692
GSE CMOs		--			59,075			--		--			59,075
Private label CMOs		--			9,367			--		--			9,367
Total mortgage-related securities	$	--		$	89,134		$	--	$	--		$	89,134
Other Securities Available for Sale:
Municipal bonds	$	--		$	1,097		$	--	$	--		$	1,097
Capital trust notes		--			11,609			--		--			11,609
Preferred stock		94,406			28,280			--		--			122,686
Common stock		16,848			1,658			--		--			18,506
Total other securities	$	111,254		$	42,644		$	--	$	--		$	153,898
Total securities available for sale	$	111,254		$	131,778		$	--	$	--		$	243,032
Other Assets:
Loans held for sale	$	--		$	680,147		$	--	$	--		$	680,147
Mortgage servicing rights		--			--			237,221		--			237,221
Interest rate lock commitments		--			--			2,180		--			2,180
Derivative assets-other⁽²⁾		3,184			1,269			--		(2,602	)		1,851
Liabilities:
Derivative liabilities	$	(1,623	)	$	(1,889	)	$	--	$	3,422		$	(90	)

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

(2)	Includes $3.2 million to purchase Treasury options.

	Fair Value Measurements at December 31, 2013 Using
	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	$	--		$	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 ⁽²⁾		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:

September 30, 2014

December 31, 2013

Fair Value

Aggregate

Carrying Amount

Fair Value

Aggregate

Carrying Amount

Carrying

Unpaid

Less Aggregate

Carrying

Unpaid

Less Aggregate

(in thousands)

Amount

Principal

Unpaid Principal

Amount

Principal

Unpaid Principal

Loans held for sale

680,147

672,945

7,202

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						For the Nine Months
	Ended September 30,						Ended September 30,
(in thousands)	2014			2013			2014			2013
Loans held for sale	$	2,278		$	6,892		$	9,212		$	(7,873	)
Mortgage servicing rights		(1,231	)		(5,579	)		(27,417	)		10,187
Total gain (loss)	$	1,047		$	1,313		$	(18,205	)	$	2,314

(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, 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:

			Total Realized/Unrealized													Change in
			Gains/(Losses) Recorded in													Unrealized Gains/
	Fair Value											Transfers		Fair Value		(Losses) Related to
	January 1,		Income/			Comprehensive						to/(from)		at Sept. 30,		Instruments Held at
(in thousands)	2014		(Loss)			(Loss) Income		Issuances		Settlements		Level 3		2014		September 30, 2014
Mortgage servicing rights	$	241,018	$	(27,417	)	$	--	$	23,620	$	--	$	--	$	237,221	$	13,091
Interest rate lock commitments		258		1,922			--		--		--		--		2,180		2,180

			Total Realized/Unrealized													Change in
			Gains/(Losses) Recorded in													Unrealized Gains/
	Fair Value											Transfers		Fair Value		(Losses) Related to
	January 1,		Income/			Comprehensive						to/(from)		at Sept. 30,		Instruments Held at
(in thousands)	2013		(Loss)			(Loss) Income		Issuances		Settlements		Level 3		2013		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

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, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

Significant

Fair Value at

Valuation

Significant

Unobservable

(dollars in thousands)

Sept. 30, 2014

Technique

Observable Inputs

Input Value

Mortgage Servicing Rights

237,221

Discounted Cash Flow

Weighted Average Constant

Prepayment Rate ⁽¹⁾

8.40

Weighted Average Discount Rate

10.00

Interest Rate Lock Commitments

2,180

Discounted Cash Flow

Weighted Average Closing Ratio

72.94

(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 September 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 September 30, 2014 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	$	--	$	--	$	9,851	$	9,851
Other assets ⁽¹⁾		--		18,030		--		18,030
Total	$	--	$	18,030	$	9,851	$	27,881

(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
	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	$	--	$	--	$	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 September 30, 2014 and December 31, 2013:

	September 30, 2014
					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	$	662,537	$	662,537	$	662,537		$	--		$	--
Securities held to maturity		7,268,244		7,317,015		--			7,315,978			1,037
FHLB stock ⁽¹⁾		520,445		520,445		--			520,445			--
Loans, net		35,251,352		35,837,523		--			--			35,837,523
Financial Liabilities:
Deposits	$	28,307,771	$	28,330,141	$	21,983,386	⁽²⁾	$	6,346,755	⁽³⁾	$	--
Borrowed funds		14,396,912		15,256,216		--			15,256,216			--

(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
					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	$	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) 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, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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