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Note G - Fair Value Measurements | 9 Months Ended
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Jun. 30, 2011
Fair Value Measurements [Abstract] |
Fair Value Measurements | Fair Value Measurements U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active exchange markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The following is a description of the valuation methodologies used to measure and report fair value of financial assets and liabilities on a recurring or nonrecurring basis: Measured on a Recurring Basis Securities Securities available for sale are recorded at fair value on a recurring basis. Securities at fair value are priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and under the provisions of the Fair Value Measurements and Disclosures topic of the FASB Accounting Standards Codification are considered a Level 2 input method. The following table presents the balance of assets measured at fair value on a recurring basis at June 30, 2011:
| Fair Value at June 30, 2011
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (In thousands)
Available-for-sale securities |  |  |  |  |  |  |
Equity securities | $ | — |  |  | $ | 520 |  |  | $ | — |  |  | $ | 520 |
Obligations of U.S. government | — |  |  | 275,625 |  |  | — |  |  | 275,625 |
Obligations of states and political subdivisions | — |  |  | 21,969 |  |  | — |  |  | 21,969 |
Obligations of foreign governments | — |  |  | — |  |  | — |  |  | — |
Corporate debt securities | — |  |  | 10,811 |  |  | — |  |  | 10,811 |
Mortgage-backed securities |  |  |  |  | — |  |  |
Agency pass-through certificates | — |  |  | 2,817,485 |  |  | — |  |  | 2,817,485 |
Other debt securities | — |  |  | — |  |  | — |  |  | — |
Balance at end of period | $ | — |  |  | $ | 3,126,410 |  |  | $ | — |  |  | $ | 3,126,410 |
There were no transfers between, into and/or out of Levels 1, 2 or 3 during the quarter ended June 30, 2011. Measured on a Nonrecurring Basis Impaired Loans & Real Estate Held for Sale From time to time, and on a nonrecurring basis, fair value adjustments to collateral dependent loans and real estate held for sale are recorded to reflect write-downs of principal balances based on the current appraised or estimated value of the collateral. Real estate held for sale consists principally of properties acquired through foreclosure. The following table presents the aggregated balance of assets measured at estimated fair value on a nonrecurring basis through the quarter ended June 30, 2011, and the total losses resulting from those fair value adjustments for the quarter and nine months ended June 30, 2011. The following estimated fair values are shown gross of estimated selling costs:
| Through June 30, 2011 |  | Quarter Ended June 30, 2011 |  | Nine Months Ended June 30, 2011
| Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Total Losses
| (In thousands) |  |
Impaired loans (1) | $ | — |  |  | $ | — |  |  | $ | 199,547 |  |  | $ | 199,547 |  |  | $ | 6,586 |  |  | $ | 35,890 |
Real estate held for sale (2) | — |  |  | — |  |  | 120,252 |  |  | 120,252 |  |  | 9,019 |  |  | 34,364 |
Balance at end of period | $ | — |  |  | $ | — |  |  | $ | 319,799 |  |  | $ | 319,799 |  |  | $ | 15,605 |  |  | $ | 70,254 |
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(1) | The losses represents remeasurements of collateral dependent loans.
(2) | The losses represents aggregate writedowns and charge-offs on real estate held for sale.
There were no liabilities carried at fair value, measured on a recurring or nonrecurring basis, at June 30, 2011. Fair Values of Financial Instruments U. S. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the statement of financial condition, for which it is practicable to estimate those values. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect the underlying fair value of the Company. Although management is not aware of any factors that would materially affect the estimated fair value amounts presented below, such amounts have not been comprehensively revalued for purposes of these financial statements since the dates shown, and therefore, estimates of fair value subsequent to those dates may differ significantly from the amounts presented below.
| June 30, 2011 |  | September 30, 2010
| Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
| (In thousands)
Financial assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 658,160 |  |  | $ | 658,160 |  |  | $ | 888,622 |  |  | $ | 888,622 |
Available-for-sale securities: |  |  |  |  |  |  |
Equity securities | 520 |  |  | 520 |  |  | — |  |  | — |
Obligations of U.S. government | 275,625 |  |  | 275,625 |  |  | 341,006 |  |  | 341,006 |
Obligations of states and political subdivisions | 21,969 |  |  | 21,969 |  |  | — |  |  | — |
Obligations of foreign governments | — |  |  | — |  |  | — |  |  | — |
Corporate debt securities | 10,811 |  |  | 10,811 |  |  | 10,000 |  |  | 10,000 |
Mortgage-backed securities |  |  |  |  |  |  |
Agency pass-through certificates | 2,817,485 |  |  | 2,817,485 |  |  | 2,130,087 |  |  | 2,130,087 |
Other debt securities | — |  |  | — |  |  | — |  |  | — |
Total available-for-sale securities | 3,126,410 |  |  | 3,126,410 |  |  | 2,481,093 |  |  | 2,481,093 |
Held-to-maturity securities: |  |  |  |  |  |  |
Equity securities | — |  |  | — |  |  | — |  |  | — |
Obligations of U.S. government | — |  |  | — |  |  | — |  |  | — |
Obligations of states and political subdivisions | 1,950 |  |  | 2,048 |  |  | 7,055 |  |  | 7,269 |
Obligations of foreign governments | — |  |  | — |  |  | — |  |  | — |
Corporate debt securities | — |  |  | — |  |  | — |  |  | — |
Mortgage-backed securities |  |  |  |  |  |  |
Agency pass-through certificates | 47,553 |  |  | 50,890 |  |  | 73,052 |  |  | 77,631 |
Other debt securities | — |  |  | — |  |  | — |  |  | — |
Total held-to-maturity securities | 49,503 |  |  | 52,938 |  |  | 80,107 |  |  | 84,900 |
Loans receivable | 8,023,611 |  |  | 8,600,812 |  |  | 8,423,703 |  |  | 8,899,937 |
Covered loans | 417,881 |  |  | 412,171 |  |  | 534,474 |  |  | 534,474 |
FHLB stock | 151,753 |  |  | 151,753 |  |  | 151,748 |  |  | 151,748 |
Financial liabilities |  |  |  |  |  |  |
Customer accounts | 8,713,690 |  |  | 8,557,383 |  |  | 8,852,540 |  |  | 8,811,009 |
FHLB advances and other borrowings | 2,662,997 |  |  | 2,907,059 |  |  | 2,665,548 |  |  | 2,965,921 |
The following methods and assumptions were used to estimate the fair value of financial instruments: Cash and cash equivalents – The carrying amount of these items is a reasonable estimate of their fair value. Available-for-sale securities and held-to-maturity securities – Securities at fair value are priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and under the provisions of the Fair Value Measurements and Disclosures topic of the FASB Accounting Standards Codification are considered a Level 2 input method. Loans receivable and covered loans – For certain homogeneous categories of loans, such as fixed- and variable-rate residential mortgages, fair value is estimated for securities backed by similar loans, adjusted for differences in loan characteristics, using the same methodology described above for AFS and HTM securities. The fair value of other loan types is estimated by discounting the future cash flows and estimated prepayments using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining term. Some loan types were valued at carrying value because of their floating rate or expected maturity characteristics. Net deferred loan fees are not included in the fair value calculation but are included in the carrying amount. FHLB stock – The fair value is based upon the par value of the stock which equates to its carrying value. Customer accounts – The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting the estimated future cash flows using the rates currently offered for deposits with similar remaining maturities. FHLB advances and other borrowings – The fair value of FHLB advances and other borrowings is estimated by discounting the estimated future cash flows using rates currently available to the Company for debt with similar remaining maturities. The following is a reconciliation of amortized cost to fair value of available-for-sale and held-to-maturity securities:
| June 30, 2011
| Amortized Cost |  | Gross Unrealized |  | Fair Value |  | Yield
| Gains |  | Losses |
| (In thousands)
Available-for-sale securities |  |  |  |  |  |  |  |  |
U.S. government and agency securities due |  |  |  |  |  |  |  |  |
Within 1 year | $ | 500 |  |  | $ | 20 |  |  | $ | — |  |  | $ | 520 |  |  | 4.00 | %
1 to 5 years | — |  |  | — |  |  | — |  |  | — |  |  | — | %
5 to 10 years | 9,300 |  |  | 4,381 |  |  | — |  |  | 13,681 |  |  | 10.38 | %
Over 10 years | 295,974 |  |  | 1,502 |  |  | (13,563 | ) |  | 283,913 |  |  | 3.07 | %
Corporate bonds due |  |  |  |  |  |  |  |  |
5 to 10 years | 10,000 |  |  | 811 |  |  | — |  |  | 10,811 |  |  | 6.00 | %
Mortgage-backed securities |  |  |  |  |  |  |  |  |
Agency pass-through certificates | 2,744,328 |  |  | 81,404 |  |  | (8,247 | ) |  | 2,817,485 |  |  | 4.79 | %
| 3,060,102 |  |  | 88,118 |  |  | (21,810 | ) |  | 3,126,410 |  |  | 4.65 | %
Held-to-maturity securities |  |  |  |  |  |  |  |  |
Tax-exempt municipal bonds due |  |  |  |  |  |  |  |  |
1 to 5 years | — |  |  | — |  |  |  |  |  | — |  |  | — | %
5 to 10 years | 1,950 |  |  | 98 |  |  | — |  |  | 2,048 |  |  | 5.72 | %
Over 10 years | — |  |  | — |  |  |  |  |  | — |  |  | — | %
U.S. government and agency securities due |  |  |  |  |  |  |  |  |
1 to 5 years | — |  |  | — |  |  |  |  |  | — |  |  | — | %
Mortgage-backed securities |  |  |  |  |  |  |  |  |
Agency pass-through certificates | 47,553 |  |  | 3,337 |  |  | — |  |  | 50,890 |  |  | 5.31 | %
| 49,503 |  |  | 3,435 |  |  | — |  |  | 52,938 |  |  | 5.33 | %
| $ | 3,109,605 |  |  | $ | 91,553 |  |  | $ | (21,810 | ) |  | $ | 3,179,348 |  |  | 4.66 | %
| September 30, 2010
| Amortized Cost |  | Gross Unrealized |  | Fair Value |  | Yield
| Gains | Losses |
| (In thousands)
Available-for-sale securities |  |  |  |  |  |  |  |  |
U.S. government and agency securities due |  |  |  |  |  |  |  |  |
Within 1 year | $ | 500 |  |  | $ | 26 |  |  | $ | — |  |  | $ | 526 |  |  | 4.00 | %
1 to 5 years | 25,000 |  |  | 180 |  |  | — |  |  | 25,180 |  |  | 3.25 | %
5 to 10 years | 158,915 |  |  | 5,344 |  |  | (105 | ) |  | 164,154 |  |  | 3.59 | %
Over 10 years | 150,000 |  |  | 1,161 |  |  | (15 | ) |  | 151,146 |  |  | 3.50 | %
Corporate bonds due |  |  |  |  |  |  |  |  |
5 to 10 years | 10,000 |  |  | — |  |  | — |  |  | 10,000 |  |  | 6.00 | %
Mortgage-backed securities |  |  |  |  |  |  |  |  |
Agency pass-through certificates | 2,058,130 |  |  | 72,853 |  |  | (896 | ) |  | 2,130,087 |  |  | 5.26 | %
| 2,402,545 |  |  | 79,564 |  |  | (1,016 | ) |  | 2,481,093 |  |  | 5.02 | %
Held-to-maturity securities |  |  |  |  |  |  |  |  |
Tax-exempt municipal bonds due |  |  |  |  |  |  |  |  |
1 to 5 years | 1,105 |  |  | 65 |  |  | — |  |  | 1,170 |  |  | 6.11 | %
5 to 10 years | 1,940 |  |  | 115 |  |  | — |  |  | 2,055 |  |  | 5.67 | %
Over 10 years | 4,010 |  |  | 34 |  |  | — |  |  | 4,044 |  |  | 5.60 | %
U.S. government and agency securities due |  |  |  |  |  |  |  |  |
1 to 5 years | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Mortgage-backed securities |  |  |  |  |  |  |  |  |
Agency pass-through certificates | 73,052 |  |  | 4,579 |  |  | — |  |  | 77,631 |  |  | 5.59 | %
| 80,107 |  |  | 4,793 |  |  | — |  |  | 84,900 |  |  | 5.60 | %
| $ | 2,482,652 |  |  | $ | 84,357 |  |  | $ | (1,016 | ) |  | $ | 2,565,993 |  |  | 5.04 | %
During the period ending June 30, 2011, $131,361,000 of available-for-sale securities were sold, resulting in a gain of $8,147,000. $368,309,000 of available-for-sale securities were sold during the period ending June 30, 2010, resulting in a gain of $20,428,000. Substantially all mortgage-backed securities have contractual due dates that exceed 10 years. The following table shows the unrealized gross losses and fair value of securities at June 30, 2011, by length of time that individual securities in each category have been in a continuous loss position. There were no securities that were in a continuous loss position for 12 or more months as of June 30, 2011. While the Company had $21,810,000 of securities that were in a continuous loss position for less than 12 months as of June 30, 2011, Management believes that the declines in fair value of these investments are not an other than temporary impairment.
| Less than 12 months |  | 12 months or more |  | Total
| Unrealized Gross Losses |  | Fair Value |  | Unrealized Gross Losses |  | Fair Value |  | Unrealized Gross Losses |  | Fair Value
U.S. agency securities | $ | (13,563 | ) |  | $ | 261,945 |  |  | $ | — |  |  | $ | — |  |  | $ | (13,563 | ) |  | $ | 261,945 |
Agency pass-through certificates | (8,247 | ) |  | 779,449 |  |  | — |  |  | — |  |  | (8,247 | ) |  | 779,449 |
| (21,810 | ) |  | $ | 1,041,394 |  |  | $ | — |  |  | $ | — |  |  | (21,810 | ) |  | $ | 1,041,394 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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- Definition Fair Value Measurements [Abstract] + Details
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