XML 45 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements
 3 Months Ended
Dec. 31, 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 December 31, 2011:
 
 
Fair Value at December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Available-for-sale securities
 
 
 
 
 
 
 
Equity securities
$
—

 
$
—

 
$
—

 
$
—

Obligations of U.S. government
—

 
151,225

 
—

 
151,225

Obligations of states and political subdivisions
—

 
23,710

 
—

 
23,710

Obligations of foreign governments
—

 
—

 
—

 
—

Corporate debt securities
—

 
29,371

 
—

 
29,371

Mortgage-backed securities
 
 
 
 
—

 
 
Agency pass-through certificates
—

 
3,343,770

 
—

 
3,343,770

Other debt securities
—

 
—

 
—

 
—

Balance at end of period
$
—

 
$
3,548,076

 
$
—

 
$
3,548,076


There were no transfers between, into and/or out of Levels 1, 2 or 3 during the quarter ended December 31, 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 December 31, 2011, and the total losses resulting from those fair value adjustments for the quarter ended December 31, 2011. The following estimated fair values are shown gross of estimated selling costs:
 
 
Through December 31, 2011
 
Quarter
Ended
December 31, 2011
 
Level 1
 
Level  2
 
Level  3
 
Total
 
Total Losses
 
(In thousands)
Impaired loans (1)
$
—

 
$
—

 
$
13,680

 
$
13,680

 
$
1,001

Covered REO (2)
—

 
—

 
15,582

 
15,582

 
701

Real estate held for sale (2)
—

 
—

 
58,986

 
58,986

 
20,964

Balance at end of period
$
—

 
$
—

 
$
88,248

 
$
88,248

 
$
22,666

 ___________________
(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 December 31, 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.
 
 
December 31, 2011
 
September 30, 2011
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
 
(In thousands)
Financial assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
909,911

 
$
909,911

 
$
816,002

 
$
816,002

Available-for-sale securities
 
 
 
 
 
 
 
Equity securities
—

 
—

 
—

 
—

Obligations of U.S. government
151,225

 
151,225

 
190,527

 
190,527

Obligations of states and political subdivisions
23,710

 
23,710

 
23,568

 
23,568

Obligations of foreign governments
—

 
—

 
—

 
—

Corporate debt securities
29,371

 
29,371

 
29,959

 
29,959

Mortgage-backed securities
 
 
 
 
 
 
 
Agency pass-through certificates
3,343,770

 
3,343,770

 
3,011,090

 
3,011,090

Other debt securities
—

 
—

 
—

 
—

Total available-for-sale securities
3,548,076

 
3,548,076

 
3,255,144

 
3,255,144

Held-to-maturity securities
 
 
 
 
 
 
 
Equity securities
—

 
—

 
—

 
—

Obligations of U.S. government
—

 
—

 
—

 
—

Obligations of states and political subdivisions
795

 
834

 
1,950

 
2,023

Obligations of foreign governments
—

 
—

 
—

 
—

Corporate debt securities
—

 
—

 
—

 
—

Mortgage-backed securities
 
 
 
 
 
 
 
Agency pass-through certificates
41,431

 
44,651

 
45,086

 
48,593

Other debt securities
—

 
—

 
—

 
—

Total held-to-maturity securities
42,226

 
45,485

 
47,036

 
50,616

Loans receivable
7,810,075

 
8,400,463

 
7,935,877

 
8,479,307

Covered loans
347,469

 
341,853

 
382,183

 
375,027

FDIC indemnification asset
92,103

 
90,201

 
98,871

 
101,751

FHLB stock
153,333

 
153,333

 
151,755

 
151,755

Financial liabilities
 
 
 
 
 
 
 
Customer accounts
8,875,675

 
8,760,540

 
8,665,903

 
8,557,357

FHLB advances and other borrowings
2,760,868

 
3,116,631

 
2,762,066

 
3,038,127


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.
FDIC indemnification asset – The fair value of the indemnification asset is estimated by discounting the expected future cash flows using the current rates.
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:
 
 
December 31, 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

 
$
30

 
$
—

 
$
530

 
4.00
%
1 to 5 years
—

 
—

 
—

 
—

 
—

5 to 10 years
9,300

 
4,324

 
—

 
13,624

 
10.38

Over 10 years
136,460

 
611

 
—

 
137,071

 
2.16

Corporate bonds due
 
 
 
 
 
 
 
 
 
5 to 10 years
30,000

 
308

 
(937
)
 
29,371

 
4.00

Municipal bonds due
 
 
 
 
 
 
 
 
 
Over 10 years
20,456

 
3,254

 
—

 
23,710

 
6.45

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
Agency pass-through certificates
3,218,244

 
125,914

 
(388
)
 
3,343,770

 
4.62

 
3,414,960

 
134,441

 
(1,325
)
 
3,548,076

 
4.54

Held-to-maturity securities
 
 
 
 
 
 
 
 
 
Tax-exempt municipal bonds due
 
 
 
 
 
 
 
 
 
1 to 5 years
—

 
—

 
—

 
—

 
—

5 to 10 years
795

 
39

 
—

 
834

 
5.58

Over 10 years
—

 
—

 
—

 
—

 
—

U.S. government and agency securities due
 
 
 
 
 
 
 
 
 
1 to 5 years
—

 
—

 
—

 
—

 
—

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
Agency pass-through certificates
41,431

 
3,220

 
—

 
44,651

 
5.31

 
42,226

 
3,259

 
—

 
45,485

 
5.32

 
$
3,457,186

 
$
137,700

 
$
(1,325
)
 
$
3,593,561

 
4.55
%
 
 
September 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

 
$
34

 
$
—

 
$
534

 
4.00
%
1 to 5 years
—

 
—

 
—

 
—

 
—

5 to 10 years
9,300

 
4,547

 
—

 
13,847

 
10.38

Over 10 years
175,515

 
631

 
—

 
176,146

 
2.57

Corporate bonds due
 
 
 
 
 
 
 
 
 
5 to 10 years
30,000

 
284

 
(325
)
 
29,959

 
4.00

Municipal bonds due
 
 
 
 
 
 
 
 
 
Over 10 years
20,461

 
3,107

 
—

 
23,568

 
6.45

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
Agency pass-through certificates
2,883,734

 
127,356

 
—

 
3,011,090

 
4.72

 
3,119,510

 
135,959

 
(325
)
 
3,255,144

 
4.62

Held-to-maturity securities
 
 
 
 
 
 
 
 
 
Tax-exempt municipal bonds due
 
 
 
 
 
 
 
 
 
1 to 5 years
405

 
5

 
—

 
410

 
6.52

5 to 10 years
1,545

 
68

 
—

 
1,613

 
5.60

Over 10 years
—

 
—

 
—

 
—

 
—

U.S. government and agency securities due
 
 
 
 
 
 
 
 
 
1 to 5 years
—

 
—

 
—

 
—

 
—

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
Agency pass-through certificates
45,086

 
3,507

 
—

 
48,593

 
5.31

 
47,036

 
3,580

 
—

 
50,616

 
5.33

 
$
3,166,546

 
$
139,539

 
$
(325
)
 
$
3,305,760

 
4.63
%

During the period ending December 31, 2011, $3,500,000 of available-for-sale securities were sold, resulting in a gain of $0. $0 of available-for-sale securities were sold during the period ending December 31, 2010, resulting in a gain of $0.
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 December 31, 2011, by length of time that individual securities in each category have been in a continuous loss position. 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
 
 
Corporate bonds due
$
—

 
$
—

 
$
(937
)
 
$
9,063

 
$
(937
)
 
$
9,063

Agency pass-through certificates
(388
)
 
66,664

 
—

 
—

 
(388
)
 
66,664

 
(388
)
 
$
66,664

 
$
(937
)
 
$
9,063

 
(1,325
)
 
$
75,727