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Table of Contents
Index to Financial Statements
represented by the fair value of contracts that have unrealized gains at the reporting date. Conversely, we have $51.2 million of derivative
contracts with unrealized losses at December 31, 2004. These agreements required the Company to pledge approximately $31.6 million of its
mortgage-backed and investment securities as collateral.
While the Company does not expect that any counterparty will fail to perform, the following table shows the maximum exposure, or net
credit risk, associated with each counterparty to interest rate swaps and purchased interest rate options at December 31, 2004 (in thousands):
NOTE 28—FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Counterparty
Credit Risk
Bank of America
$
80,606
Solomon Brothers
781
Lehman Brothers
689
Union Bank of Switzerland
452
Total
$
82,528
The fair value of financial instruments whose estimated fair values were their carrying values are summarized as follows:
•
Cash and equivalents, cash and investments required to be segregated, brokerage receivables, net and brokerage payables —Fair
value is estimated to be carrying value.
•
Available
-for-sale investment securities including mortgage-backed, trading securities and other investments —
Fair value is estimated
by using quoted market prices for most securities. For illiquid securities, market prices are estimated by obtaining market price quotes
on similar liquid securities and adjusting the price to reflect differences between the two securities, such as credit risk, liquidity, term
coupon, payment characteristics and other information.
•
FHLB stock
—
Cost is considered to be a reasonable estimate of fair value because the FHLB has historically redeemed these securities
at cost.
•
Financial derivatives and off
-balance instruments —The fair value of financial derivatives and off-balance sheet instruments is the
amount the Company would pay or receive to terminate the agreement as determined from quoted market prices, which is equal to the
carrying value.
The fair value of financial instruments whose estimated fair values were different from their carrying values are summarized below (in
thousands):
•
Commitments to purchase and originate loans —
The fair value is estimated by calculating the net present value of the anticipated cash
flows associated with IRLCs.
December 31, 2004
December 31, 2003
Carrying
Value
Fair Value
Carrying
Value
Fair Value
Assets:
Loans receivable and loans held
-
for
-
sale, net
$
11,785,035
$
11,765,901
$
9,131,393
$
9,049,197
Liabilities:
Deposits
$
12,302,974
$
12,359,634
$
12,514,486
$
12,311,009
Securities sold under agreements to repurchase
$
9,896,872
$
9,879,314
$
5,283,609
$
5,257,531
Other borrowings by Bank subsidiary
$
1,760,732
$
1,757,997
$
1,203,554
$
1,225,480
Subordinated notes
$
185,165
$
$
695,330
$
775,743
Senior notes
$
400,452
$
$
—
$
—
120
•
Loans receivable and loans held
-for-sale, net —For certain residential mortgage loans, fair value is estimated using quoted market
prices for similar types of products. The fair value of certain other types of