INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2012

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 5 — INVESTMENT SECURITIES

An analysis of the investment securities available-for-sale portfolio is presented as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
As of March 31, 2012
Investment securities available-for-sale:
U.S. Treasury securities	$	19,903	$	715	$	—		$	20,618
U.S. Government agency and U.S. Government sponsored enterprise debt securities	514,003		844		(525		)	514,322
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	46,248		3,135		—			49,383
Residential mortgage-backed securities	893,214		31,786		(369		)	924,631
Municipal securities	78,414		4,358		—			82,772
Corporate debt securities:
Investment grade	1,151,013		7,227		(67,631		)	1,090,609
Non-investment grade (1)	24,616		13		(10,707		)	13,922
Other securities	10,276		187		—			10,463
Total investment securities available-for-sale	$	2,737,687	$	48,265	$	(79,232	)	$	2,706,720
As of December 31, 2011
Investment securities available-for-sale:
U.S. Treasury securities	$	19,892	$	833	$	—		$	20,725
U.S. Government agency and U.S. Government sponsored enterprise debt securities	575,148		1,709		(279		)	576,578
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	46,008		3,307		—			49,315
Residential mortgage-backed securities	963,688		30,854		(772		)	993,770
Municipal securities	76,255		3,696		(5		)	79,946
Corporate debt securities:
Investment grade	1,411,409		6,762		(95,610		)	1,322,561
Non-investment grade (1)	30,693		—		(11,078		)	19,615
Other securities	9,875		195		(2		)	10,068
Total investment securities available-for-sale	$	3,132,968	$	47,356	$	(107,746	)	$	3,072,578

(1)For the three months ended March 31, 2012, the Company recorded $99 thousand, on a pre-tax basis, of the credit portion of OTTI through earnings and $5.1 million of the non-credit portion of OTTI for pooled trust preferred securities in other comprehensive income. The Company recorded $633 thousand, on a pre-tax basis, of the credit portion of OTTI through earnings and $5.1 million of the non-credit portion of OTTI for pooled trust preferred securities and other mortgage-backed securities in other comprehensive income for the year ended December 31, 2011.

The fair values of investment securities are generally determined by reference to the average of at least two quoted market prices obtained from independent external brokers or prices obtained from independent external pricing service providers who have experience in valuing these securities. The Company performs a monthly analysis on the broker quotes received from third parties to ensure that the prices represent a reasonable estimate of fair value. The procedures include, but are not limited to, initial and ongoing review of third party pricing methodologies, review of pricing trends, and monitoring of trading volumes. The Company assesses whether the prices received from independent brokers represent a reasonable estimate of fair value through the use of internal and external cash flow models developed that are based on spreads and, when available, market indices. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon available market data, the price received from third parties is adjusted accordingly.

Prices from third party pricing services are often unavailable for securities that are rarely traded or are traded only in privately negotiated transactions. As a result, certain securities are priced via independent broker quotations that utilize inputs that may be difficult to corroborate with observable market based data. Additionally, the majority of these independent broker quotations are non-binding.

As a result of the global financial crisis and illiquidity in the U.S. markets, the market for the pooled trust preferred securities has been inactive since mid-2007. It is the Company’s view that current broker prices (which are typically non-binding) on these securities are based on forced liquidation or distressed sale values in very inactive markets that are not representative of the fair value of these securities. As such, the Company considered what weight, if any, to place on transactions that are not orderly when estimating fair value. For the pooled trust preferred securities the Company determined their fair values using the methodologies set forth in Note 3 to the Company’s condensed consolidated financial statements presented elsewhere in this report.

The following table shows the Company’s rollforward of the amount related to OTTI credit losses for the periods shown:

	Three Months Ended
	March 31,
	2012		2011
	(In thousands)
Beginning balance	$	115,412	$	124,340
Addition of other-than-temporary impairment that was not previously recognized	—		—
Additional increases to the amount related to the credit loss for which an other-than-temporary impairment was previously recognized	99		464
Reduction for securities sold	—		(9,561		)
Ending balance	$	115,511	$	115,243

The following tables show the Company’s investment portfolio’s gross unrealized losses and related fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of March 31, 2012 and December 31, 2011:

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
As of March 31, 2012
Investment securities available-for-sale:
U.S. Treasury securities	$	—	$	—		$	—	$	—		$	—	$	—
U.S. Government agency and U.S. Government sponsored enterprise debt securities	141,223		(525		)	—		—			141,223		(525		)
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		—			—		—			—		—
Residential mortgage-backed securities	93,968		(369		)	—		—			93,968		(369		)
Municipal securities	—		—			—		—			—		—
Corporate debt securities:
Investment grade	450,019		(30,057		)	357,426		(37,574		)	807,445		(67,631		)
Non-investment grade	2,352		(30		)	9,389		(10,677		)	11,741		(10,707		)
Other securities	—		—			—		—			—		—
Total investment securities available-for-sale	$	687,562	$	(30,981	)	$	366,815	$	(48,251	)	$	1,054,377	$	(79,232	)

	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
As of December 31, 2011
Investment securities available-for-sale:
U.S. Treasury securities	$	—	$	—		$	—	$	—		$	—	$	—
U.S. Government agency and U.S. Government sponsored enterprise debt securities	143,265		(279		)	—		—			143,265		(279		)
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		—			—		—			—		—
Residential mortgage-backed securities	195,393		(772		)	—		—			195,393		(772		)
Municipal securities	1,158		(5		)	—		—			1,158		(5		)
Corporate debt securities:
Investment grade	754,055		(61,935		)	350,181		(33,675		)	1,104,236		(95,610		)
Non-investment grade	9,973		(565		)	9,595		(10,513		)	19,568		(11,078		)
Other securities	4,503		(2		)	—		—			4,503		(2		)
Total investment securities available-for-sale	$	1,108,347	$	(63,558	)	$	359,776	$	(44,188	)	$	1,468,123	$	(107,746	)

Unrealized Losses

The majority of the unrealized losses related to securities that have been in a continuous loss position for less than twelve months is related to investment grade corporate debt securities. As of March 31, 2012, the Company had $1.09 billion in investment grade corporate debt securities available-for-sale, representing 40% of the total investment securities available-for-sale portfolio.

As of March 31, 2012, there were 23 individual securities that have been in a continuous unrealized loss position for twelve months or more. These securities are comprised of 5 positions in trust preferred securities with a total fair value of $9.4 million and 18 investment grade corporate debt securities with a fair value of $357.4 million. As of March 31, 2012, there were also 61 securities, not including the 23 securities above, which have been in a continuous unrealized loss position for less than twelve months. The securities in an unrealized loss position for less than twelve months include 47 investment grade corporate debt securities, 6 residential mortgage-backed securities, 6 government agency securities, and 2 non-investment grade corporate debt security. The unrealized losses on these securities are primarily attributed to the sovereign debt crisis in Europe, which has impacted both European and U.S. institutions. The issuers of these securities have not, to our knowledge, established any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. The Company does not intend to sell these securities and it is not more likely than not that the company will be required to sell these securities before recovery of their current amortized cost basis. As such, the Company does not deem these securities, other than those previously stated, to be other-than-temporarily impaired as of March 31, 2012.

Corporate Debt Securities

The unrealized losses related to securities that have been in a continuous loss position of twelve months or longer are related to 5 positions in trust preferred debt securities and 18 investment grade corporate debt securities. As of March 31, 2012, these 5 positions in trust preferred securities had an estimated fair value of $9.4 million, representing less than 1% of the total investment securities available-for-sale portfolio. As of March 31, 2012, these non-investment grade trust preferred debt securities had gross unrealized losses amounting to $10.7 million, or 53% of the total amortized cost basis of these securities, comprised of $5.6 million in unrealized losses on securities that are not other-than-temporarily impaired and $5.1 million in noncredit-related impairment losses on securities that are other-than-temporarily impaired as of March 31, 2012 pursuant to the provisions of ASC 320-10-65. We recorded an impairment loss of $99 thousand on our portfolio of pooled trust preferred securities during the first three months of 2012 for additional increases to the amount related to the credit loss for which an other-than-temporary impairment was previously recognized.

The scheduled maturities of investment securities at March 31, 2012 are presented as follows:

	Amortized		Estimated
	Cost		Fair Value
	(In thousands)
Due within one year	$	625,794	$	621,332
Due after one year through five years	252,183		248,610
Due after five years through ten years	880,483		829,519
Due after ten years	979,227		1,007,259
Total investment securities available-for-sale	$	2,737,687	$	2,706,720