NOTE 6 — 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, 2014
Investment securities available-for-sale:
U.S. Treasury securities	$	431,307	$	91	$	(3,145	)	$	428,253
U.S. Government agency and U.S. Government sponsored enterprise debt securities	391,470		763		(7,548		)	384,685
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	120,999		769		(2,661		)	119,107
Residential mortgage-backed securities	829,005		7,331		(12,231		)	824,105
Municipal securities	290,241		3,197		(9,541		)	283,897
Other residential mortgage-backed securities:
Investment grade	58,450		—		(1,443		)	57,007
Other commercial mortgage-backed securities:
Investment grade	50,999		420		—			51,419
Corporate debt securities:
Investment grade	212,593		60		(2,962		)	209,691
Non-investment grade (1)	20,577		28		(5,093		)	15,512
Other securities	99,114		2,573		(619		)	101,068
Total investment securities available-for-sale	$	2,504,755	$	15,232	$	(45,243	)	$	2,474,744
As of December 31, 2013
Investment securities available-for-sale:
U.S. Treasury securities	$	495,053	$	201	$	(3,622	)	$	491,632
U.S. Government agency and U.S. Government sponsored enterprise debt securities	406,807		242		(12,726		)	394,323
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	182,257		1,062		(4,449		)	178,870
Residential mortgage-backed securities	892,435		7,729		(14,927		)	885,237
Municipal securities	297,390		1,122		(17,533		)	280,979
Other residential mortgage-backed securities:
Investment grade	48,129		—		(1,802		)	46,327
Other commercial mortgage-backed securities:
Investment grade	51,000		617		—			51,617
Corporate debt securities:
Investment grade	312,726		613		(3,344		)	309,995
Non-investment grade (1)	20,668		62		(5,629		)	15,101
Other securities	80,025		555		(864		)	79,716
Total investment securities available-for-sale	$	2,786,490	$	12,203	$	(64,896	)	$	2,733,797

(1) For the three months ended March 31, 2014 and the year ended December 31, 2013, the Company did not record any OTTI.

The Company did not have any investment securities held-to-maturity as of March 31, 2014 and December 31, 2013.

The fair values of the investment securities are generally determined by independent external pricing service providers who have experience in valuing these securities and by comparison to and/or average of quoted market prices obtained from independent external brokers. The Company performs a monthly analysis on the pricing service quotes and 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 observable market inputs including comparable trades, the yield curve, 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.

The market for the pooled trust preferred securities continues to have minimal activity or distressed transactions. 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 4 to the Company’s condensed consolidated financial statements.

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,
	2014		2013
	(In thousands)
Beginning balance, January 1,	$	115,511	$	115,511
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	—		—
Reduction for securities sold	—		—
Ending balance	$	115,511	$	115,511

During the three months ended March 31, 2014, the Company recorded $3.5 million of gross gains and $127 thousand of gross losses resulting in a net income statement impact of $3.4 million of net gain on sale of investment securities. The gross $127 thousand of losses resulted from the securities acquired from MetroCorp which were sold immediately after the acquisition closed, and the net income statement impact from these securities was a net gain of $41 thousand. During the three months ended March 31, 2013, the Company recorded $5.6 million of gross gains and no gross losses resulting in a net income statement impact of $5.6 million of gain on sale of investment securities. The tax expense on the sale of investment securities available-for-sale amounted to $1.4 million and $2.3 million for the three months ended March 31, 2014 and 2013, respectively. Total net proceeds for these sales were $330.2 million and $196.9 million for the three months ended March 31, 2014 and 2013, respectively.

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, 2014 and December 31, 2013:

	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, 2014
Investment securities available-for-sale:
U.S. Treasury securities	$	346,069	$	(3,145	)	$	—	$	—		$	346,069	$	(3,145	)
U.S. Government agency and U.S. Government sponsored enterprise debt securities	252,148		(7,548		)	—		—			252,148		(7,548		)
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	81,367		(1,752		)	16,082		(909		)	97,449		(2,661		)
Residential mortgage-backed securities	417,992		(7,447		)	119,255		(4,784		)	537,247		(12,231		)
Municipal securities	110,001		(4,462		)	64,839		(5,079		)	174,840		(9,541		)
Other residential mortgage-backed securities:
Investment grade	57,007		(1,443		)	—		—			57,007		(1,443		)
Corporate debt securities:
Investment grade	128,623		(1,276		)	79,554		(1,686		)	208,177		(2,962		)
Non-investment grade	—		—			14,869		(5,093		)	14,869		(5,093		)
Other securities	19,444		(619		)	—		—			19,444		(619		)
Total investment securities available-for-sale	$	1,412,651	$	(27,692	)	$	294,599	$	(17,551	)	$	1,707,250	$	(45,243	)

	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, 2013
Investment securities available-for-sale:
U.S. Treasury securities	$	337,248	$	(3,622	)	$	—	$	—		$	337,248	$	(3,622	)
U.S. Government agency and U.S. Government sponsored enterprise debt securities	387,097		(12,726		)	—		—			387,097		(12,726		)
U.S. Government agency and U.S. Government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	114,754		(3,280		)	16,065		(1,169		)	130,819		(4,449		)
Residential mortgage-backed securities	502,285		(10,570		)	92,540		(4,357		)	594,825		(14,927		)
Municipal securities	173,782		(10,765		)	47,892		(6,768		)	221,674		(17,533		)
Other residential mortgage-backed securities:
Investment grade	46,328		(1,802		)	—		—			46,328		(1,802		)
Corporate debt securities:
Investment grade	193,482		(1,538		)	79,442		(1,806		)	272,924		(3,344		)
Non-investment grade	—		—			14,422		(5,629		)	14,422		(5,629		)
Other securities	48,098		(864		)	—		—			48,098		(864		)
Total investment securities available-for-sale	$	1,803,074	$	(45,167	)	$	250,361	$	(19,729	)	$	2,053,435	$	(64,896	)

Unrealized Losses

The majority of the unrealized losses related to securities that have been in a continuous loss position for less than twelve months are related to government sponsored debt securities, residential agency mortgage-backed and municipal securities. As of March 31, 2014, government sponsored debt securities, residential agency mortgage-backed securities and municipal securities, represented 16%, 33% and 11% of the total investment securities available-for-sale portfolio, respectively. As of December 31, 2013, government sponsored debt securities, municipal securities and residential agency mortgage-backed securities, represented approximately 14%, 10% and 32% of the total investment securities available-for-sale portfolio, respectively.

As of March 31, 2014, there were 75 individual securities that have been in a continuous unrealized loss position for twelve months or more. These securities are comprised of 40 municipal securities with a total fair value of $64.8 million, 23 residential agency mortgage-backed securities with a fair value of $119.3 million, 5 non-investment grade trust preferred securities with a total fair value of $14.9 million, 4 investment grade corporate debt securities with a fair value of $79.6 million and 3 commercial agency mortgage-backed securities with a fair value of $16.1 million. The unrealized losses on these securities are primarily attributed to the rise in interest rates, together with the widened liquidity spread and credit spread. 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 of March 31, 2014, there were also 179 securities, not including the 75 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 62 municipal securities, 47 residential agency mortgage-backed securities, 34 U.S. Treasury securities, 13 commercial agency mortgage-backed securities, 9 government sponsored debt securities, 6 other residential mortgage-backed securities, 5 investment grade corporate debt securities and 3 other securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated and as long-term rates increased. 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 any of the securities as of March 31, 2014 to be other-than-temporarily impaired.

As of December 31, 2013 there were 65 securities which have been in a continuous unrealized loss position for twelve months or more. These securities are comprised of 32 municipal securities with a total fair value of $47.9 million, 21 residential agency mortgage-backed securities with a total fair value of $92.5 million, 5 trust preferred securities with a total fair value of $14.4 million, 4 investment grade corporate debt securities with a total fair value of $79.4 million and 3 commercial agency mortgage-backed securities with a total fair value of $16.1 million. As of December 31, 2013 there were also 239 securities, not including the 65 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 94 municipal securities, 55 residential agency mortgage-backed securities, 33 U.S. Treasury securities, 19 commercial agency mortgage-backed securities, 16 government sponsored debt securities, 8 investment grade corporate debt securities, 5 other residential mortgage-backed securities and 9 other securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated and as long-term rates increased. 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 the investments before recovery of their current amortized cost basis. As such, the Company does not deem these securities, to be other-than-temporarily impaired as of December 31, 2013.

Corporate Debt Securities

As of March 31, 2014, the majority of unrealized losses related to securities that have been in a continuous loss position of twelve months or longer are due to 5 trust preferred securities, 40 municipal securities and 23 residential agency mortgage-backed securities. As of March 31, 2014, these 5 trust preferred securities had an estimated fair value of $14.9 million, representing approximately 1% of the total investment securities available-for-sale portfolio. As of March 31, 2014, these trust preferred debt securities had gross unrealized losses amounting to $5.1 million, or 26% of the total amortized cost basis of these securities. We did not record an impairment loss on our portfolio of pooled trust preferred as of March 31, 2014 and December 31, 2013.

Investment Securities Maturities

The scheduled maturities of investment securities at March 31, 2014 are presented as follows:

	Amortized		Estimated
	Cost		Fair Value
	(In thousands)
Due within one year	$	395,151	$	384,287
Due after one year through five years	505,195		501,542
Due after five years through ten years	608,053		602,553
Due after ten years	996,356		986,362
Total investment securities available-for-sale	$	2,504,755	$	2,474,744

Actual maturities of mortgage-backed securities can differ from contractual maturities because borrowers have the right to prepay obligations. In addition, such factors as prepayments and interest rates may affect the yields on the carrying values of mortgage-backed securities.