XML 48 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Securities
 9 Months Ended
Sep. 30, 2012
Investments, Debt and Equity Securities [Abstract]  
Securities
Securities
 
 The amortized cost and fair value of securities are summarized in the following tables:
 
September 30, 2012
(in thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Available for Sale:
 
 
 
 
 
 
 
Residential mortgage-backed securities
$
66,496

 
$
2,543

 
$
—

 
$
69,039

Agency collateralized mortgage obligations
500,268

 
9,451

 
(694
)
 
509,025

Private-label collateralized mortgage obligations
2,504

 
6

 
—

 
2,510

Corporate debt securities
14,958

 
—

 
(400
)
 
14,558

Municipal securities
23,919

 
359

 
—

 
24,278

Total
$
608,145

 
$
12,359

 
$
(1,094
)
 
$
619,410

Held to Maturity:
 

 
 

 
 

 
 

U.S. Government agency securities
$
95,987

 
$
976

 
$
—

 
$
96,963

Residential mortgage-backed securities
26,999

 
2,353

 
—

 
29,352

Agency collateralized mortgage obligations
32,534

 
1,133

 
—

 
33,667

Corporate debt securities
15,000

 
—

 
(60
)
 
14,940

Municipal securities
2,979

 
49

 
—

 
3,028

Total
$
173,499

 
$
4,511

 
$
(60
)
 
$
177,950


 
December 31, 2011
(in thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Available for Sale:
 
 
 
 
 
 
 
U.S. Government agency securities
$
22,500

 
$
58

 
$
—

 
$
22,558

Residential mortgage-backed securities
21,087

 
325

 
—

 
21,412

Agency collateralized mortgage obligations
519,167

 
9,171

 
(175
)
 
528,163

Private-label collateralized mortgage obligations
24,974

 
—

 
(1,968
)
 
23,006

Corporate debt securities
19,952

 
—

 
(1,632
)
 
18,320

Total
$
607,680

 
$
9,554

 
$
(3,775
)
 
$
613,459

Held to Maturity:
 

 
 

 
 

 
 

U.S. Government agency securities
$
97,750

 
$
88

 
$
—

 
$
97,838

Residential mortgage-backed securities
37,658

 
2,769

 
—

 
40,427

Agency collateralized mortgage obligations
45,122

 
840

 
(1
)
 
45,961

Corporate debt securities
15,000

 
—

 
(484
)
 
14,516

Municipal securities
1,105

 
10

 
—

 
1,115

Total
$
196,635

 
$
3,707

 
$
(485
)
 
$
199,857


 
The amortized cost and fair value of debt securities by contractual maturity at September 30, 2012 are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations.
 
 
Available for Sale
 
Held to Maturity
(in thousands)
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$
—

 
$
—

 
$
10,000

 
$
9,977

Due after one year through five years
14,958

 
14,558

 
5,000

 
4,963

Due after five years through ten years
11,055

 
11,176

 
—

 
—

Due after ten years
12,864

 
13,102

 
98,966

 
99,991

 
38,877

 
38,836

 
113,966

 
114,931

Residential mortgage-backed securities
66,496

 
69,039

 
26,999

 
29,352

Agency collateralized mortgage obligations
500,268

 
509,025

 
32,534

 
33,667

Private-label collateralized mortgage obligations
2,504

 
2,510

 
—

 
—

Total
$
608,145

 
$
619,410

 
$
173,499

 
$
177,950


 
During the third quarter of 2012, the Company sold two private-label collateralized mortgage obligations (CMOs) with a total fair market value of $3.2 million and realized a net pretax loss of $37,000. Both bonds sold had been classified as available for sale. The Company also had $25.0 million of agency debentures and $5.0 million of corporate debentures that were called by their respective issuers during the third quarter of 2012.

During the third quarter of 2011, the Company sold one security with a fair market value of $852,000 and realized a net pretax gain of $7,000. The security sold had been classified as held to maturity (HTM), however, its remaining par value was less than 15% of its originally purchased par value.

During the first nine months of 2012, the Company sold four mortgage-backed securities (MBSs), 27 agency CMOs and seven private-label CMOs with a total fair market value of $257.4 million and realized a net pretax gain of $959,000. Five of the bonds sold had been classified as held to maturity, however, each remaining par value was less than 15% of its original purchased par value. Year-to-date, the Company also had $160.3 million in a total of eleven agency debentures and one corporate debenture that were called by their respective issuers.

During the first nine months of 2011, the Company sold a total of 13 securities with a combined fair market value of $126.2 million. All of the securities were U.S. agency CMOs. All but one, as detailed in the paragraph above, had been classified as available for sale and all had a total combined amortized cost of $125.8 million. The Company realized net pretax gains of $350,000 on the combined sales.  

The Company does not maintain a trading portfolio and there were no transfers of securities between the AFS and HTM portfolios. The Company uses the specific identification method to record security sales.

At September 30, 2012, securities with a carrying value of $644.5 million were pledged to secure public deposits and for other purposes as required or permitted by law.
 
The following table summarizes the Company's gains and losses on the sales of debt securities and credit losses recognized for the OTTI of investments:

(in thousands)
Gross Realized Gains
 
Gross Realized (Losses)
 
OTTI Credit Losses
 
Net Gains (Losses)
Three Months Ended:
 
 
 
 
 
 
 
September 30, 2012
$
5

 
$
(42
)
 
$
—

 
$
(37
)
September 30, 2011
7

 
—

 
—

 
7

Nine Months Ended:
 
 
 
 
 
 
 
September 30, 2012
2,500

 
(1,541
)
 
(649
)
 
310

September 30, 2011
983

 
(633
)
 
(315
)
 
35



In determining fair market values for its portfolio holdings, the Company receives information from a third party provider which management evaluates and corroborates using amounts from one of its securities brokers. Under the current guidance, these values are considered Level 2 inputs, based upon mathematically derived matrix pricing and observed data from similar assets. They are not Level 1 direct quotes, nor do they reflect Level 3 inputs that would be derived from internal analysis or judgment. As the Company does not manage a trading portfolio and typically only sells from its AFS portfolio in order to manage interest rate risk or credit exposure, direct quotes, or street bids, are warranted on an as-needed basis only.

The following table shows the fair value and gross unrealized losses associated with the Company's investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
 
 
September 30, 2012
 
Less than 12 months
12 months or more
Total
 (in thousands)
Fair Value
Unrealized
(Losses)
Fair Value
Unrealized
(Losses)
Fair Value
Unrealized
(Losses)
Available for Sale:
 
 
 
 
 
 
Agency CMOs
$
47,733

$
(694
)
$
—

$
—

$
47,733

$
(694
)
Corporate debt securities
9,637

(321
)
4,921

(79
)
14,558

(400
)
Total
$
57,370

$
(1,015
)
$
4,921

$
(79
)
$
62,291

$
(1,094
)
Held to Maturity:
 
 
 
 
 
 
Corporate debt securities
$
—

$
—

$
14,940

$
(60
)
$
14,940

$
(60
)
Total
$
—

$
—

$
14,940

$
(60
)
$
14,940

$
(60
)

 
December 31, 2011
 
Less than 12 months
12 months or more
Total
 (in thousands)
Fair Value
Unrealized
(Losses)
Fair Value
Unrealized
(Losses)
Fair Value
Unrealized
(Losses)
Available for Sale:
 
 
 
 
 
 
Agency CMOs
$
49,793

$
(175
)
$
—

$
—

$
49,793

$
(175
)
Private-label CMOs
6,017

(268
)
16,989

(1,700
)
23,006

(1,968
)
Corporate debt securities
18,320

(1,632
)
—

—

18,320

(1,632
)
Total
$
74,130

$
(2,075
)
$
16,989

$
(1,700
)
$
91,119

$
(3,775
)
Held to Maturity:
 
 
 
 
 
 
Agency CMOs
$
1,312

$
(1
)
$
—

$
—

$
1,312

$
(1
)
Corporate debt securities
14,516

(484
)
—

—

14,516

(484
)
Total
$
15,828

$
(485
)
$
—

$
—

$
15,828

$
(485
)

 
The Company's investment securities portfolio consists of U.S. Government agency securities, U.S. Government sponsored agency MBSs, agency CMOs, private-label CMOs, municipal bonds and corporate bonds of the financial sector. The Company considers securities of the U.S. Government sponsored agencies and the U.S. Government MBS/CMOs to have little credit risk because their principal and interest payments are backed by an agency of the U.S. Government.

The unrealized losses in the Company's investment portfolio at September 30, 2012 were associated with two distinct types of securities. The first type, those backed by the U.S. Government or one of its agencies, includes three government agency sponsored CMOs. Management believes that the unrealized losses on these investments were primarily caused by the movement of interest rates from the date of purchase and notes the contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Secondly, the Company owns four investment-grade corporate bonds that were in an unrealized loss position as of September 30, 2012. Due to their structure and credit rating, the Company does not anticipate incurring any credit-related losses on these bonds and the full return of principal and income is expected. Because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider any of these investments to be other-than-temporarily impaired at September 30, 2012.

As previously mentioned, the Company sold two private-label CMOs from its AFS portfolio during the third quarter of 2012. One of the securities had never incurred an OTTI loss due to credit and, as such, there was never a stated intent to hold the security until fair market value recovered. As its credit position was beginning to deteriorate, it was sold at a $42,000 pretax loss in an effort to reduce the Company's exposure to further loss. The other private-label CMO that was sold had previously incurred OTTI losses due to credit and the Company had a stated intent to hold it until recovery of fair market value. The recovery did occur and it was sold, realizing a pretax gain of $5,000.

As of September 30, 2012, the Company still owned one private-label CMO which it had previously recognized a total of $140,000 of losses attributable to credit. The security's amortized cost and its fair market value indication was $2.5 million. As such, the bond was no longer considered impaired. The bond was subsequently sold in October and the Company realized a pretax gain of $23,000.

The table below rolls forward the cumulative life-to-date credit losses which have been recognized in earnings for the private-label CMOs previously mentioned for the three months and nine months ended September 30, 2012 and September 30, 2011:

 
Private-label CMOs
 
Available for Sale
(in thousands)
2012
2011
Cumulative OTTI credit losses at July 1,
$
252

$
2,940

Additions for which OTTI was not previously recognized
—

—

Additional increases for OTTI previously recognized when
  there is no intent to sell and no requirement to sell before
  recovery of amortized cost basis
—

—

Reduction due to credit impaired securities sold
(112
)
—

Cumulative OTTI credit losses recognized for securities still
  held at September 30,
$
140

$
2,940



 
Private-label CMOs
 
Available for Sale
(in thousands)
2012
2011
Cumulative OTTI credit losses at January 1,
$
2,949

$
2,625

Additions for which OTTI was not previously recognized
—

—

Additional increases for OTTI previously recognized when
  there is no intent to sell and no requirement to sell before
  recovery of amortized cost basis
649

315

Reduction due to credit impaired securities sold
(3,458
)
—

Cumulative OTTI credit losses recognized for securities still
  held at September 30,
$
140

$
2,940