XML 23 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Investment Securities
 3 Months Ended
Mar. 31, 2014
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

Note 2. Investment Securities
At March 31, 2014, the Company had $1.13 billion and $357.6 million in available for sale and held to maturity investment securities, respectively. Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, regulatory actions, changes in the business environment or any changes in the competitive marketplace could have an adverse effect on the Company’s investment portfolio which could result in other-than-temporary impairment on certain investment securities in future periods. The total number of all held to maturity and available for sale securities in an unrealized loss position as of March 31, 2014 totaled 283, compared with 346 at December 31, 2013. All securities with unrealized losses at March 31, 2014 were analyzed for other-than-temporary impairment. Based upon this analysis, no other-than-temporary impairment existed at March 31, 2014.

Securities Available for Sale
The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for securities available for sale at March 31, 2014 and December 31, 2013 (in thousands):
 

March 31, 2014
 

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses
 
Fair
value
Agency obligations

$
93,064


335


(108
)
 
93,291

Mortgage-backed securities

1,027,193


14,599


(13,105
)
 
1,028,687

State and municipal obligations

7,567


154


(52
)
 
7,669

Equity securities

397


97


—

 
494

 

$
1,128,221


15,185


(13,265
)
 
1,130,141

 






 

 
 
December 31, 2013
 
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Fair
value
Agency obligations
 
$
93,223

 
372

 
(179
)
 
93,416

Mortgage-backed securities
 
1,060,013

 
14,493

 
(19,532
)
 
1,054,974

State and municipal obligations
 
8,739

 
171

 
(152
)
 
8,758

Equity securities
 
357

 
89

 
—

 
446

 
 
$
1,162,332

 
15,125

 
(19,863
)
 
1,157,594


The amortized cost and fair value of securities available for sale at March 31, 2014, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
 
 
March 31, 2014
 
 
Amortized
cost
 
Fair
value
Due in one year or less
 
$
21,105

 
21,156

Due after one year through five years
 
76,516

 
76,846

Due after five years through ten years
 
—

 
—

Due after ten years
 
3,010

 
2,958

Mortgage-backed securities
 
1,027,193

 
1,028,687

Equity securities
 
397

 
494

 
 
$
1,128,221

 
1,130,141



Proceeds from the sale of securities from the available for sale portfolio were $6,085,000 resulting in gross losses of $365,000 and no gross gains during the three months ended March 31, 2014 . In addition, for the three months ended March 31, 2014, the Company recognized gross gains of $2,000, and no gross losses related to calls on certain securities in the available for sale portfolio, with proceeds from the calls totaling $740,000 for the three months ended March 31, 2014. For the same period last year, proceeds from the sale of securities available for sale were $7,395,000 resulting in gross gains of $481,000 and no gross losses.
The following table presents a roll-forward of the credit loss component of other-than-temporary impairment (“OTTI”) on debt securities for which a non-credit component of OTTI was recognized in other comprehensive income. OTTI recognized in earnings for credit-impaired debt securities is presented in two components based upon whether the current period is the first time a debt security was credit-impaired (initial credit impairment), or whether the current period is not the first time a debt security was credit impaired (subsequent credit impairment). Changes in the credit loss component of credit-impaired debt securities were as follows (in thousands):
 
 
Three months ended March 31,
 

2014

2013
Beginning credit loss amount

$
1,674

 
1,240

Add: Initial OTTI credit losses

—

 
—

Subsequent OTTI credit losses

—

 
—

Less: Realized losses for securities sold

1,540

 
—

Securities intended or required to be sold

—

 
—

Increases in expected cash flows on debt securities

—

 
—

Ending credit loss amount

$
134

 
1,240


The Company did not incur an OTTI charge on securities for the three months ended March 31, 2014 or 2013, respectively. For the three months ended March 31, 2014, the Company realized a $365,000 loss on the sale of a previously impaired non-agency mortgage-backed security. The Company previously incurred cumulative credit losses of $1.5 million on this security.
The following tables represent the Company’s disclosure regarding securities available for sale with temporary impairment at March 31, 2014 and December 31, 2013 (in thousands):
 

March 31, 2014 Unrealized Losses
 

Less than 12 months
 
12 months or longer
 
Total
 

Fair value
 
Gross
unrealized
losses
 
Fair
value
 
Gross
unrealized
losses
 
Fair
value
 
Gross
unrealized
losses
Agency obligations

$
31,196

 
(108
)
 
—

 
—

 
31,196

 
(108
)
Mortgage-backed securities

526,823

 
(12,496
)
 
24,780

 
(609
)
 
551,603

 
(13,105
)
State and municipal obligations

2,958

 
(52
)
 
—

 
—

 
2,958

 
(52
)


$
560,977

 
(12,656
)
 
24,780

 
(609
)
 
585,757

 
(13,265
)
 

December 31, 2013 Unrealized Losses
 

Less than 12 months
 
12 months or longer
 
Total
 

Fair
value
 
Gross
unrealized
losses
 
Fair
value
 
Gross
unrealized
losses
 
Fair
value
 
Gross
unrealized
losses
Agency Obligations
 
$
34,355

 
(179
)
 
—

 
—

 
34,355

 
(179
)
Mortgage-backed securities

604,778

 
(18,850
)
 
13,521

 
(682
)
 
618,299

 
(19,532
)
State and municipal obligations

2,867

 
(152
)
 
—

 
—

 
2,867

 
(152
)


$
642,000

 
(19,181
)
 
13,521

 
(682
)
 
655,521

 
(19,863
)

The temporary loss position associated with securities available for sale was the result of changes in market interest rates relative to the coupon of the individual security and changes in credit spreads. In addition, there remains a lack of liquidity in certain sectors of the mortgage-backed securities market. Increases in delinquencies and foreclosures have resulted in limited trading activity and significant price declines, regardless of favorable movements in interest rates. The Company does not have the intent to sell securities in a temporary loss position at March 31, 2014, nor is it likely that the Company will be required to sell the securities before their prices recovers.
The number of securities in an unrealized loss position at March 31, 2014 totaled 66, compared with 76 at December 31, 2013. The decrease in the number of securities in an unrealized loss position at March 31, 2014, was a function of improved valuations due to a decline in market interest rates. At March 31, 2014, there were 4 private label mortgage-backed securities in an unrealized loss position, with an amortized cost of $3.7 million and unrealized losses totaling $27,000. Two of these private label mortgage-backed securities were below investment grade at March 31, 2014.
The Company estimates the loss projections for each security by stressing the individual loans collateralizing the security and applying a range of expected default rates, loss severities, and prepayment speeds in conjunction with the underlying credit enhancement for each security. Based on specific assumptions about collateral and vintage, a range of possible cash flows was identified to determine whether other-than-temporary impairment existed during the three months ended March 31, 2014. The Company concluded that no other-than-temporary impairment of the securities available for sale portfolio existed at March 31, 2014.
Investment Securities Held to Maturity
The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for investment securities held to maturity at March 31, 2014 and December 31, 2013 (in thousands):
 
 
March 31, 2014
 
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Fair
value
Agency obligations

$
7,175

 
19

 
(45
)
 
7,149

Mortgage-backed securities

4,671

 
213

 
—

 
4,884

State and municipal obligations

335,675

 
7,990

 
(3,523
)
 
340,142

Corporate obligations

10,081

 
52

 
(44
)
 
10,089

 

$
357,602

 
8,274

 
(3,612
)
 
362,264

 
 
 
 
 
 
 
 
 
 

December 31, 2013
 
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Fair
value
Agency obligations

$
7,523

 
13

 
(66
)
 
7,470

Mortgage-backed securities

5,273

 
247

 
—

 
5,520

State and municipal obligations

334,750

 
5,435

 
(7,198
)
 
332,987

Corporate obligations

9,954

 
58

 
(76
)
 
9,936

 

$
357,500

 
5,753

 
(7,340
)
 
355,913


The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair values may fluctuate during the investment period. For the three months ended March 31, 2014, the Company recognized gross gains of $13,000, and no gross losses related to calls on certain securities in the held to maturity portfolio, with proceeds from the calls totaling $6,395,000 for the three months ended March 31, 2014. For the three months ended March 31, 2013, the Company recognized gross gains of $13,000 and gross losses of $2,000, related to calls on certain securities in the held to maturity portfolio, with proceeds from the calls totaling $9,044,000. In addition, for the three months ended March 31, 2013, the Company recognized gross gains of $19,000 and no gross losses related to sales on certain securities in the held to maturity portfolio, with proceeds from the sales totaling $524,000. The sales of these securities were in response to the credit deterioration of the issuers.
The amortized cost and fair value of investment securities in the held to maturity portfolio at March 31, 2014 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
 
 
March 31, 2014
 
 
Amortized
cost
 
Fair
value
Due in one year or less

$
13,572

 
13,656

Due after one year through five years

50,356

 
51,686

Due after five years through ten years

131,292

 
134,548

Due after ten years

157,711

 
157,490

Mortgage-backed securities

4,671

 
4,884



$
357,602

 
362,264


The following tables represent the Company’s disclosure regarding investment securities held to maturity with temporary impairment at March 31, 2014 and December 31, 2013 (in thousands):
 
 
March 31, 2014 Unrealized Losses
 
 
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair
value
 
Gross
unrealized
losses
 
Fair
value
 
Gross
unrealized
losses
 
Fair
value
 
Gross
unrealized
losses
Agency obligations

$
4,117

 
(38
)
 
493

 
(7
)
 
4,610

 
(45
)
State and municipal obligations

81,597

 
(1,988
)
 
28,906

 
(1,535
)
 
110,503

 
(3,523
)
Corporate obligations

4,337

 
(32
)
 
1,294

 
(12
)
 
5,631

 
(44
)
 

$
90,051

 
(2,058
)
 
30,693

 
(1,554
)
 
120,744

 
(3,612
)
 
 
December 31, 2013 Unrealized Losses
 
 
Less than 12 months
 
12 months or longer
 
Total
 

Fair
value

Gross
unrealized
losses

Fair
value

Gross
unrealized
losses

Fair
value

Gross
unrealized
losses
Agency obligations
 
$
5,766

 
(66
)
 
—

 
—

 
5,766

 
(66
)
State and municipal obligations
 
123,988

 
(5,376
)
 
19,051

 
(1,822
)
 
143,039

 
(7,198
)
Corporate obligations

5,387

 
(76
)
 
—

 
—

 
5,387

 
(76
)
 

$
135,141

 
(5,518
)
 
19,051

 
(1,822
)
 
154,192

 
(7,340
)

Based upon the review of the held to maturity securities portfolio, the Company believes that as of March 31, 2014, securities with unrealized loss positions shown above do not represent impairments that are other-than-temporary. The review of the portfolio for other-than-temporary impairment considers the percentage and length of time the fair value of an investment is below book value, as well as general market conditions, changes in interest rates, credit risks, whether the Company has the intent to sell the securities and whether it is likely that the Company would be required to sell the securities before their prices recover.
The number of securities in an unrealized loss position at March 31, 2014 totaled 217, compared with 270 at December 31, 2013. The decrease in the number of securities in an unrealized loss position at March 31, 2014, was a function of improved valuations due to slightly lower market interest rates and tighter spreads on municipal securities, which represents the majority of the held to maturity portfolio. All temporarily impaired investment securities were investment grade at March 31, 2014.