Securities

12 Months Ended

Dec. 31, 2011

Securities

Securities

Note 5. Securities

        At December 31, 2011, the Company had total securities of $8.10 billion, comprised of securities available-for-sale at fair value of $7.57 billion, securities held-to-maturity at amortized cost of $467.7 million and trading securities at fair value of $62.0 million. The Company had total securities of $5.98 billion at December 31, 2010, comprised of securities available-for-sale at fair value of $5.72 billion and trading securities at fair value of $255.4 million.

        The following is a summary of amortized cost and estimated fair value for the major categories of securities available-for-sale and securities held-to-maturity at December 31, 2011 and 2010:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2011
Securities available-for-sale:
U.S. Treasury	$	19,163	$	24	$	(5	)	$	19,182
Federal agency—Debt		1,967,928		6,230		(296	)		1,973,862
Federal agency—MBS		650,091		31,040		(87	)		681,044
CMOs—Federal agency		4,239,205		89,926		(2,224	)		4,326,907
CMOs—Non-agency		79,999		322		(11,320	)		69,001
State and municipal		383,210		18,767		(373	)		401,604
Other debt securities		106,051		1,896		(8,873	)		99,074
Total debt securities		7,445,647		148,205		(23,178	)		7,570,674
Equity securities and mutual funds		352		875		—			1,227
Total securities available-for-sale	$	7,445,999	$	149,080	$	(23,178	)	$	7,571,901
Securities held-to-maturity (1):
Federal agency—Debt	$	40,423	$	780	$	—		$	41,203
Federal agency—MBS		75,231		1,632		—			76,863
CMOs—Federal agency		292,547		2,580		(195	)		294,932
State and municipal		59,479		1,463		(37	)		60,905
Total securities held-to-maturity	$	467,680	$	6,455	$	(232	)	$	473,903
December 31, 2010
Securities available-for-sale:
U.S. Treasury	$	14,070	$	47	$	(4	)	$	14,113
Federal agency—Debt		1,142,520		5,029		(5,221	)		1,142,328
Federal agency—MBS		540,768		13,379		(2,801	)		551,346
CMOs—Federal agency		3,442,238		65,494		(10,585	)		3,497,147
CMOs—Non-agency		126,819		1,147		(9,671	)		118,295
State and municipal		334,596		9,399		(615	)		343,380
Other debt securities		50,564		2,018		(8,952	)		43,630
Total debt securities		5,651,575		96,513		(37,849	)		5,710,239
Equity securities and mutual funds		6,545		3,891		—			10,436
Total securities available-for-sale	$	5,658,120	$	100,404	$	(37,849	)	$	5,720,675

        (1)   Securities held-to-maturity are presented in the consolidated balance sheets at amortized cost.

        Proceeds from sales of securities available-for-sale were $101.1 million, $574.5 million and $829.8 million in 2011, 2010 and 2009, respectively. There were no sales of securities held-to-maturity in 2011. The following table provides the gross realized gains and losses on the sales and calls of securities:

	For the year ended December 31,
(in thousands)	2011			2010			2009
Gross realized gains	$	6,747		$	6,915		$	22,696
Gross realized losses		(1,681	)		(6,522	)		(8,410	)
Net realized gains	$	5,066		$	393		$	14,286

        Interest income on securities (including trading securities) is comprised of: (i) taxable interest income of $146.1 million, $123.7 million and $108.2 million for the years ended December 31, 2011, 2010 and 2009, respectively, (ii) nontaxable interest income of $12.4 million, $12.3 million and $15.1 million for the years ended December 31, 2011, 2010 and 2009, respectively, and (iii) dividend income of $0.8 million, $0.8 million and $1.3 million for the years ended December 31, 2011, 2010 and 2009, respectively.

        The following table provides the expected remaining maturities of debt securities included in the securities portfolio at December 31, 2011, except for mortgage-backed securities which are allocated according to the average life of expected cash flows. Average expected maturities will differ from contractual maturities because of the amortizing nature of the loan collateral and prepayment behavior of borrowers.

(in thousands)	One year or less		Over 1 year through 5 years		Over 5 years through 10 years		Over 10 years		Total
Securities available-for-sale:
U.S. Treasury	$	15,037	$	4,145	$	—	$	—	$	19,182
Federal agency—Debt		1,509,730		464,132		—		—		1,973,862
Federal agency—MBS		18		288,795		275,369		116,862		681,044
CMOs—Federal agency		228,586		3,511,071		533,526		53,724		4,326,907
CMOs—Non-agency		11,322		32,416		25,263		—		69,001
State and municipal		48,082		202,844		99,581		51,097		401,604
Other		4,866		46,229		47,979		—		99,074
Total debt securities available-for-sale	$	1,817,641	$	4,549,632	$	981,718	$	221,683	$	7,570,674
Amortized cost	$	1,813,185	$	4,448,799	$	964,830	$	218,833	$	7,445,647
Securities held-to-maturity:
Federal agency—Debt	$	10,954	$	—	$	—	$	29,469	$	40,423
Federal agency—MBS		—		15,251		59,980		—		75,231
CMOs—Federal agency		—		214,600		32,651		45,296		292,547
State and municipal		—		2,532		53,429		3,518		59,479
Total debt securities held-to-maturity at amortized cost	$	10,954	$	232,383	$	146,060	$	78,283	$	467,680

        Securities totaling $988.5 million were pledged to secure trust funds, public deposits, or for other purposes required or permitted by law at December 31, 2011.

Impairment Assessment

        The Company performs a quarterly assessment of the debt and equity securities in its investment portfolio that have an unrealized loss to determine whether the decline in the fair value of these securities below their cost is other-than-temporary. Impairment is considered other-than-temporary when it becomes probable that an investor will be unable to recover the cost of an investment. The Company's impairment assessment takes into consideration factors such as the length of time and the extent to which the market value has been less than cost; the financial condition and near-term prospects of the issuer, including events specific to the issuer or industry; defaults or deferrals of scheduled interest, principal or dividend payments; external credit ratings and recent downgrades; and whether the Company intends to sell the security and whether it is more likely than not it will be required to sell the security prior to recovery of its amortized cost basis. If a decline in fair value is judged to be other than temporary, the cost basis of the individual security is written down to fair value which then becomes the new cost basis. The new cost basis is not adjusted for subsequent recoveries in fair value.

        When there are credit losses associated with an impaired debt security and the Company does not have the intent to sell the security and it is more likely than not that it will not have to sell the security before recovery of its cost basis, the Company will separate the amount of the impairment into the amount that is credit-related and the amount related to non-credit factors. The credit-related impairment is recognized in Net impairment loss recognized in earnings in the consolidated statements of income. The non-credit-related impairment is recognized in AOCI.

Securities Deemed to be Other-Than-Temporarily Impaired

        Through the impairment assessment process, the Company determined that certain investments were other-than-temporarily impaired at December 31, 2011. The Company recorded impairment losses in earnings on securities available-for-sale of $0.7 million, $2.0 million and $16.4 million for 2011, 2010 and 2009, respectively. The Company recognized $4.2 million and $7.5 million of non-credit-related other-than-temporary impairment in AOCI on securities available-for-sale at December 31, 2011 and 2010, respectively. There were no impairment losses recognized in earnings or AOCI for securities held-to-maturity in 2011.

        The following table provides total impairment losses recognized in earnings on other-than-temporarily impaired securities:

	For the year ended December 31,
(in thousands) Impairment Losses on Other-Than-Temporarily Impaired Securities
	2011		2010		2009
Non-agency CMOs	$	651	$	1,738	$	4,409
Collateralized debt obligation income notes		—		—		9,282
Perpetual preferred stock		—		293		1,124
Equity securities and mutual funds		—		—		1,630
Total	$	651	$	2,031	$	16,445

        The following table summarizes the changes in cumulative credit-related other-than-temporary impairment recognized in earnings for debt securities for the years ended December 31, 2011 and 2010. Credit-related other-than-temporary impairment that was recognized in earnings is reflected as an "Initial credit-related impairment" if the period reported is the first time the security had credit impairment. A credit-related other-than-temporary impairment is reflected as a "Subsequent credit-related impairment" if the period reported is not the first time the security had credit impairment.

	For the year ended December 31,
(in thousands)	2011		2010
Balance, beginning of period	$	19,445	$	17,707
Subsequent credit-related impairment		651		1,712
Initial credit-related impairment		—		26
Balance, end of period	$	20,096	$	19,445

Non-agency CMOs

        The Company held $41.4 million of variable rate non-agency CMOs at December 31, 2011. The Company determined that $9.2 million of these non-agency CMOs were other-than-temporarily impaired because the present value of expected cash flows was less than cost. These CMOs have a fixed interest rate for an initial period after which they become variable-rate instruments with annual rate resets. For purposes of projecting future cash flows, the current fixed coupon was used through the reset date for each security. The prevailing LIBOR/Treasury forward curve as of the measurement date was used to project all future floating-rate cash flows based on the characteristics of each security. Other factors considered in the projection of future cash flows include the current level of subordination from other CMO classes, anticipated prepayment rates, cumulative defaults and loss given default. The Company recognized credit-related impairment losses in earnings on its investments in certain variable rate non-agency CMOs totaling $0.7 million and $1.7 million in 2011 and 2010, respectively. The remaining other-than-temporary impairment for these securities at December 31, 2011 and 2010 was recognized in AOCI. This non-credit portion of other-than-temporary impairment is attributed to external market conditions, primarily the lack of liquidity in these securities and increases in interest rates. The Company also holds $27.6 million in fixed rate non-agency CMOs, none of which have experienced any other-than-temporary impairment.

        The following table provides a summary of the gross unrealized losses and fair value of investment securities that are not deemed to be other-than-temporarily impaired aggregated by investment category and length of time that the securities have been in a continuous unrealized loss position as of December 31, 2011 and 2010. The table also includes investment securities that had both a credit-related impairment recognized in earnings and a non-credit-related impairment recognized in AOCI:

	Less than 12 months				12 months or greater				Total
(in thousands)	Fair Value		Estimated Unrealized Loss		Fair Value		Estimated Unrealized Loss		Fair Value		Estimated Unrealized Loss
December 31, 2011
Securities available-for-sale:
U.S. Treasury	$	4,145	$	5	$	—	$	—	$	4,145	$	5
Federal agency—Debt		409,129		296		—		—		409,129		296
Federal agency—MBS		24,519		87		—		—		24,519		87
CMOs—Federal agency		744,737		2,224		—		—		744,737		2,224
CMOs—Non-agency		20,094		833		31,400		10,487		51,494		11,320
State and municipal		42,164		268		2,023		105		44,187		373
Other debt securities		34,153		508		14,718		8,365		48,871		8,873
Total securities available-for-sale	$	1,278,941	$	4,221	$	48,141	$	18,957	$	1,327,082	$	23,178
Securities held-to-maturity:
CMOs—Federal agency	$	32,256	$	195	$	—	$	—	$	32,256	$	195
State and municipal		5,784		37		—		—		5,784		37
Total securities held-to-maturity	$	38,040	$	232	$	—	$	—	$	38,040	$	232
December 31, 2010
Securities available-for-sale:
U.S. Treasury	$	5,028	$	4	$	—	$	—	$	5,028	$	4
Federal agency—Debt		561,205		5,221		—		—		561,205		5,221
Federal agency—MBS		109,381		2,801		—		—		109,381		2,801
CMOs—Federal agency		755,751		10,585		—		—		755,751		10,585
CMOs—Non-agency		7,718		18		61,571		9,653		69,289		9,671
State and municipal		25,845		558		700		57		26,545		615
Other debt securities		—		—		14,407		8,952		14,407		8,952
Total securities available-for-sale	$	1,464,928	$	19,187	$	76,678	$	18,662	$	1,541,606	$	37,849

        At December 31, 2011, the Company had $1.33 billion of securities available-for-sale in an unrealized loss position, consisting of $1.32 billion of temporarily impaired securities and $9.2 million of securities that had non-credit related impairment recognized in AOCI. At December 31, 2011, the Company had 90 debt securities available-for-sale and held-to-maturity in an unrealized loss position. The debt securities in an unrealized loss position include 2 U.S. Treasury note, 12 Federal agency debt securities, 3 Federal agency MBS, 36 Federal agency CMOs, 12 Non-agency CMOs, 19 state and municipal securities and 6 other debt securities.

        The unrealized loss on non-agency CMOs reflects the lack of liquidity in this sector of the market. The Company only holds the most senior tranches of each non-agency issue which provides protection against defaults. Other than the $0.7 million credit loss recognized in 2011 on non-agency CMOs, the Company expects to receive principal and interest payments equivalent to or greater than the current cost basis of its portfolio of debt securities. Additionally, the Company does not intend to sell the securities, and it is not more likely than not that it will be required to sell the securities before it recovers the cost basis of its investment. The mortgages in these asset pools are relatively large and have been made to borrowers with strong credit history and significant equity invested in their homes. They are well diversified geographically. Over the past year, the real estate market has stabilized somewhat, though performance varies substantially by geography and borrower. Though reduced, a significant weakening of economic fundamentals coupled with a return to elevated unemployment rates and substantial deterioration in the value of high-end residential properties could increase the probability of default and related credit losses. These conditions could cause the value of these securities to decline and trigger the recognition of further other-than-temporary impairment charges.

        Other debt securities include the Company's investments in highly rated corporate debt and collateralized bond obligations backed by trust preferred securities ("CDOs") issued by a geographically diverse pool of small- and medium-sized financial institutions. The CDOs held in securities available-for-sale at December 31, 2011 are the most senior tranches of each issue. Trading activity for the type of CDO held by the Company has been limited since 2008. Accordingly, the fair values of these securities were determined using an internal pricing model that incorporates assumptions about discount rates in an illiquid market, projected cash flows and collateral performance. The CDOs had a $8.3 million net unrealized loss at December 31, 2011 which the Company attributes to the illiquid credit markets. The CDOs have collateral that well exceeds the outstanding debt. Security valuations reflect the current and prospective performance of the issuers whose debt is contained in these asset pools. The Company expects to receive all contractual principal and interest payments due on its CDOs. Additionally, the Company does not intend to sell the securities, and it is not more likely than not that it will be required to sell the securities before it recovers the cost basis of its investment.

        At December 31, 2010, the Company had $1.54 billion of securities available-for-sale in an unrealized loss position consisting of $1.51 billion of temporarily impaired securities and $27.4 million of securities that had non-credit related impairment recognized in AOCI. At December 31, 2010, the Company had 109 debt securities in an unrealized loss position. The debt securities in an unrealized loss position included 1 U.S. Treasury note, 22 Federal agency debt securities, 7 Federal agency MBS, 30 Federal agency CMOs, 12 Non-agency CMOs, 36 state and municipal securities and 1 other debt security.