Note 4. Securities

At March 31, 2013, the Company had total securities of $9.19 billion, comprised of securities available-for-sale at fair value of $7.74 billion, securities held-to-maturity at amortized cost of $1.40 billion and trading securities at fair value of $53.5 million. At December 31, 2012, the Company had total securities of $10.72 billion, comprised of securities available-for-sale at fair value of $9.21 billion, securities held-to-maturity at amortized cost of $1.40 billion and trading securities at fair value of $115.1 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 March 31, 2013 and December 31, 2012:

			Gross		Gross
	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
March 31, 2013
Securities available-for-sale:
U.S. Treasury	$	30,353	$	17	$	—		$	30,370
Federal agency - Debt	1,111,725		2,951		(73		)	1,114,603
Federal agency - MBS	611,286		35,131		(937		)	645,480
CMOs - Federal agency	5,068,740		81,888		(11,397		)	5,139,231
CMOs - Non-agency	51,201		464		(889		)	50,776
State and municipal	430,002		16,188		(1,020		)	445,170
Other debt securities	306,845		7,722		(5,175		)	309,392
Total debt securities	7,610,152		144,361		(19,491		)	7,735,022
Equity securities and mutual funds	337		2,692		—			3,029
Total securities available-for-sale	$	7,610,489	$	147,053	$	(19,491	)	$	7,738,051

Securities held-to-maturity (1):
Federal agency - Debt	$	95,935	$	3,596	$	—		$	99,531
Federal agency - MBS	305,881		8,867		(946		)	313,802
CMOs - Federal agency	741,007		23,680		(1,960		)	762,727
State and municipal	258,067		3,280		(2,571		)	258,776
Total securities held-to-maturity	$	1,400,890	$	39,423	$	(5,477	)	$	1,434,836

December 31, 2012
Securities available-for-sale:
U.S. Treasury	$	20,393	$	7	$	(3	)	$	20,397
Federal agency - Debt	2,344,374		5,031		(203		)	2,349,202
Federal agency - MBS	653,428		39,673		(69		)	693,032
CMOs - Federal agency	5,233,126		91,165		(6,038		)	5,318,253
CMOs - Non-agency	62,975		662		(2,124		)	61,513
State and municipal	437,266		17,447		(239		)	454,474
Other debt securities	305,340		7,945		(5,868		)	307,417
Total debt securities	9,056,902		161,930		(14,544		)	9,204,288
Equity securities and mutual funds	336		1,365		—			1,701
Total securities available-for-sale	$	9,057,238	$	163,295	$	(14,544	)	$	9,205,989

Securities held-to-maturity (1):
Federal agency - Debt	$	97,183	$	4,032	$	—		$	101,215
Federal agency - MBS	303,642		11,490		(182		)	314,950
CMOs - Federal agency	745,980		28,973		(382		)	774,571
State and municipal	251,598		5,122		(857		)	255,863
Total securities held-to-maturity	$	1,398,403	$	49,617	$	(1,421	)	$	1,446,599

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

Proceeds from sales of securities available-for-sale were $1.03 billion for the three months ended March 31, 2013, compared with $5.2 million for the three months ended March 31, 2012. There were no sales of securities held-to-maturity during the three months ended March 31, 2013 and March 31, 2012. The following table provides the gross realized gains and losses on the sales and calls of securities:

	For the three months ended
	March 31,
(in thousands)	2013		2012
Gross realized gains	$	1,046	$	496
Gross realized losses	—		(47		)
Net realized gains	$	1,046	$	449

Interest income on securities for the three months ended March 31, 2013 and 2012 is comprised of: (i) taxable interest income of $39.8 million and $41.5 million, respectively (ii) nontaxable interest income of $4.4 million and $3.8 million, respectively, and (iii) dividend income of $19 thousand and $41 thousand, respectively.

The following table provides the expected remaining maturities of debt securities included in the securities portfolio at March 31, 2013, 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	$	3,021	$	27,349	$	—	$	—	$	30,370
Federal agency - Debt	906,857		207,746		—		—		1,114,603
Federal agency - MBS	16		434,041		211,423		—		645,480
CMOs - Federal agency	174,283		4,750,547		214,401		—		5,139,231
CMOs - Non-agency	6,460		20,738		23,578		—		50,776
State and municipal	91,153		260,487		70,006		23,524		445,170
Other	13,016		296,376		—		—		309,392

Total debt securities available-for-sale	$	1,194,806	$	5,997,284	$	519,408	$	23,524	$	7,735,022

Amortized cost	$	1,190,413	$	5,906,598	$	489,221	$	23,920	$	7,610,152

Securities held-to-maturity:
Federal agency - Debt	$	—	$	—	$	—	$	95,935	$	95,935
Federal agency - MBS	—		2,438		303,443		—		305,881
CMOs - Federal agency	—		155,414		585,593		—		741,007
State and municipal	—		13,383		163,726		80,958		258,067
Total debt securities held-to-maturity at amortized cost	$	—	$	171,235	$	1,052,762	$	176,893	$	1,400,890

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

There were no impairment losses recorded in earnings for the three months ended March 31, 2013 and 2012. The Company recognized $0.5 million and $2.4 million of non-credit-related other-than-temporary impairment in AOCI on securities available-for-sale at March 31, 2013 and 2012, respectively. No impairment losses were recognized in earnings or AOCI for securities held-to-maturity at March 31, 2013.

The following table summarizes the changes in cumulative credit-related other-than-temporary impairment recognized in earnings for debt securities for the three months ended March 31, 2013 and 2012. 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 a 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 a credit impairment. Cumulative impairment is reduced for securities with previously recognized credit-related impairment that were sold or redeemed during the period. Cumulative impairment is further adjusted for other changes in expected cash flows.

	For the three months ended
	March 31,
(in thousands)	2013			2012
Balance, beginning of period	$	16,486		$	17,531
Reduction for securities sold or redeemed	(12,761		)	—
Reduction for increase in expected cash flows on securities for which OTTI was previously recognized	(49		)	(162		)
Balance, end of period	$	3,676		$	17,369

Non-Agency CMOs

The Company held $37.4 million of variable rate non-agency CMOs at March 31, 2013. The Company determined that $9.3 million of these non-agency CMOs were other-than-temporarily impaired. 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 no credit-related impairment losses in earnings for the three months ended March 31, 2013 and 2012. The remaining other-than-temporary impairment for these securities at March 31, 2013 and 2012 was recognized in AOCI. This non-credit portion of other-than-temporarily impairment is attributed to external market conditions, primarily the lack of liquidity in these securities, resulting in an increase in interest rate spreads for these securities. The Company also holds $13.4 million in fixed rate non-agency CMOs at March 31, 2013, 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 March 31, 2013 and December 31, 2012. 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

March 31, 2013

Securities available-for-sale:
Federal agency - Debt	$	141,151	$	73	$	—	$	—	$	141,151	$	73
Federal agency - MBS (1)	84,678		937		46		—		84,724		937
CMOs - Federal agency	1,617,943		11,395		3,301		2		1,621,244		11,397
CMOs - Non-agency	—		—		19,090		889		19,090		889
State and municipal	45,745		950		3,530		70		49,275		1,020
Other debt securities	19,062		8		15,270		5,167		34,332		5,175
Total securities available-for-sale	$	1,908,579	$	13,363	$	41,237	$	6,128	$	1,949,816	$	19,491

Securities held-to-maturity:
Federal agency - MBS	$	96,961	$	946	$	—	$	—	$	96,961	$	946
CMOs - Federal agency	108,876		1,960		—		—		108,876		1,960
State and municipal	127,939		2,571		—		—		127,939		2,571
Total securities held-to-maturity	$	333,776	$	5,477	$	—	$	—	$	333,776	$	5,477

December 31, 2012

Securities available-for-sale:
U.S. Treasury	$	5,096	$	3	$	—	$	—	$	5,096	$	3
Federal agency - Debt	346,136		203		—		—		346,136		203
Federal agency - MBS (1)	50,932		69		46		—		50,978		69
CMOs - Federal agency	1,413,367		5,994		13,565		44		1,426,932		6,038
CMOs - Non-agency	—		—		25,484		2,124		25,484		2,124
State and municipal	85,550		225		810		14		86,360		239
Other debt securities	39,877		49		16,038		5,819		55,915		5,868
Total securities available-for-sale	$	1,940,958	$	6,543	$	55,943	$	8,001	$	1,996,901	$	14,544

Securities held-to-maturity:
Federal agency - MBS	$	31,514	$	182	$	—	$	—	$	31,514	$	182
CMOs - Federal agency	60,998		382		—		—		60,998		382
State and municipal	64,344		857		—		—		64,344		857
Total securities held-to-maturity	$	156,856	$	1,421	$	—	$	—	$	156,856	$	1,421

(1) The estimated gross unrealized loss for federal agency MBS securities in a continuous unrealized loss position of 12 months or greater was an insignificant amount as of March 31, 2013.

At March 31, 2013, the Company had $1.95 billion of securities available-for-sale in an unrealized loss position, consisting of $1.94 billion of temporarily impaired securities and $9.3 million of securities that had non-credit-related impairment recognized in AOCI. The Company had $333.8 million of securities held-to-maturity in an unrealized loss position. At March 31, 2013, the Company had 337 debt securities available-for-sale and held-to-maturity in an unrealized loss position. The debt securities in an unrealized loss position include 4 federal agency debt securities, 15 federal agency MBS securities, 64 federal agency CMOs, 3 non-agency CMOs, 249 state and municipal securities and 2 other debt securities.

Other debt securities include the Company’s investments in two 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 March 31, 2013 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 $5.2 million net unrealized loss at March 31, 2013, 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 received a substantial paydown on one of the CDOs held during the first quarter. The Company expects to receive all remaining 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, 2012, the Company had $2.00 billion of securities available-for-sale in an unrealized loss position, consisting of $1.98 billion of temporarily impaired securities and $16.2 million of securities that had non-credit related impairment recognized in AOCI. At December 31, 2012, the Company had $156.9 million of securities held-to-maturity in an unrealized loss position. At December 31, 2012, the Company had 231 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, 8 federal agency debt securities, 7 federal agency MBS, 53 federal agency CMOs, 4 non-agency CMOs, 152 state and municipal securities and 5 other debt securities.