XML 26 R13.htm IDEA: XBRL DOCUMENT v3.19.1
Investment Securities
 3 Months Ended
Mar. 31, 2019
Investments Debt And Equity Securities [Abstract]  
Investment Securities

NOTE 5 – INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities portfolio at March 31, 2019 and December 31, 2018 and the corresponding amounts of unrealized gains and losses therein:

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

9,739

 

 

$

51

 

 

$

(13

)

 

$

9,777

 

U.S. government-sponsored entities and agencies

 

 

703,398

 

 

 

172

 

 

 

(5,056

)

 

 

698,514

 

Mortgage-backed securities - Agency

 

 

2,557,848

 

 

 

25,070

 

 

 

(22,215

)

 

 

2,560,703

 

States and political subdivisions

 

 

944,149

 

 

 

21,883

 

 

 

(596

)

 

 

965,436

 

Pooled trust preferred securities

 

 

13,850

 

 

 

—

 

 

 

(5,727

)

 

 

8,123

 

Other securities

 

 

327,621

 

 

 

2,573

 

 

 

(2,975

)

 

 

327,219

 

Total available-for-sale securities

 

$

4,556,605

 

 

$

49,749

 

 

$

(36,582

)

 

$

4,569,772

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government-sponsored entities and agencies

 

$

74,195

 

 

$

30

 

 

$

(39

)

 

$

74,186

 

Mortgage-backed securities - Agency

 

 

123,627

 

 

 

366

 

 

 

(135

)

 

 

123,858

 

States and political subdivisions

 

 

287,012

 

 

 

8,880

 

 

 

(59

)

 

 

295,833

 

Total held-to-maturity securities

 

$

484,834

 

 

$

9,276

 

 

$

(233

)

 

$

493,877

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

5,332

 

 

$

—

 

 

$

(31

)

 

$

5,301

 

U.S. government-sponsored entities and agencies

 

 

639,458

 

 

 

35

 

 

 

(11,342

)

 

 

628,151

 

Mortgage-backed securities - Agency

 

 

2,243,774

 

 

 

9,738

 

 

 

(44,217

)

 

 

2,209,295

 

States and political subdivisions

 

 

932,757

 

 

 

11,113

 

 

 

(3,441

)

 

 

940,429

 

Pooled trust preferred securities

 

 

13,861

 

 

 

—

 

 

 

(5,366

)

 

 

8,495

 

Other securities

 

 

337,435

 

 

 

486

 

 

 

(6,176

)

 

 

331,745

 

Total available-for-sale securities

 

$

4,172,617

 

 

$

21,372

 

 

$

(70,573

)

 

$

4,123,416

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government-sponsored entities and agencies

 

$

73,986

 

 

$

—

 

 

$

(1,627

)

 

$

72,359

 

Mortgage-backed securities - Agency

 

 

127,120

 

 

 

39

 

 

 

(2,750

)

 

 

124,409

 

States and political subdivisions

 

 

305,228

 

 

 

6,208

 

 

 

(2,101

)

 

 

309,335

 

Total held-to-maturity securities

 

$

506,334

 

 

$

6,247

 

 

$

(6,478

)

 

$

506,103

 

 

Proceeds from sales or calls of available-for-sale investment securities and the resulting realized gains and realized losses were as follows for the three months ended March 31, 2019 and 2018:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(dollars in thousands)

 

 

2019

 

 

 

2018

 

Proceeds from sales of available-for-sale securities

 

$

8,681

 

 

$

84,257

 

Proceeds from calls of available-for-sale securities

 

 

23,685

 

 

 

17,436

 

Total

 

$

32,366

 

 

$

101,693

 

 

 

 

 

 

 

 

 

 

Realized gains on sales of available-for-sale securities

 

$

71

 

 

$

2,008

 

Realized gains on calls of available-for-sale securities

 

 

3

 

 

 

1

 

Realized losses on sales of available-for-sale securities

 

 

(148

)

 

 

(1,257

)

Realized losses on calls of available-for-sale securities

 

 

(29

)

 

 

(49

)

Other securities gains (losses) (1)

 

 

—

 

 

 

85

 

Net debt securities gains (losses)

 

$

(103

)

 

$

788

 

 

(1)

For the three months ended March 31, 2018, other securities gains (losses) included realized gains and losses of equity securities previously classified as trading securities.  For the three months ended March 31, 2019, gains (losses) on equity securities are included in other income.

 

(1

All of the mortgage-backed securities in the investment portfolio are residential mortgage-backed securities.  The amortized cost and fair value of the investment securities portfolio are shown by expected maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Weighted average yield is based on amortized cost.

 

 

 

At March 31, 2019

(dollars in thousands)

 

 

 

 

Weighted

 

 

 

 

Amortized

 

 

Fair

 

 

Average

 

 

Maturity

 

Cost

 

 

Value

 

 

Yield

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

105,019

 

 

$

105,091

 

 

 

2.49

 

%

One to five years

 

 

518,087

 

 

 

518,110

 

 

 

2.46

 

 

Five to ten years

 

 

583,312

 

 

 

590,229

 

 

 

3.28

 

 

Beyond ten years

 

 

3,350,187

 

 

 

3,356,342

 

 

 

2.97

 

 

Total

 

$

4,556,605

 

 

$

4,569,772

 

 

 

2.94

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

$

18,069

 

 

$

18,179

 

 

 

4.32

 

%

One to five years

 

 

34,127

 

 

 

35,080

 

 

 

3.95

 

 

Five to ten years

 

 

76,905

 

 

 

79,823

 

 

 

4.49

 

 

Beyond ten years

 

 

355,733

 

 

 

360,795

 

 

 

3.58

 

 

Total

 

$

484,834

 

 

$

493,877

 

 

 

3.78

 

%

 

The following table summarizes the available-for-sale investment securities with unrealized losses at March 31, 2019 and December 31, 2018 by aggregated major security type and length of time in a continuous unrealized loss position:

 

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

(dollars in thousands)

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

4,395

 

 

$

(2

)

 

$

1,481

 

 

$

(11

)

 

$

5,876

 

 

$

(13

)

U.S. government-sponsored entities

   and agencies

 

 

—

 

 

 

—

 

 

 

536,114

 

 

 

(5,056

)

 

 

536,114

 

 

 

(5,056

)

Mortgage-backed securities - Agency

 

 

37,689

 

 

 

(179

)

 

 

1,130,333

 

 

 

(22,036

)

 

 

1,168,022

 

 

 

(22,215

)

States and political subdivisions

 

 

544

 

 

 

—

 

 

 

109,859

 

 

 

(596

)

 

 

110,403

 

 

 

(596

)

Pooled trust preferred securities

 

 

—

 

 

 

—

 

 

 

8,123

 

 

 

(5,727

)

 

 

8,123

 

 

 

(5,727

)

Other securities

 

 

27,648

 

 

 

(128

)

 

 

155,906

 

 

 

(2,847

)

 

 

183,554

 

 

 

(2,975

)

Total available-for-sale

 

$

70,276

 

 

$

(309

)

 

$

1,941,816

 

 

$

(36,273

)

 

$

2,012,092

 

 

$

(36,582

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

3,829

 

 

$

(12

)

 

$

1,472

 

 

$

(19

)

 

$

5,301

 

 

$

(31

)

U.S. government-sponsored entities

   and agencies

 

 

54,701

 

 

 

(594

)

 

 

519,911

 

 

 

(10,748

)

 

 

574,612

 

 

 

(11,342

)

Mortgage-backed securities - Agency

 

 

82,289

 

 

 

(742

)

 

 

1,172,984

 

 

 

(43,475

)

 

 

1,255,273

 

 

 

(44,217

)

States and political subdivisions

 

 

99,162

 

 

 

(1,340

)

 

 

151,097

 

 

 

(2,101

)

 

 

250,259

 

 

 

(3,441

)

Pooled trust preferred securities

 

 

—

 

 

 

—

 

 

 

8,495

 

 

 

(5,366

)

 

 

8,495

 

 

 

(5,366

)

Other securities

 

 

94,607

 

 

 

(1,965

)

 

 

143,842

 

 

 

(4,211

)

 

 

238,449

 

 

 

(6,176

)

Total available-for-sale

 

$

334,588

 

 

$

(4,653

)

 

$

1,997,801

 

 

$

(65,920

)

 

$

2,332,389

 

 

$

(70,573

)

 

The following table summarizes the held-to-maturity investment securities with unrecognized losses at March 31, 2019 and December 31, 2018 by aggregated major security type and length of time in a continuous unrecognized loss position:

 

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

 

 

Fair

 

 

Unrecognized

 

 

Fair

 

 

Unrecognized

 

 

Fair

 

 

Unrecognized

 

(dollars in thousands)

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government-sponsored entities

   and agencies

 

$

—

 

 

$

—

 

 

$

41,036

 

 

$

(964

)

 

$

41,036

 

 

$

(964

)

Mortgage-backed securities - Agency

 

 

—

 

 

 

—

 

 

 

44,719

 

 

 

(2,190

)

 

 

44,719

 

 

 

(2,190

)

States and political subdivisions

 

 

—

 

 

 

—

 

 

 

7,433

 

 

 

(214

)

 

 

7,433

 

 

 

(214

)

  Total held-to-maturity

 

$

—

 

 

$

—

 

 

$

93,188

 

 

$

(3,368

)

 

$

93,188

 

 

$

(3,368

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government-sponsored entities

   and agencies

 

$

—

 

 

$

—

 

 

$

72,359

 

 

$

(4,642

)

 

$

72,359

 

 

$

(4,642

)

Mortgage-backed securities - Agency

 

 

4,335

 

 

 

(24

)

 

 

119,207

 

 

 

(8,006

)

 

 

123,542

 

 

 

(8,030

)

States and political subdivisions

 

 

24,533

 

 

 

(983

)

 

 

70,022

 

 

 

(3,556

)

 

 

94,555

 

 

 

(4,539

)

  Total held-to-maturity

 

$

28,868

 

 

$

(1,007

)

 

$

261,588

 

 

$

(16,204

)

 

$

290,456

 

 

$

(17,211

)

 

The unrecognized losses on held-to-maturity investment securities presented in the table above include unrecognized losses on securities that were transferred from available-for-sale to held-to-maturity totaling $3.1 million at March 31, 2019 and $10.7 million at December 31, 2018.

Management evaluates debt securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  Management considers many factors, including: (1) the length of

time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.  If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.  Otherwise, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors.  The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings.  The amount of the total OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes.  The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

There was no OTTI recorded during the three months ended March 31, 2019 or 2018.

At March 31, 2019, Old National’s securities portfolio consisted of 2,057 securities, 532 of which were in an unrealized loss position.  The unrealized losses attributable to our U.S. Treasury, U.S. government-sponsored entities and agencies, agency mortgage-backed securities, states and political subdivisions, and other securities are the result of fluctuations in interest rates.  Our pooled trust preferred securities are discussed below.  At March 31, 2019, we had no intent to sell any securities that were in an unrealized loss position nor is it expected that we would be required to sell any securities.

Pooled Trust Preferred Securities

At March 31, 2019, our securities portfolio contained two pooled trust preferred securities with a fair value of $8.1 million and unrealized losses of $5.7 million.  These securities are not subject to FASB ASC 325-10 and are evaluated using collateral-specific assumptions to estimate the expected future interest and principal cash flows.  For the three months ended March 31, 2019 and 2018, our analysis indicated no OTTI on these securities.

The table below summarizes the relevant characteristics of our pooled trust preferred securities as well as our single issuer trust preferred securities that are included in the “other securities” category in this footnote.  Each of the pooled trust preferred securities support a more senior tranche of security holders.  Both pooled trust preferred securities have experienced credit defaults.  However, these securities have excess subordination and are not other-than-temporarily impaired as a result of their class hierarchy, which provides more loss protection.

 

Trust preferred securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual

 

 

Expected

 

 

Excess

 

March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferrals

 

 

Defaults as

 

 

Subordination

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

# of Issuers

 

and Defaults

 

 

a % of

 

 

as a % of

 

 

 

 

Lowest

 

 

 

 

 

 

 

 

 

Unrealized

 

 

Realized

 

 

Currently

 

as a % of

 

 

Remaining

 

 

Current

 

 

 

 

Credit

 

Amortized

 

 

Fair

 

 

Gain/

 

 

Losses

 

 

Performing/

 

Original

 

 

Performing

 

 

Performing

 

 

Class

 

Rating (1)

 

Cost

 

 

Value

 

 

(Loss)

 

 

2019

 

 

Remaining

 

Collateral

 

 

Collateral

 

 

Collateral

 

Pooled trust preferred securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretsl XXVII LTD

B

 

B

 

$

4,334

 

 

$

2,298

 

 

$

(2,036

)

 

$

—

 

 

33/43

 

17.2%

 

 

4.5%

 

 

36.2%

 

Trapeza Ser 13A

A2A

 

BBB

 

 

9,516

 

 

 

5,825

 

 

 

(3,691

)

 

 

—

 

 

44/49

 

4.5%

 

 

4.5%

 

 

55.7%

 

 

 

 

 

 

 

13,850

 

 

 

8,123

 

 

 

(5,727

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Single Issuer trust preferred securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JP Morgan Chase & Co

 

 

BBB-

 

 

4,790

 

 

 

4,375

 

 

 

(415

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

$

18,640

 

 

$

12,498

 

 

$

(6,142

)

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Lowest rating for the security provided by any nationally recognized credit rating agency.

Equity securities are recorded at fair value and totaled $6.2 million at March 31, 2019 and $5.6 million at December 31, 2018.  There were gains on equity securities of $0.2 million during the three months ended March 31, 2019 and  $0.1 million during the three months ended March 31, 2018.  Old National also has equity securities without readily determinable fair values that are included in other assets that totaled $76.6 million at March 31, 2019 and $79.2 million at December 31, 2018.  These are illiquid investments that consist of partnerships, limited liability companies, and other ownership interests that support affordable housing, economic development, and community

revitalization initiatives in low-to-moderate income neighborhoods.  There have been no impairments or downward adjustments on these securities in the three months ended March 31, 2019 or 2018.