Investment Securities

Investment securities are classified as held to maturity or available for sale at the time of purchase. The majority of the Corporation's investment securities are mortgage-related securities issued by government-sponsored enterprises ("GSE") such as the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”), and the Federal Home Loan Mortgage Corporation (“FHLMC”). The amortized cost and fair values of investment securities available for sale and held to maturity were as follows.



June 30, 2015:	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	($ in Thousands)
Investment securities available for sale:
U.S. Treasury securities	$	999	$	2	$	—		$	1,001
Obligations of state and political subdivisions ("municipal securities")	451,577		18,576		(50		)	470,103
Residential mortgage-related securities:
FNMA / FHLMC	2,207,339		52,006		(7,718		)	2,251,627
GNMA	905,728		1,876		(5,520		)	902,084
Private-label	1,926		1		(10		)	1,917
GNMA commercial mortgage-related securities	1,794,286		3,803		(23,527		)	1,774,562
Other securities (debt and equity)	6,638		66		—			6,704
Total investment securities available for sale	$	5,368,493	$	76,330	$	(36,825	)	$	5,407,998
Investment securities held to maturity:
Municipal securities	$	532,382	$	4,360	$	(6,288	)	$	530,454
Total investment securities held to maturity	$	532,382	$	4,360	$	(6,288	)	$	530,454
December 31, 2014:	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	($ in Thousands)
Investment securities available for sale:
U.S. Treasury securities	$	999	$	—	$	(1	)	$	998
Municipal securities	560,839		21,869		(29		)	582,679
Residential mortgage-related securities:
FNMA / FHLMC	3,534,240		59,640		(30,423		)	3,563,457
GNMA	165,863		1,596		(127		)	167,332
Private-label	2,297		7		(10		)	2,294
GNMA commercial mortgage-related securities	1,097,913		1,922		(25,942		)	1,073,893
Other securities (debt and equity)	6,108		51		—			6,159
Total investment securities available for sale	$	5,368,259	$	85,085	$	(56,532	)	$	5,396,812
Investment securities held to maturity:
Municipal securities	$	404,455	$	9,444	$	(832	)	$	413,067
Total investment securities held to maturity	$	404,455	$	9,444	$	(832	)	$	413,067

The amortized cost and fair values of investment securities available for sale and held to maturity at June 30, 2015, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available for Sale					Held to Maturity
($ in Thousands)	Amortized Cost		Fair Value			Amortized Cost		Fair Value
Due in one year or less	$	23,394	$	23,632		$	—	$	—
Due after one year through five years	245,147		256,811			2,481		2,513
Due after five years through ten years	190,071		196,705			127,117		127,465
Due after ten years	584		604			402,784		400,476
Total debt securities	459,196		477,752			532,382		530,454
Residential mortgage-related securities:
FNMA / FHLMC	2,207,339		2,251,627			—		—
GNMA	905,728		902,084
Private-label	1,926		1,917			—		—
GSE commercial mortgage-related securities	1,794,286		1,774,562			—		—
Equity securities	18		56			—		—
Total investment securities	$	5,368,493	$	5,407,998		$	532,382	$	530,454
Ratio of Fair Value to Amortized Cost			100.7		%			99.6		%

During the second quarter of 2015, the Corporation restructured its investment portfolio and sold over $1 billion of FNMA and FHLMC mortgage-related securities and reinvested into GNMA mortgage-related securities, generating a $1 million net gain on sale. This restructuring lowered risk weighted assets and related capital requirements, while improving the liquidity of the investment portfolio.



	Six Months Ended June 30,						Year Ended December 31,
	2015			2014			2014
				($ in Thousands)
Gross gains	$	5,251		$	1,102		$	1,184
Gross losses	(4,009		)	(690		)	(690		)
Investment securities gains, net	$	1,242		$	412		$	494
Proceeds from sales of investment securities	$	1,065,328		$	80,362		$	102,011

The following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2015.



	Less than 12 months						12 months or more						Total
June 30, 2015	Number of Securities	Unrealized Losses			Fair Value		Number of Securities	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
		($ in Thousands)
Investment securities available for sale:
Municipal securities	18	$	(47	)	$	8,022	1	$	(3	)	$	186	$	(50	)	$	8,208
Residential mortgage-related securities:
GSE	62	(6,719		)	1,015,136		20	(6,519		)	387,416		(13,238		)	1,402,552
Private-label	2	(9		)	1,825		2	(1		)	21		(10		)	1,846
GSE commercial mortgage-related securities	29	(5,043		)	858,144		20	(18,484		)	446,382		(23,527		)	1,304,526
Total		$	(11,818	)	$	1,883,127		$	(25,007	)	$	834,005	$	(36,825	)	$	2,717,132
Investment securities held to maturity:
Municipal securities	623	$	(5,824	)	$	303,766	21	$	(464	)	$	9,346	$	(6,288	)	$	313,112
Total		$	(5,824	)	$	303,766		$	(464	)	$	9,346	$	(6,288	)	$	313,112

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2014.



	Less than 12 months						12 months or more						Total
December 31, 2014	Number of Securities	Unrealized Losses			Fair Value		Number of Securities	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
		($ in Thousands)
Investment securities available for sale:
U.S. Treasury securities	1	$	(1	)	$	998	—	$	—		$	—	$	(1	)	$	998
Municipal securities	6	(9		)	3,374		6	(20		)	2,133		(29		)	5,507
Residential mortgage-related securities:
GSE	16	(1,404		)	333,713		56	(29,146		)	1,256,533		(30,550		)	1,590,246
Private-label	1	(9		)	1,772		2	(1		)	27		(10		)	1,799
GSE commercial mortgage-related securities	9	(1,766		)	329,982		20	(24,176		)	460,425		(25,942		)	790,407
Total		$	(3,189	)	$	669,839		$	(53,343	)	$	1,719,118	$	(56,532	)	$	2,388,957
Investment securities held to maturity:
Municipal securities	74	$	(216	)	$	31,924	85	$	(616	)	$	38,915	$	(832	)	$	70,839
Total		$	(216	)	$	31,924		$	(616	)	$	38,915	$	(832	)	$	70,839

The Corporation reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment. A determination as to whether a security’s decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the other-than-temporary impairment analysis include, the length of time and extent to which the security has been in an unrealized loss position, changes in security ratings, financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions. The Corporation may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds, and the value of any underlying collateral for certain securities.

Based on the Corporation’s evaluation, management does not believe any unrealized loss at June 30, 2015 represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions, and not credit deterioration. The unrealized losses reported for municipal securities relate to various state and local political subdivisions and school districts. The Corporation currently does not intend to sell nor does it believe that it will be required to sell the securities contained in the above unrealized losses table before recovery of their amortized cost basis. The improvement in the unrealized loss position of the investment securities portfolio was due to a slight reduction in the level of intermediate term interest rates from December 31, 2014 to June 30, 2015. Since December 31, 2014, the three-year and five-year U.S. Treasury note rates declined 7 basis points ("bp") and 1 bp, respectively.

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: The Corporation is required to maintain Federal Reserve stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation had FHLB stock of $88 million and $118 million at June 30, 2015 and December 31, 2014, respectively, and Federal Reserve Bank stock of $73 million and $71 million at June 30, 2015 and December 31, 2014, respectively. During second quarter of 2015, the Corporation sold $43 million of excess FHLB stock.