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.



September 30, 2015:	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	($ in Thousands)
Investment securities available for sale:
U.S. Treasury securities	$	999	$	3	$	—		$	1,002
Obligations of state and political subdivisions ("municipal securities")	409,529		18,176		(4		)	427,701
Residential mortgage-related securities:
FNMA / FHLMC	1,932,740		52,232		(4,182		)	1,980,790
GNMA	1,106,601		4,106		(2,574		)	1,108,133
Private-label	1,755		1		(10		)	1,746
GNMA commercial mortgage-related securities	1,885,776		6,461		(14,656		)	1,877,581
Other securities (debt and equity)	6,640		63		—			6,703
Total investment securities available for sale	$	5,344,040	$	81,042	$	(21,426	)	$	5,403,656
Investment securities held to maturity:
Municipal securities	$	604,799	$	10,023	$	(1,450	)	$	613,372
Total investment securities held to maturity	$	604,799	$	10,023	$	(1,450	)	$	613,372
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 September 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	$	39,763	$	40,025		$	—	$	—
Due after one year through five years	236,730		248,772			3,980		4,042
Due after five years through ten years	140,072		145,956			133,801		136,164
Due after ten years	585		599			467,018		473,166
Total debt securities	417,150		435,352			604,799		613,372
Residential mortgage-related securities:
FNMA / FHLMC	1,932,740		1,980,790			—		—
GNMA	1,106,601		1,108,133			—		—
Private-label	1,755		1,746			—		—
GSE commercial mortgage-related securities	1,885,776		1,877,581			—		—
Equity securities	18		54			—		—
Total investment securities	$	5,344,040	$	5,403,656		$	604,799	$	613,372
Ratio of Fair Value to Amortized Cost			101.1		%			101.4		%

During the second and third quarters 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 $4 million net gain on sale. This restructuring lowered risk weighted assets and related capital requirements, while improving the liquidity of the investment portfolio. The $1.2 billion of proceeds from the sales of investment securities includes a $139 million receivable due to an unsettled trade from the sale of investment securities that occurred at the end of September.



	Nine Months Ended September 30,						Year Ended December 31,
	2015			2014			2014
				($ in Thousands)
Gross gains	$	8,047		$	1,159		$	1,184
Gross losses	(4,009		)	(690		)	(690		)
Investment securities gains, net	$	4,038		$	469		$	494
Proceeds from sales of investment securities	$	1,206,242		$	101,987		$	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 September 30, 2015.



	Less than 12 months						12 months or more						Total
September 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	2	$	(2	)	$	628	1	$	(2	)	$	186	$	(4	)	$	814
Residential mortgage-related securities:
GSE	51	(2,894		)	854,924		20	(3,862		)	374,787		(6,756		)	1,229,711
Private-label	1	—			90		3	(10		)	1,591		(10		)	1,681
GSE commercial mortgage-related securities	15	(1,411		)	526,820		20	(13,245		)	445,030		(14,656		)	971,850
Total		$	(4,307	)	$	1,382,462		$	(17,119	)	$	821,594	$	(21,426	)	$	2,204,056
Investment securities held to maturity:
Municipal securities	244	$	(1,180	)	$	112,223	20	$	(270	)	$	9,405	$	(1,450	)	$	121,628
Total		$	(1,180	)	$	112,223		$	(270	)	$	9,405	$	(1,450	)	$	121,628

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 September 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 reduction in the level of intermediate term interest rates from December 31, 2014 to September 30, 2015. Since December 31, 2014, the three-year and five-year U.S. Treasury note rates declined 18 basis points ("bp") and 28 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 September 30, 2015 and December 31, 2014, respectively, and Federal Reserve Bank stock of $73 million and $71 million at September 30, 2015 and December 31, 2014, respectively. During second quarter of 2015, the Corporation purchased $14 million of additional FHLB stock to support the overall increase in FHLB advances and subsequently sold $43 million of excess FHLB stock.