Investment Securities

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



September 30, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value


	($ in Thousands)
Investment securities available for sale:
U. S. Treasury securities	$	1,000	$	1	$	—		$	1,001
Residential mortgage-related securities:
FNMA / FHLMC	882,951		29,941		(32		)	912,860
GNMA	1,798,096		14,183		(750		)	1,811,529
Private-label	1,215		—		(15		)	1,200
GNMA commercial mortgage-related securities	2,121,913		4,218		(11,462		)	2,114,669
Other securities (debt and equity)	4,718		111		—			4,829
Total investment securities available for sale	$	4,809,893	$	48,454	$	(12,259	)	$	4,846,088
Investment securities held to maturity:
Obligations of state and political subdivisions (municipal securities)	$	1,129,056	$	31,897	$	(233	)	$	1,160,720
Residential mortgage-related securities:
FNMA / FHLMC	38,297		1,009		(16		)	39,290
GNMA	86,141		1,703		(24		)	87,820
Total investment securities held to maturity	$	1,253,494	$	34,609	$	(273	)	$	1,287,830



December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value


	($ in Thousands)
Investment securities available for sale:
U. S. Treasury securities	$	999	$	—	$	(2	)	$	997
Residential mortgage-related securities:
FNMA / FHLMC	1,388,995		33,791		(8,160		)	1,414,626
GNMA	1,605,956		507		(16,460		)	1,590,003
Private-label	1,722		1		(14		)	1,709
GNMA commercial mortgage-related securities	1,982,477		1,334		(28,501		)	1,955,310
Other securities (debt and equity)	4,718		51		—			4,769
Total investment securities available for sale	$	4,984,867	$	35,684	$	(53,137	)	$	4,967,414
Investment securities held to maturity:
Municipal securities	$	1,043,767	$	16,803	$	(339	)	$	1,060,231
Residential mortgage-related securities:
FNMA / FHLMC	41,469		513		(645		)	41,337
GNMA	82,994		189		(309		)	82,874
Total investment securities held to maturity	$	1,168,230	$	17,505	$	(1,293	)	$	1,184,442

The amortized cost and fair values of investment securities available for sale and held to maturity at September 30, 2016, 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	$	4,500	$	4,535		$	38,786	$	27,004
Due after one year through five years	1,200		1,200			250,221		260,817
Due after five years through ten years	—		—			234,104		243,746
Due after ten years	—		—			605,945		629,153
Total debt securities	5,700		5,735			1,129,056		1,160,720
Residential mortgage-related securities:
FNMA / FHLMC	882,951		912,860			38,297		39,290
GNMA	1,798,096		1,811,529			86,141		87,820
Private-label	1,215		1,200			—		—
GNMA commercial mortgage-related securities	2,121,913		2,114,669			—		—
Equity securities	18		95			—		—
Total investment securities	$	4,809,893	$	4,846,088		$	1,253,494	$	1,287,830
Ratio of Fair Value to Amortized Cost			100.8		%			102.7		%

During the first nine months of 2016, the Corporation sold approximately $360 million of FNMA and FHLMC mortgage-related securities and reinvested into GNMA mortgage-related securities, generating a $6 million net gain on sale. This sale of FNMA and FHLMC mortgage-related securities and the subsequent purchase of GNMA mortgage-related securities lowered risk weighted assets and related capital requirements.



	Nine Months Ended September 30,
	2016			2015
	($ in Thousands)
Gross gains	$	6,403		$	8,047
Gross losses	(202		)	(4,009		)
Investment securities gains, net	$	6,201		$	4,038
Proceeds from sales of investment securities	$	359,591		$	1,206,242

Securities with a carrying value of approximately $2.6 billion and $3.2 billion at September 30, 2016, and December 31, 2015, respectively, were pledged to secure certain deposits or for other purposes as required or permitted by law.

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 individual securities have been in a continuous unrealized loss position, at September 30, 2016.



	Less than 12 months						12 months or more						Total
	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:
Residential mortgage-related securities:
FNMA / FHLMC	3	$	(32	)	$	14,694	—	$	—		$	—	$	(32	)	$	14,694
GNMA	8	(750		)	280,378		—	—			—		(750		)	280,378
Private-label	—	—			—		1	(15		)	1,197		(15		)	1,197
GNMA commercial mortgage-related securities	40	(2,035		)	828,434		21	(9,427		)	466,898		(11,462		)	1,295,332
Total	51	$	(2,817	)	$	1,123,506	22	$	(9,442	)	$	468,095	$	(12,259	)	$	1,591,601
Investment securities held to maturity:
Municipal securities	37	$	(224	)	$	37,317	4	$	(9	)	$	1,842	$	(233	)	$	39,159
Residential mortgage-related securities:
FNMA / FHLMC	1	(8		)	1,108		1	(8		)	6,834		(16		)	7,942
GNMA	5	(24		)	6,317		—	—			—		(24		)	6,317
Total	43	$	(256	)	$	44,742	5	$	(17	)	$	8,676	$	(273	)	$	53,418

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, 2015.



	Less than 12 months						12 months or more						Total
	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	$	(2	)	$	997	—	$	—		$	—	$	(2	)	$	997
Residential mortgage-related securities:
FNMA / FHLMC	17	(1,548		)	220,852		14	(6,612		)	338,186		(8,160		)	559,038
GNMA	46	(16,460		)	1,434,484		—	—			—		(16,460		)	1,434,484
Private-label	1	(1		)	83		3	(13		)	1,565		(14		)	1,648
GNMA commercial mortgage-related securities	40	(9,610		)	1,132,844		21	(18,891		)	448,218		(28,501		)	1,581,062
Total	105	$	(27,621	)	$	2,789,260	38	$	(25,516	)	$	787,969	$	(53,137	)	$	3,577,229
Investment securities held to maturity:
Municipal securities	53	$	(146	)	$	23,137	24	$	(193	)	$	9,254	$	(339	)	$	32,391
Residential mortgage-related securities:
FNMA / FHLMC	10	(177		)	12,754		3	(468		)	11,106		(645		)	23,860
GNMA	21	(201		)	45,499		3	(108		)	6,797		(309		)	52,296
Total	84	$	(524	)	$	81,390	30	$	(769	)	$	27,157	$	(1,293	)	$	108,547

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.

Based on the Corporation’s evaluation, management does not believe any unrealized loss at September 30, 2016, 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 reduction in unrealized losses at September 30, 2016 is due to the reduction in overall interest rates. The U.S. Treasury 3-year and 5-year rates dropped by 43 basis points ("bp") and 62 bp, respectively, from December 31, 2015.

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. At September 30, 2016, and December 31, 2015, the Corporation had FHLB stock of $65 million and $74 million, respectively. The Corporation had Federal Reserve Bank stock of $75 million and $73 million at September 30, 2016 and December 31, 2015, respectively.