Investment Securities

Investment securities are generally classified as available for sale or held to maturity at the time of purchase. See Note 1 for the Corporation’s accounting policy for investment securities. The majority of the Corporation's investment securities are mortgage-related securities issued by the Government National Mortgage Association (“GNMA”) or GSEs 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.



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value


	($ in Thousands)
Investment securities available for sale:
U. S. Treasury securities	$	1,000	$	—	$	—		$	1,000
Residential mortgage-related securities:
FNMA / FHLMC	625,234		17,298		(2,602		)	639,930
GNMA	2,028,301		1,372		(25,198		)	2,004,475
Private-label	1,134		1		(14		)	1,121
GNMA commercial mortgage-related securities	2,064,508		356		(35,966		)	2,028,898
Other securities (debt and equity)	4,718		105		(21		)	4,802
Total investment securities available for sale	$	4,724,895	$	19,132	$	(63,801	)	$	4,680,226
Investment securities held to maturity:
Municipal securities	$	1,145,843	$	3,868	$	(12,036	)	$	1,137,675
Residential mortgage-related securities:
FNMA / FHLMC	37,697		439		(693		)	37,443
GNMA	89,996		216		(656		)	89,556
Total investment securities held to maturity	$	1,273,536	$	4,523	$	(13,385	)	$	1,264,674



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 December 31, 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
	Amortized Cost		Fair Value			Amortized Cost		Fair Value
	($ in Thousands)
Due in one year or less	$	4,500	$	4,479		$	38,791	$	28,517
Due after one year through five years	1,200		1,200			257,652		264,427
Due after five years through ten years	—		—			229,063		229,364
Due after ten years	—		—			620,337		615,367
Total debt securities	5,700		5,679			1,145,843		1,137,675
Residential mortgage-related securities:
FNMA / FHLMC	625,234		639,930			37,697		37,443
GNMA	2,028,301		2,004,475			89,996		89,556
Private-label	1,134		1,121			—		—
GNMA commercial mortgage-related securities	2,064,508		2,028,898			—		—
Equity securities	18		123			—		—
Total investment securities	$	4,724,895	$	4,680,226		$	1,273,536	$	1,264,674
Ratio of Fair Value to Amortized Cost			99.1		%			99.3		%

During 2016 and 2015, the Corporation restructured its investment securities portfolio from FNMA and FHLMC mortgage-related securities and reinvested into GNMA mortgage-related securities. The Corporation sold approximately $550 million of FNMA and FHLMC mortgage-related securities in 2016 and sold approximately $1.6 billion in 2015, generating net gains on sales of $9 million and $8 million, respectively. The sales of FNMA and FHLMC mortgage-related securities and the subsequent purchase of GNMA mortgage-related securities lowered risk weighted assets and related capital requirements.

Total proceeds and gross realized gains and losses from sales of investment securities for each of the three years ended December 31 were as follows. There were no other-than-temporary impairment write-downs on investment securities for 2016, 2015, or 2014.



	2016			2015			2014
	($ in Thousands)
Gross gains	$	9,518		$	12,270		$	1,184
Gross losses	(202		)	(4,137		)	(690		)
Investment securities gains, net	$	9,316		$	8,133		$	494
Proceeds from sales of investment securities	$	549,555		$	1,601,947		$	102,011

Securities with a carrying value of approximately $1.8 billion and $3.2 billion at December 31, 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 December 31, 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)
Residential mortgage-related securities:
FNMA / FHLMC	14	$	(2,602	)	$	244,252	—	$	—		$	—	$	(2,602	)	$	244,252
GNMA	54	(25,198		)	1,723,523		—	—			—		(25,198		)	1,723,523
Private-label	—	—			—		1	(14		)	1,119		(14		)	1,119
GNMA commercial mortgage-related securities	74	(16,445		)	1,427,889		21	(19,521		)	429,258		(35,966		)	1,857,147
Other securities (debt and equity)	3	(21		)	1,479		—	—			—		(21		)	1,479
Total	145	$	(44,266	)	$	3,397,143	22	$	(19,535	)	$	430,377	$	(63,801	)	$	3,827,520
Investment securities held to maturity:
Municipal securities	700	$	(11,937	)	$	414,186	4	$	(99	)	$	1,752	$	(12,036	)	$	415,938
Residential mortgage-related securities:
FNMA / FHLMC	14	(441		)	17,477		1	(252		)	6,031		(693		)	23,508
GNMA	39	(656		)	64,633		—	—			—		(656		)	64,633
Total	753	$	(13,034	)	$	496,296	5	$	(351	)	$	7,783	$	(13,385	)	$	504,079

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 December 31, 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 increase in unrealized losses at December 31, 2016 is due to the increase in overall interest rates. The U.S. Treasury 3-year and 5-year rates increased by 16 basis points ("bp") and 17 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 December 31, 2016, and 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 December 31, 2016 and 2015, respectively.