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.



March 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value


	($ in Thousands)
Investment securities available for sale:
U. S. Treasury securities	$	1,004	$	1	$	—		$	1,005
Residential mortgage-related securities:
FNMA / FHLMC	575,826		15,710		(1,117		)	590,419
GNMA	2,063,054		1,837		(25,065		)	2,039,826
Private-label	1,118		—		(16		)	1,102
GNMA commercial mortgage-related securities	1,696,287		145		(33,095		)	1,663,337
Other securities (debt and equity)	4,718		94		(11		)	4,801
Total investment securities available for sale	$	4,342,007	$	17,787	$	(59,304	)	$	4,300,490
Investment securities held to maturity:
Obligations of state and political subdivisions (municipal securities)	$	1,131,526	$	7,150	$	(9,479	)	$	1,129,197
Residential mortgage-related securities:
FNMA / FHLMC	38,829		403		(727		)	38,505
GNMA	88,256		146		(762		)	87,640
GNMA commercial mortgage-related securities	296,232		5,005		(6,257		)	294,980
Total investment securities held to maturity	$	1,554,843	$	12,704	$	(17,225	)	$	1,550,322



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

The amortized cost and fair values of investment securities available for sale and held to maturity at March 31, 2017, 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	$	3,500	$	3,489		$	41,148	$	32,101
Due after one year through five years	2,204		2,205			252,007		259,468
Due after five years through ten years	—		—			248,861		250,081
Due after ten years	—		—			589,510		587,547
Total debt securities	5,704		5,694			1,131,526		1,129,197
Residential mortgage-related securities:
FNMA / FHLMC	575,826		590,419			38,829		38,505
GNMA	2,063,054		2,039,826			88,256		87,640
Private-label	1,118		1,102			—		—
GNMA commercial mortgage-related securities	1,696,287		1,663,337			296,232		294,980
Equity securities	18		112			—		—
Total investment securities	$	4,342,007	$	4,300,490		$	1,554,843	$	1,550,322
Ratio of Fair Value to Amortized Cost			99.0		%			99.7		%

During the first quarter of 2017, the Corporation reclassified approximately $300 million of GNMA commercial mortgage-related securities from available for sale to held to maturity. The reclassification of these investment securities was accounted for at fair value. Management elected to transfer these investment securities as the Corporation has the positive intent and ability to hold these investment securities to maturity. Management expects to continue transferring investment securities from available for sale to held to maturity throughout 2017.



	Three Months Ended March 31,
	2017		2016
	($ in Thousands)
Gross gains	$	—	$	3,287
Gross losses	—		(189		)
Investment securities gains, net	$	—	$	3,098
Proceeds from sales of investment securities	$	—	$	119,379

Investment securities with a carrying value of approximately $2.1 billion and $1.8 billion at March 31, 2017, and December 31, 2016, 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 March 31, 2017.



	Less than 12 months						12 months or more						Total
March 31, 2017	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	13	$	(1,117	)	$	216,103	—	$	—		$	—	$	(1,117	)	$	216,103
GNMA	56	(25,065		)	1,638,688		—	—			—		(25,065		)	1,638,688
Private-label	—	—			—		1	(16		)	1,100		(16		)	1,100
GNMA commercial mortgage-related securities	73	(15,538		)	1,214,494		19	(17,557		)	368,724		(33,095		)	1,583,218
Other securities (debt and equity)	3	(11		)	1,489		—	—			—		(11		)	1,489
Total	145	$	(41,731	)	$	3,070,774	20	$	(17,573	)	$	369,824	$	(59,304	)	$	3,440,598
Investment securities held to maturity:
Municipal securities	538	$	(9,407	)	$	342,534	4	$	(72	)	$	1,778	$	(9,479	)	$	344,312
Residential mortgage-related securities:
FNMA / FHLMC	16	(480		)	19,969		1	(247		)	5,785		(727		)	25,754
GNMA	38	(762		)	62,494		—	—			—		(762		)	62,494
GNMA commercial mortgage-related securities	9	(4,369		)	255,424		2	(1,888		)	39,556		(6,257		)	294,980
Total	601	$	(15,018	)	$	680,421	7	$	(2,207	)	$	47,119	$	(17,225	)	$	727,540

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, 2016.



	Less than 12 months						12 months or more						Total
December 31, 2016	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	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

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 March 31, 2017, 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.

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 March 31, 2017, and December 31, 2016, the Corporation had FHLB stock of $64 million and $65 million, respectively. The Corporation had Federal Reserve Bank stock of $75 million at both March 31, 2017 and December 31, 2016, respectively.