Investment Securities

Summaries of the amortized cost, carrying value, and fair value of Webster’s investment securities are presented below:



	At December 31, 2014
			Recognized in OCI							Not Recognized in OCI
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale:
U.S. Treasury Bills	$	525	$	—	$	—		$	525	$	—	$	—		$	525
Agency collateralized mortgage obligations (“agency CMO”)	543,417		8,636		(1,065		)	550,988		—		—			550,988
Agency mortgage-backed securities (“agency MBS”)	1,030,724		10,462		(12,668		)	1,028,518		—		—			1,028,518
Agency commercial mortgage-backed securities (“agency CMBS”)	80,400		—		(134		)	80,266		—		—			80,266
Non-agency commercial mortgage-backed securities ("non-agency CMBS")	534,631		18,885		(123		)	553,393		—		—			553,393
Collateralized loan obligations ("CLO") ⁽¹⁾	426,269		482		(1,017		)	425,734		—		—			425,734
Pooled trust preferred securities	—		—		—			—		—		—			—
Single issuer trust preferred securities	41,981		—		(3,736		)	38,245		—		—			38,245
Corporate debt securities	106,520		3,781		—			110,301		—		—			110,301
Equity securities - financial institutions	3,500		2,403		—			5,903		—		—			5,903
Total available-for-sale	$	2,767,967	$	44,649	$	(18,743	)	$	2,793,873	$	—	$	—		$	2,793,873
Held-to-maturity:
Agency CMO	$	442,129	$	—	$	—		$	442,129	$	6,584	$	(739	)	$	447,974
Agency MBS	2,134,319		—		—			2,134,319		57,196		(11,340		)	2,180,175
Agency CMBS	578,687		—		—			578,687		1,597		(1,143		)	579,141
Municipal bonds and notes	373,211		—		—			373,211		15,138		(55		)	388,294
Non-agency CMBS	338,723		—		—			338,723		9,428		(1,015		)	347,136
Private Label MBS	5,886		—		—			5,886		100		—			5,986
Total held-to-maturity	$	3,872,955	$	—	$	—		$	3,872,955	$	90,043	$	(14,292	)	$	3,948,706


(1)	Amortized cost is net of $3.7 million of other-than-temporary impairments at December 31, 2014.



	At December 31, 2013
			Recognized in OCI							Not Recognized in OCI
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale:
U.S. Treasury Bills	$	325	$	—	$	—		$	325	$	—	$	—		$	325
Agency CMO	794,397		14,383		(1,868		)	806,912		—		—			806,912
Agency MBS	1,265,276		9,124		(47,698		)	1,226,702		—		—			1,226,702
Agency CMBS	71,759		—		(782		)	70,977		—		—			70,977
Non-agency CMBS	436,872		28,398		(996		)	464,274		—		—			464,274
CLO ⁽¹⁾	357,326		315		—			357,641		—		—			357,641
Pooled trust preferred securities ⁽²⁾	31,900		—		(3,410		)	28,490		—		—			28,490
Single issuer trust preferred securities	41,807		—		(6,872		)	34,935		—		—			34,935
Corporate debt securities	108,936		4,155		—			113,091		—		—			113,091
Equity securities - financial institutions ⁽³⁾	2,314		1,270		—			3,584		—		—			3,584
Total available-for-sale	$	3,110,912	$	57,645	$	(61,626	)	$	3,106,931	$	—	$	—		$	3,106,931
Held-to-maturity:
Agency CMO	$	365,081	$	—	$	—		$	365,081	$	10,135	$	(1,009	)	$	374,207
Agency MBS	2,130,685		—		—			2,130,685		43,315		(53,188		)	2,120,812
Agency CMBS	115,995		—		—			115,995		44		(818		)	115,221
Municipal bonds and notes	448,405		—		—			448,405		11,104		(1,228		)	458,281
Non-agency CMBS	290,057		—		—			290,057		8,635		(4,975		)	293,717
Private Label MBS	8,498		—		—			8,498		176		—			8,674
Total held-to-maturity	$	3,358,721	$	—	$	—		$	3,358,721	$	73,409	$	(61,218	)	$	3,370,912


(1)	Amortized cost is net of $2.6 million of other-than-temporary impairments at December 31, 2013.


(2)	Amortized cost is net of $14.0 million of other-than-temporary impairments at December 31, 2013.


(3)	Amortized cost is net of $20.4 million of other-than-temporary impairments at December 31, 2013.

Contractual Maturities

The amortized cost and fair value of debt securities at December 31, 2014, by contractual maturity, are set forth below:



	Available-for-Sale				Held-to-Maturity
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	15,522	$	15,533	$	15	$	15
Due after one year through five years	126,521		130,307		63,419		65,863
Due after five through ten years	297,718		298,342		65,509		68,037
Due after ten years	2,324,706		2,343,788		3,744,012		3,814,791
Total debt securities	$	2,764,467	$	2,787,970	$	3,872,955	$	3,948,706

For the maturity schedule above, mortgage-backed securities and collateralized loan obligations, which are not due at a single maturity date, have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this maturity date presentation because borrowers have the right to prepay obligations with or without prepayment penalties. At December 31, 2014, the Company had a carrying value of $882.1 million in callable securities in its CMBS, CLO, and municipal bond portfolios. The Company considers these factors in the evaluation of its interest rate risk profile and effective duration. These maturities do not reflect actual duration which is impacted by prepayment assumptions.

Securities with a carrying value totaling $2.9 billion at December 31, 2014 and $2.7 billion at December 31, 2013 were pledged to secure public funds, trust deposits, repurchase agreements, and for other purposes, as required or permitted by law. At December 31, 2014 and December 31, 2013, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated shareholders’ equity.

Gross Unrealized Losses and Fair Value

The following tables provide information on the gross unrealized losses and fair value of the Company’s investment securities with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment security type and length of time that individual investment securities have been in a continuous unrealized loss position:



	At December 31, 2014
	Less Than Twelve Months					Twelve Months or Longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			# of Holdings	Fair Value		Unrealized Losses
Available-for-sale:
Agency CMO	$	47,217	$	(240	)	$	35,968	$	(825	)	8	$	83,185	$	(1,065	)
Agency MBS	3,691		(18		)	641,355		(12,650		)	64	645,046		(12,668		)
Agency CMBS	80,266		(134		)	—		—			4	80,266		(134		)
Non-agency CMBS	24,932		(117		)	9,396		(6		)	4	34,328		(123		)
CLO	99,221		(1,017		)	—		—			6	99,221		(1,017		)
Pooled trust preferred securities	—		—			—		—			—	—		—
Single issuer trust preferred securities	4,150		(36		)	34,095		(3,700		)	8	38,245		(3,736		)
Total available-for-sale in an unrealized loss position	$	259,477	$	(1,562	)	$	720,814	$	(17,181	)	94	$	980,291	$	(18,743	)
Held-to-maturity:
Agency CMO	$	52,172	$	(187	)	$	24,942	$	(552	)	6	$	77,114	$	(739	)
Agency MBS	20,791		(86		)	608,568		(11,254		)	44	629,359		(11,340		)
Agency CMBS	324,394		(1,143		)	—		—			17	324,394		(1,143		)
Municipal bonds and notes	5,341		(23		)	3,074		(32		)	15	8,415		(55		)
Non-agency CMBS	13,003		(30		)	65,913		(985		)	7	78,916		(1,015		)
Total held-to-maturity in an unrealized loss position	$	415,701	$	(1,469	)	$	702,497	$	(12,823	)	89	$	1,118,198	$	(14,292	)



	At December 31, 2013
	Less Than Twelve Months					Twelve Months or Longer					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			# of Holdings	Fair Value		Unrealized Losses
Available-for-sale:
Agency CMO	$	149,894	$	(1,713	)	$	9,011	$	(155	)	15	$	158,905	$	(1,868	)
Agency MBS	616,286		(29,537		)	279,680		(18,161		)	88	895,966		(47,698		)
Agency CMBS	70,977		(782		)	—		—			3	70,977		(782		)
Non-agency CMBS	52,340		(996		)	—		—			7	52,340		(996		)
CLO	—		—			—		—			—	—		—
Pooled trust preferred securities	—		—			11,141		(3,410		)	2	11,141		(3,410		)
Single issuer trust preferred securities	3,777		(381		)	31,158		(6,491		)	8	34,935		(6,872		)
Total available-for-sale in an unrealized loss position	$	893,274	$	(33,409	)	$	330,990	$	(28,217	)	123	$	1,224,264	$	(61,626	)
Held-to-maturity:
Agency CMO	$	53,789	$	(1,009	)	$	—	$	—		4	$	53,789	$	(1,009	)
Agency MBS	1,045,693		(42,181		)	170,780		(11,007		)	94	1,216,473		(53,188		)
Agency CMBS	90,218		(818		)	—		—			4	90,218		(818		)
Municipal bonds and notes	46,587		(1,193		)	2,166		(35		)	51	48,753		(1,228		)
Non-agency CMBS	106,527		(4,059		)	14,832		(916		)	11	121,359		(4,975		)
Total held-to-maturity in an unrealized loss position	$	1,342,814	$	(49,260	)	$	187,778	$	(11,958	)	164	$	1,530,592	$	(61,218	)

Available-for-Sale Impairment Analysis

The following discussion summarizes, by investment security type, the basis for evaluating if the applicable investment securities within the Company’s available-for-sale portfolio were other-than-temporarily impaired at December 31, 2014. Unless otherwise noted for an investment security type, management does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not the Company will not be required to sell these securities before the recovery of its amortized cost.

Agency collateralized mortgage obligations ("agency CMO") – There were unrealized losses of $1.1 million on the Company’s investment in agency CMO at December 31, 2014, compared to $1.9 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. The contractual cash flows for these investments are performing as expected, and there has been no change in the underlying credit quality. As such, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Agency mortgage-backed securities ("agency MBS") – There were unrealized losses of $12.7 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2014, compared to $47.7 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. These investments are issued by a government or a government sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. There has been no change in the credit quality, and the contractual cash flows are performing as expected. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Agency commercial mortgage-backed securities ("agency CMBS") - There were unrealized losses of $134 thousand on the Company's investment in commercial mortgage-backed securities issued by government agencies at December 31, 2014, compared to $0.8 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Non-agency commercial mortgage-backed securities ("non-agency CMBS") – There were unrealized losses of $123 thousand on the Company’s investment in non-agency commercial mortgage-backed securities at December 31, 2014, compared to $1.0 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. Internal and external metrics are considered when evaluating potential OTTI. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. In addition, market analytics are performed to validate internal results. Contractual cash flows for the bonds continue to perform as expected. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Collateralized loan obligations ("CLO") – There were unrealized losses of $1.0 million on the Company’s investment in Volcker compliant collateralized loan obligations at December 31, 2014 compared to no unrealized losses at December 31, 2013. The unrealized loss is due to increased CLO spreads on Volcker compliant holdings during the period. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014. The Company continues to recognize the full write-down of CLO positions to market value if they meet the definition of a Covered Fund under the Volcker Rule effective December 10, 2013.

Pooled trust preferred securities – There were no unrealized losses on the Company's investment in pooled trust preferred securities at December 31, 2014, compared to $3.4 million at December 31, 2013. The decrease in unrealized loss is due to the sale of the remaining two non-investment grade pooled trust preferred securities during the third quarter of 2014. The Company does not hold investments in pooled trust preferred securities at December 31, 2014.

Single issuer trust preferred securities - There were unrealized losses of $3.7 million on the Company's investment in single issuer trust preferred securities at December 31, 2014, compared to $6.9 million at December 31, 2013. Unrealized losses decreased due to lower market spreads which resulted in higher security prices since December 31, 2013. The single issuer portfolio consists of four investments issued by three large capitalization money center financial institutions, which continue to service the debt. The Company performs periodic credit reviews of the issuer and as a result does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Corporate debt securities – There were no unrealized losses on the Company’s investment in corporate debt securities at December 31, 2014 and December 31, 2013. These securities are currently performing as expected at December 31, 2014.

Equity securities - financial institutions – There were no unrealized losses on the Company’s investment in equity securities at December 31, 2014 and December 31, 2013.

Held-to-Maturity Impairment Analysis

The following discussion summarizes, by investment type, the basis for the conclusion that the applicable investment securities within the Company’s held-to-maturity portfolio were not other-than-temporarily impaired at December 31, 2014. Unless otherwise noted under an investment security type, management does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell these securities before the recovery of its amortized cost.

Agency CMO – There were unrealized losses of $0.7 million on the Company’s investment in agency CMO at December 31, 2014, compared to $1.0 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. The contractual cash flows for these investments are performing as expected, and there has been no change in the underlying credit quality. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Agency MBS – There were unrealized losses of $11.3 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2014, compared to $53.2 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. These investments are issued by a government or a government sponsored agency and, therefore, are backed by certain government guarantees, either direct or indirect. There has been no change in the credit quality, and the contractual cash flows are performing as expected. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Agency CMBS - There were unrealized losses of $1.1 million on the Company’s investment in commercial mortgage-backed securities issued by government agencies at December 31, 2014, compared to $0.8 million at December 31, 2013. Unrealized losses increased due to wider spreads on certain securities which resulted in lower security prices since December 31, 2013. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Municipal bonds and notes – There were unrealized losses of $55 thousand on the Company’s investment in municipal bonds and notes at December 31, 2014, compared to $1.2 million at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. The municipal portfolio is primarily comprised of bank qualified bonds, over 99.3% with credit ratings of A or better. In addition, the portfolio is comprised of 88.3% general obligation bonds, 11.1% revenue bonds, and 0.6% other bonds. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Non-agency CMBS – There were unrealized losses of $1.0 million on the Company’s investment in non-agency commercial mortgage-backed securities at December 31, 2014, compared to $5.0 million unrealized losses at December 31, 2013. Unrealized losses decreased due to lower market rates which resulted in higher security prices since December 31, 2013. Internal and external metrics are considered when evaluating potential OTTI. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. In addition, market analytics are performed to validate internal results. The contractual cash flows for these investments are performing as expected. The Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

Private Label MBS - There were no unrealized losses on the Company's investment in private label residential mortgage-backed securities issued by entities other than government agencies at December 31, 2014 and December 31, 2013. These securities are currently performing as expected at December 31, 2014.

Other-Than-Temporary Impairment

There were additions to OTTI of $1.1 million and $7.3 million for the years ended December 31, 2014 and 2013, respectively. The cumulative OTTI related to previously impaired securities was reduced due to the sale of four trust preferred securities during the first quarter of 2014, the sale of two trust preferred securities, and two CLOs were called during the third quarter of 2014. CLO positions carried at an unrealized loss are Volcker compliant and the losses are considered to be temporary. To the extent that changes in interest rates, credit movements, and other factors that influence the fair value of investments occur, the Company may be required to record impairment charges for OTTI in future periods.

The following is a roll forward of the amount of OTTI related to debt securities:



	Years ended December 31,
(In thousands)	2014			2013			2012
Balance of OTTI, beginning of period	$	16,633		$	10,460		$	10,460
Reduction for securities sold, called	(14,082		)	(1,104		)	—
Additions for OTTI not previously recognized	1,145			7,277			—
Balance of OTTI, end of period	$	3,696		$	16,633		$	10,460

Realized Gains and Losses

The following table summarizes proceeds from available-for-sale securities, the gross realized gains and losses from those sales, and the impact of the recognition of other-than-temporary impairments for the periods presented:



	Years ended December 31,
(In thousands)	2014			2013			2012
Proceeds from sales ⁽¹⁾	$	98,402		$	57,804		$	148,222

Gross realized gains	$	7,268		$	2,847		$	3,347
Gross realized losses	(1,769		)	(2,135		)	—
OTTI write-down	(1,145		)	(7,277		)	—
Net realized gains (losses) from investment securities	$	4,354		$	(6,565	)	$	3,347


(1)	Proceeds from sales, for the year ended December 31, 2014, do not include $28.2 million of unsettled sales transactions at December 31, 2014. The gross realized gains and gross realized losses for the year ended December 31, 2014 reflect the unsettled sales transactions.