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Securities
 6 Months Ended
Jun. 30, 2014
Marketable Securities [Abstract]  
Securities [Text Block]
(2) Securities
Trading Securities
 
The fair value and net unrealized gain (loss) included in trading securities is as follows (in thousands):
 
 
 
June 30, 2014
 
December 31, 2013
 
June 30, 2013
 
 
Fair Value
 
Net Unrealized Gain (Loss)
 
Fair Value
 
Net Unrealized Gain (Loss)
 
Fair
Value
 
Net Unrealized Gain (Loss)
U.S. Government agency debentures
 
$
19,027

 
$
6

 
$
34,120

 
$
77

 
$
60,713

 
$
(552
)
U.S. agency residential mortgage-backed securities
 
13,540

 
3

 
21,011

 
123

 
43,858

 
38

Municipal and other tax-exempt securities
 
32,950

 
28

 
27,350

 
(182
)
 
53,819

 
(1,271
)
Other trading securities
 
35,580

 
20

 
9,135

 
(7
)
 
32,201

 
(717
)
Total
 
$
101,097

 
$
57

 
$
91,616

 
$
11

 
$
190,591

 
$
(2,502
)

Investment Securities
 
The amortized cost and fair values of investment securities are as follows (in thousands):

 
 
June 30, 2014
 
 
Amortized
 
Carrying
 
Fair
 
Gross Unrealized2
 
 
Cost
 
Value1
 
Value
 
Gain
 
Loss
Municipal and other tax-exempt
 
$
425,221

 
$
425,221

 
$
429,051

 
$
4,442

 
$
(612
)
U.S. agency residential mortgage-backed securities – Other
 
40,879

 
41,973

 
44,176

 
2,203

 
—

Other debt securities
 
182,743

 
182,743

 
197,584

 
14,914

 
(73
)
Total
 
$
648,843

 
$
649,937

 
$
670,811

 
$
21,559

 
$
(685
)
1 
Carrying value includes $1.1 million of net unrealized gain which remains in Accumulated other comprehensive income (“AOCI”) in the Consolidated Balance Sheets related to certain securities transferred from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.
2 
Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.
 
 
December 31, 2013
 
 
Amortized
 
Carrying
 
Fair
 
Gross Unrealized2
 
 
Cost
 
Value1
 
Value
 
Gain
 
Loss
Municipal and other tax-exempt
 
$
440,187

 
$
440,187

 
$
439,870

 
$
2,452

 
$
(2,769
)
U.S. agency residential mortgage-backed securities – Other
 
48,351

 
50,182

 
51,864

 
1,738

 
(56
)
Other debt securities
 
187,509

 
187,509

 
195,393

 
8,497

 
(613
)
Total
 
$
676,047

 
$
677,878

 
$
687,127

 
$
12,687

 
$
(3,438
)
1 
Carrying value includes $1.8 million of net unrealized gain which remains in Accumulated other comprehensive income (“AOCI”) in the Consolidated Balance Sheets related to certain securities transferred from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.
2 
Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.
 
 
June 30, 2013
 
 
Amortized
 
Carrying
 
Fair
 
Gross Unrealized2
 
 
Cost
 
Value1
 
Value
 
Gain
 
Loss
Municipal and other tax-exempt
 
$
375,317

 
$
375,317

 
$
371,690

 
$
2,189

 
$
(5,816
)
U.S. agency residential mortgage-backed securities – Other
 
61,152

 
64,172

 
66,796

 
2,624

 
—

Other debt securities
 
176,301

 
176,301

 
187,219

 
10,978

 
(60
)
Total
 
$
612,770

 
$
615,790

 
$
625,705

 
$
15,791

 
$
(5,876
)
1 
Carrying value includes $3.0 million of net unrealized gain which remains in Accumulated other comprehensive income (“AOCI”) in the Consolidated Balance Sheets related to certain securities transferred from the Available for Sale securities portfolio to the Investment securities portfolio as discussed in greater detail following.
2 
Gross unrealized gains and losses are not recognized in AOCI in the Consolidated Balance Sheets.

During the three months ended September 30, 2011, the Company transferred certain U.S. government agency residential mortgage-backed securities from the available for sale portfolio to the investment securities (held-to-maturity) portfolio as the Company has the positive intent and ability to hold these securities to maturity. No gains or losses were recognized in the Consolidated Statement of Earnings at the time of the transfer. Transfers of debt securities into the investment securities portfolio (held-to-maturity) are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the investment securities portfolio.  Such amounts are amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of the premium or accretion of the discount on the transferred securities. At the time of transfer, the fair value totaled $131 million, amortized cost totaled $118 million and the pretax unrealized gain totaled $13 million.

The amortized cost and fair values of investment securities at June 30, 2014, by contractual maturity, are as shown in the following table (dollars in thousands):
 
 
Less than
One Year
 
One to
Five Years
 
Six to
Ten Years
 
Over
Ten Years
 
Total
 
Weighted
Average
Maturity²
Municipal and other tax-exempt:
 
 
 
 
 
 
 
 
 
 
 
 
Carrying value
 
$
36,962

 
$
296,908

 
$
52,328

 
$
39,023

 
$
425,221

 
4.14

Fair value
 
37,136

 
298,655

 
52,567

 
40,693

 
429,051

 
 
Nominal yield¹
 
1.99
%
 
1.70
%
 
2.64
%
 
5.35
%
 
2.18
%
 
 
Other debt securities:
 
 

 
 

 
 

 
 

 
 

 
 
Carrying value
 
12,853

 
32,853

 
47,576

 
89,461

 
182,743

 
8.32

Fair value
 
12,909

 
33,627

 
50,213

 
100,835

 
197,584

 
 
Nominal yield
 
3.54
%
 
4.78
%
 
5.37
%
 
6.32
%
 
5.60
%
 
 
Total fixed maturity securities:
 
 

 
 

 
 

 
 

 
 

 
 
Carrying value
 
$
49,815

 
$
329,761

 
$
99,904

 
$
128,484

 
$
607,964

 
5.39

Fair value
 
50,045

 
332,282

 
102,780

 
141,528

 
626,635

 
 

Nominal yield
 
2.39
%
 
2.01
%
 
3.94
%
 
6.02
%
 
3.20
%
 
 

Residential mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

 
 

Carrying value
 
 

 
 

 
 

 
 

 
$
41,973

 
³

Fair value
 
 

 
 

 
 

 
 

 
44,176

 
 

Nominal yield4
 
 

 
 

 
 

 
 

 
2.74
%
 
 

Total investment securities:
 
 

 
 

 
 

 
 

 
 

 
 

Carrying value
 
 

 
 

 
 

 
 

 
$
649,937

 
 

Fair value
 
 

 
 

 
 

 
 

 
670,811

 
 

Nominal yield
 
 

 
 

 
 

 
 

 
3.17
%
 
 

1 
Calculated on a taxable equivalent basis using a 39% effective tax rate.
2 
Expected maturities may differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without penalty.
3 
The average expected lives of residential mortgage-backed securities were 2.9 years based upon current prepayment assumptions.
4 
The nominal yield on residential mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. See Quarterly Financial Summary - Unaudited for current yields on the investment securities portfolio.
Available for Sale Securities 

The amortized cost and fair value of available for sale securities are as follows (in thousands):
 
 
June 30, 2014
 
 
Amortized
 
Fair
 
Gross Unrealized1
 
 
 
 
Cost
 
Value
 
Gain
 
Loss
 
OTTI²
U.S. Treasury
 
$
1,023

 
$
1,024

 
$
1

 
$
—

 
$
—

Municipal and other tax-exempt
 
63,931

 
64,970

 
1,624

 
(585
)
 
—

Residential mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

U. S. government agencies:
 
 

 
 

 
 

 
 

 
 

FNMA
 
4,297,579

 
4,364,168

 
82,436

 
(15,847
)
 
—

FHLMC
 
2,055,924

 
2,068,940

 
27,019

 
(14,003
)
 
—

GNMA
 
815,201

 
820,454

 
8,850

 
(3,597
)
 
—

Other
 
5,489

 
5,942

 
453

 
—

 
—

Total U.S. government agencies
 
7,174,193

 
7,259,504

 
118,758

 
(33,447
)
 
—

Private issue:
 
 

 
 

 
 

 
 

 
 

Alt-A loans
 
70,880

 
75,700

 
4,820

 
—

 
—

Jumbo-A loans
 
97,939

 
103,342

 
5,889

 
—

 
(486
)
Total private issue
 
168,819

 
179,042

 
10,709

 
—

 
(486
)
Total residential mortgage-backed securities
 
7,343,012

 
7,438,546

 
129,467

 
(33,447
)
 
(486
)
Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
2,129,521

 
2,115,295

 
5,539

 
(19,765
)
 
—

Other debt securities
 
34,501

 
34,528

 
195

 
(168
)
 
—

Perpetual preferred stock
 
22,171

 
24,730

 
2,559

 
—

 
—

Equity securities and mutual funds
 
19,507

 
20,053

 
780

 
(234
)
 
—

Total
 
$
9,613,666

 
$
9,699,146

 
$
140,165

 
$
(54,199
)
 
$
(486
)
1 Gross unrealized gain/loss recognized in AOCI in the consolidated balance sheet.
2 Amounts represent unrealized loss that remains in AOCI after an other-than-temporary credit loss has been recognized in income.
 
 
December 31, 2013
 
 
Amortized
 
Fair
 
Gross Unrealized¹
 
 
 
 
Cost
 
Value
 
Gain
 
Loss
 
OTTI²
U.S. Treasury
 
$
1,042

 
$
1,042

 
$
—

 
$
—

 
$
—

Municipal and other tax-exempt
 
73,232

 
73,775

 
1,606

 
(1,063
)
 
—

Residential mortgage-backed securities:
 
 
 
 

 
 

 
 

 
 

U. S. government agencies:
 
 

 
 

 
 

 
 

 
 

FNMA
 
4,224,327

 
4,232,332

 
68,154

 
(60,149
)
 
—

FHLMC
 
2,308,341

 
2,293,943

 
25,813

 
(40,211
)
 
—

GNMA
 
1,151,225

 
1,152,128

 
9,435

 
(8,532
)
 
—

Other
 
36,296

 
37,607

 
1,311

 
—

 
—

Total U.S. government agencies
 
7,720,189

 
7,716,010

 
104,713

 
(108,892
)
 
—

Private issue:
 
 

 
 

 
 

 
 

 
 

Alt-A loans
 
104,559

 
107,212

 
4,386

 
—

 
(1,733
)
Jumbo-A loans
 
109,622

 
113,887

 
4,974

 
—

 
(709
)
Total private issue
 
214,181

 
221,099

 
9,360

 
—

 
(2,442
)
Total residential mortgage-backed securities
 
7,934,370

 
7,937,109

 
114,073

 
(108,892
)
 
(2,442
)
Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
2,100,146

 
2,055,804

 
1,042

 
(45,384
)
 
—

Other debt securities
 
35,061

 
35,241

 
368

 
(188
)
 
—

Perpetual preferred stock
 
22,171

 
22,863

 
705

 
(13
)
 
—

Equity securities and mutual funds
 
19,069

 
21,328

 
2,326

 
(67
)
 
—

Total
 
$
10,185,091

 
$
10,147,162

 
$
120,120

 
$
(155,607
)
 
$
(2,442
)
1 Gross unrealized gain/loss recognized in AOCI in the consolidated balance sheet.
2 Amounts represent unrealized loss that remains in AOCI after an other-than-temporary credit loss has been recognized in income.

 
 
June 30, 2013
 
 
Amortized
 
Fair
 
Gross Unrealized1
 
 
 
 
Cost
 
Value
 
Gain
 
Loss
 
OTTI²
U.S. Treasury
 
$
1,061

 
$
1,060

 
$
—

 
$
(1
)
 
$
—

Municipal and other tax-exempt
 
95,974

 
95,103

 
1,653

 
(1,870
)
 
(654
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
U. S. government agencies:
 
 

 
 

 
 

 
 

 
 

FNMA
 
4,648,337

 
4,687,141

 
78,285

 
(39,481
)
 
—

FHLMC
 
2,695,506

 
2,715,896

 
32,994

 
(12,604
)
 
—

GNMA
 
916,646

 
925,081

 
11,163

 
(2,728
)
 
—

Other
 
42,563

 
44,677

 
2,114

 
—

 
—

Total U.S. government agencies
 
8,303,052

 
8,372,795

 
124,556

 
(54,813
)
 
—

Private issue:
 
 

 
 

 
 

 
 

 
 

Alt-A loans
 
113,804

 
115,036

 
2,905

 
—

 
(1,673
)
Jumbo-A loans
 
178,581

 
182,139

 
4,129

 
(274
)
 
(297
)
Total private issue
 
292,385

 
297,175

 
7,034

 
(274
)
 
(1,970
)
Total residential mortgage-backed securities
 
8,595,437

 
8,669,970

 
131,590

 
(55,087
)
 
(1,970
)
Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
1,885,585

 
1,846,943

 
343

 
(38,985
)
 
—

Other debt securities
 
35,622

 
35,894

 
479

 
(207
)
 
—

Perpetual preferred stock
 
22,172

 
25,583

 
3,439

 
(28
)
 
—

Equity securities and mutual funds
 
19,990

 
23,521

 
3,736

 
(205
)
 
—

Total
 
$
10,655,841

 
$
10,698,074

 
$
141,240

 
$
(96,383
)
 
$
(2,624
)
1 
Gross unrealized gain/loss recognized in AOCI in the consolidated balance sheet
2 
Amounts represent unrealized loss that remains in AOCI after an other-than-temporary credit loss has been recognized in income.

The amortized cost and fair values of available for sale securities at June 30, 2014, by contractual maturity, are as shown in the following table (dollars in thousands):
 
Less than
One Year
 
One to
Five Years
 
Six to
Ten Years
 
Over
Ten Years
 
Total
 
Weighted
Average
Maturity5
U.S. Treasuries:
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
$
1,023

 
$
—

 
$
—

 
$
—

 
$
1,023

 
0.63

Fair value
1,024

 
—

 
—

 
—

 
1,024

 
 
Nominal yield
0.24
%
 
—
%
 
—
%
 
—
%
 
0.24
%
 
 
Municipal and other tax-exempt:
 

 
 

 
 

 
 

 
 
 
 
Amortized cost
$
3,404

 
$
33,797

 
$
2,778

 
$
23,952

 
$
63,931

 
8.67

Fair value
3,432

 
35,004

 
3,032

 
23,502

 
64,970

 
 
Nominal yield¹
3.96
%
 
4.00
%
 
6.25
%
 
1.92
%
6 
3.32
%
 
 
Commercial mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
$
—

 
$
626,496

 
$
1,156,265

 
$
346,760

 
$
2,129,521

 
8.84

Fair value
—

 
624,969

 
1,146,932

 
343,394

 
2,115,295

 
 
Nominal yield
—
%
 
1.30
%
 
1.63
%
 
1.27
%
 
1.47
%
 
 
Other debt securities:
 

 
 

 
 

 
 

 
 
 
 
Amortized cost
$
30,101

 
$
—

 
$
—

 
$
4,400

 
$
34,501

 
4.64

Fair value
30,297

 
—

 
—

 
4,231

 
34,528

 
 
Nominal yield
1.80
%
 
—
%
 
—
%
 
1.71
%
6 
1.79
%
 
 
Total fixed maturity securities:
 

 
 

 
 

 
 

 
 
 
 
Amortized cost
$
34,528

 
$
660,293

 
$
1,159,043

 
$
375,112

 
$
2,228,976

 
8.77

Fair value
34,753

 
659,973

 
1,149,964

 
371,127

 
2,215,817

 
 
Nominal yield
1.97
%
 
1.44
%
 
1.64
%
 
1.32
%
 
1.53
%
 
 
Residential mortgage-backed securities:
 

 
 

 
 

 
 

 
 
 
 
Amortized cost
 

 
 

 
 

 
 

 
$
7,343,012

 
2 

Fair value
 

 
 

 
 

 
 

 
7,438,546

 
 
Nominal yield4
 

 
 

 
 

 
 

 
1.87
%
 
 
Equity securities and mutual funds:
 

 
 

 
 

 
 

 
 

 
 

Amortized cost
 

 
 

 
 

 
 

 
$
41,678

 
³

Fair value
 

 
 

 
 

 
 

 
44,783

 
 

Nominal yield
 

 
 

 
 

 
 

 
1.26
%
 
 

Total available-for-sale securities:
 

 
 

 
 

 
 

 
 
 
 

Amortized cost
 

 
 

 
 

 
 

 
$
9,613,666

 
 

Fair value
 

 
 

 
 

 
 

 
9,699,146

 
 

Nominal yield
 

 
 

 
 

 
 

 
1.79
%
 
 

1 
Calculated on a taxable equivalent basis using a 39% effective tax rate.
2 
The average expected lives of mortgage-backed securities were 3.5 years based upon current prepayment assumptions.
3 
Primarily common stock and preferred stock of corporate issuers with no stated maturity.
4 
The nominal yield on mortgage-backed securities is based upon prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments. See Quarterly Financial Summary –– Unaudited following for current yields on available for sale securities portfolio.
5 
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
6 
Nominal yield on municipal and other tax-exempt securities and other debt securities with contractual maturity dates over ten years are based on variable rates which generally are reset within 35 days.

Sales of available for sale securities resulted in gains and losses as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
Proceeds
$
800,405

 
$
1,083,001

 
$
1,331,190

 
$
1,784,881

Gross realized gains
9,894

 
9,992

 
16,327

 
15,784

Gross realized losses
(9,890
)
 
(6,239
)
 
(15,083
)
 
(7,176
)
Related federal and state income tax expense
2

 
1,460

 
484

 
3,349



A summary of investment and available for sale securities that have been pledged as collateral for repurchase agreements, public trust funds on deposit and for other purposes, as required by law was as follows (in thousands):
 
June 30,
2014
 
December 31,
2013
 
June 30,
2013
Investment:
 
 
 
 
 
Carrying value
$
77,835

 
$
89,087

 
$
97,286

Fair value
81,248

 
91,804

 
100,644

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
Amortized cost
5,556,130

 
5,171,782

 
5,078,098

Fair value
5,583,008

 
5,133,530

 
5,103,507



The secured parties do not have the right to sell or re-pledge these securities. In addition, securities may be pledged as collateral on a line of credit for the trading activities of BOSC, Inc. Under the terms of the credit agreement, the creditor has the right to sell or repledge the collateral. There were no securities pledged under this line of credit at June 30, 2014, March 31, 2014 or June 30, 2013.

Temporarily Impaired Securities as of June 30, 2014
(in thousands):
 
 
Number of Securities
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Investment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal and other tax-exempt
 
42

 
$
—

 
$
—

 
$
104,959

 
$
612

 
$
104,959

 
$
612

U.S. Agency residential mortgage-backed securities – Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other debt securities
 
30

 
3,593

 
40

 
808

 
33

 
4,401

 
73

Total investment
 
72

 
$
3,593

 
$
40

 
$
105,767

 
$
645

 
$
109,360

 
$
685


 
 
Number of Securities
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Available for sale:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Municipal and other tax-exempt
 
23

 
$
571

 
$
—

 
$
22,270

 
$
585

 
$
22,841

 
$
585

Residential mortgage-backed securities:
 
 
 
 

 
 

 
 

 
 

 


 


U. S. agencies:
 
 
 
 

 
 

 
 

 
 

 


 


FNMA
 
33

 
—

 
—

 
890,711

 
15,847

 
890,711

 
15,847

FHLMC
 
37

 
255,401

 
951

 
712,951

 
13,052

 
968,352

 
14,003

GNMA
 
7

 
77,869

 
6

 
153,596

 
3,591

 
231,465

 
3,597

Total U.S. agencies
 
77

 
333,270

 
957

 
1,757,258

 
32,490

 
2,090,528

 
33,447

Private issue1:
 
 

 
 

 
 

 
 

 
 

 


 


Alt-A loans
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Jumbo-A loans
 
11

 
19,976

 
486

 
—

 
—

 
19,976

 
486

Total private issue
 
11

 
19,976

 
486

 
—

 
—

 
19,976

 
486

Total residential mortgage-backed securities
 
88

 
353,246

 
1,443

 
1,757,258

 
32,490

 
2,110,504

 
33,933

Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
96

 
114,048

 
488

 
1,242,462

 
19,277

 
1,356,510

 
19,765

Other debt securities
 
2

 
—

 
—

 
4,231

 
168

 
4,231

 
168

Perpetual preferred stocks
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Equity securities and mutual   funds
 
80

 
5,298

 
195

 
1,306

 
39

 
6,604

 
234

Total available for sale
 
289

 
$
473,163


$
2,126


$
3,027,527


$
52,559


$
3,500,690


$
54,685

1Includes the following securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income:
Alt-A loans
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Jumbo-A loans
 
11

 
19,976

 
486

 
—

 
—

 
19,976

 
486


Temporarily Impaired Securities as of December 31, 2013
(In thousands)
 
 
Number of Securities
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Investment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal and other tax-exempt
 
107

 
$
166,382

 
$
1,921

 
$
53,073

 
$
848

 
$
219,455

 
$
2,769

U.S. Agency residential mortgage-backed securities – Other
 
2

 
15,224

 
56

 
—

 
—

 
15,224

 
56

Other debt securities
 
30

 
10,932

 
549

 
777

 
64

 
11,709

 
613

Total investment
 
139

 
$
192,538

 
$
2,526

 
$
53,850

 
$
912

 
$
246,388

 
$
3,438


 
 
Number of Securities
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Available for sale:
 
 

 
 

 
 

 
 

 
 

 


 


Municipal and other tax-exempt
 
27

 
$
13,286

 
$
245

 
$
17,805

 
$
818

 
$
31,091

 
$
1,063

Residential mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

 


 


U. S. agencies:
 
 

 
 

 
 

 
 

 
 

 


 


FNMA
 
81

 
2,281,491

 
60,149

 
—

 
—

 
2,281,491

 
60,149

FHLMC
 
50

 
1,450,588

 
40,211

 
—

 
—

 
1,450,588

 
40,211

GNMA
 
27

 
647,058

 
8,532

 
—

 
—

 
647,058

 
8,532

Total U.S. agencies
 
158

 
4,379,137

 
108,892

 
—

 
—

 
4,379,137

 
108,892

Private issue1:
 
 

 
 

 
 

 
 

 
 

 


 


Alt-A loans
 
7

 
11,043

 
756

 
30,774

 
977

 
41,817

 
1,733

Jumbo-A loans
 
9

 
14,642

 
709

 
—

 
—

 
14,642

 
709

Total private issue
 
16

 
25,685

 
1,465

 
30,774

 
977

 
56,459

 
2,442

Total residential mortgage-backed securities
 
174

 
4,404,822

 
110,357

 
30,774

 
977

 
4,435,596

 
111,334

Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
123

 
1,800,717

 
45,302

 
2,286

 
82

 
1,803,003

 
45,384

Other debt securities
 
3

 
4,712

 
188

 
—

 
—

 
4,712

 
188

Perpetual preferred stocks
 
1

 
4,988

 
13

 
—

 
—

 
4,988

 
13

Equity securities and mutual funds
 
118

 
2,070

 
67

 
—

 
—

 
2,070

 
67

Total available for sale
 
446

 
$
6,230,595

 
$
156,172

 
$
50,865

 
$
1,877

 
$
6,281,460

 
$
158,049

1 
Includes the following securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income:
Alt-A loans
 
7

 
$
11,043

 
$
756

 
$
30,774

 
$
977

 
$
41,817

 
$
1,733

Jumbo-A loans
 
9

 
14,642

 
709

 
—

 
—

 
14,642

 
709


Temporarily Impaired Securities as of June 30, 2013
(In thousands)
 
 
Number of Securities
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Investment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal and other tax-exempt
 
149

 
$
271,897

 
$
5,816

 
$
—

 
$
—

 
$
271,897

 
$
5,816

U.S. Agency residential mortgage-backed securities – Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other debt securities
 
14

 
841

 
60

 
—

 
—

 
841

 
60

Total investment
 
163

 
$
272,738

 
$
5,876

 
$
—

 
$
—

 
$
272,738

 
$
5,876


 
 
Number of Securities
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
 
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Available for sale:
 
 

 
 

 
 

 
 

 
 

 


 


U.S. Treasury
 
1

 
$
1,060

 
$
1

 
$
—

 
$
—

 
$
1,060

 
$
1

Municipal and other tax-exempt1
 
86

 
$
66,168

 
$
2,524

 
$
—

 
$
—

 
$
66,168

 
$
2,524

Residential mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

 


 


U. S. agencies:
 
 

 
 

 
 

 
 

 
 

 


 


FNMA
 
72

 
2,196,603

 
39,481

 
—

 
—

 
2,196,603

 
39,481

FHLMC
 
38

 
1,202,545

 
12,604

 
—

 
—

 
1,202,545

 
12,604

GNMA
 
13

 
197,149

 
2,728

 
—

 
—

 
197,149

 
2,728

Total U.S. agencies
 
123

 
3,596,297

 
54,813

 
—

 
—

 
3,596,297

 
54,813

Private issue1:
 
 

 
 

 
 

 
 

 
 

 


 


Alt-A loans
 
10

 
51,681

 
1,236

 
3,379

 
437

 
55,060

 
1,673

Jumbo-A loans
 
2

 
17,615

 
296

 
12,298

 
275

 
29,913

 
571

Total private issue
 
12

 
69,296

 
1,532

 
15,677

 
712

 
84,973

 
2,244

Total residential mortgage-backed securities
 
135

 
3,665,593

 
56,345

 
15,677

 
712

 
3,681,270

 
57,057

Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
113

 
1,730,306

 
38,985

 
—

 
—

 
1,730,306

 
38,985

Other debt securities
 
4

 
5,193

 
207

 
—

 
—

 
5,193

 
207

Perpetual preferred stocks
 
1

 
4,973

 
28

 
—

 
—

 
4,973

 
28

Equity securities and mutual funds
 
7

 
3,558

 
205

 
—

 
—

 
3,558

 
205

Total available for sale
 
347

 
$
5,476,851

 
$
98,295

 
$
15,677

 
$
712

 
$
5,492,528

 
$
99,007

1 
Includes the following securities for which an unrealized loss remains in AOCI after an other-than-temporary credit loss has been recognized in income:
Municipal and other tax-exempt
 
21

 
$
11,731

 
$
654

 
$
—

 
$
—

 
$
11,731

 
$
654

Alt-A loans
 
10

 
51,681

 
1,236

 
3,379

 
437

 
55,060

 
1,673

Jumbo-A loans
 
2

 
17,615

 
296

 
—

 
—

 
17,615

 
296



On a quarterly basis, the Company performs separate evaluations of impaired debt and equity investments and available for sale securities to determine if the unrealized losses are temporary.
 
For debt securities, management determines whether it intends to sell or if it is more-likely-than-not that it will be required to sell impaired securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements and securities portfolio management. Based on this evaluation as of June 30, 2014, the Company does not intend to sell any impaired available for sale securities before fair value recovers to the current amortized cost and it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be maturity.

Impairment of debt securities rated investment grade by all nationally-recognized rating agencies is considered temporary unless specific contrary information is identified. None of the debt securities rated investment grade were considered to be other-than-temporarily impaired at June 30, 2014.
At June 30, 2014, the composition of the Company’s investment and available for sale securities portfolios by the lowest current credit rating assigned by any of the three nationally-recognized rating agencies is as follows (in thousands):
 
 
 
U.S. Govt / GSE 1
 

AAA - AA
 
 
A - BBB
 
 
Below Investment Grade
 
 
Not Rated
 
 
Total
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Investment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal and other tax-exempt
 
$
—

 
$
—

 
$
271,498

 
$
272,244

 
$
16,497

 
$
16,721

 
$
—

 
$
—

 
$
137,226

 
$
140,086

 
$
425,221

 
$
429,051

Mortgage-backed securities -- other
 
41,973

 
44,176

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
41,973

 
44,176

Other debt securities
 
—

 
—

 
160,353

 
175,071

 
—

 
—

 
—

 
—

 
22,390

 
22,513

 
182,743

 
197,584

Total investment securities
 
$
41,973

 
$
44,176

 
$
431,851

 
$
447,315

 
$
16,497

 
$
16,721

 
$
—

 
$
—

 
$
159,616

 
$
162,599

 
$
649,937

 
$
670,811

 
 
U.S. Govt / GSE 1
 
AAA - AA
 
 
A - BBB
 
Below Investment Grade
 
Not Rated
 
Total
 
 
Amortized Cost
 
Fair
Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair
Value
Available for Sale:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury
 
$
1,023

 
$
1,024

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,023

 
$
1,024

Municipal and other tax-exempt
 
—

 
—

 
40,967

 
42,360

 
11,505

 
11,225

 
—

 
—

 
11,459

 
11,385

 
63,931

 
64,970

Residential mortgage-backed securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 


 


U. S. government agencies:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 


 


FNMA
 
4,297,579

 
4,364,168

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
4,297,579

 
4,364,168

FHLMC
 
2,055,924

 
2,068,940

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2,055,924

 
2,068,940

GNMA
 
815,201

 
820,454

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
815,201

 
820,454

Other
 
5,489

 
5,942

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
5,489

 
5,942

Total U.S. government agencies
 
7,174,193

 
7,259,504

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
7,174,193

 
7,259,504

Private issue:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 


 


Alt-A loans
 
—

 
—

 
—

 
—

 
—

 
—

 
70,880

 
75,700

 
—

 
—

 
70,880

 
75,700

Jumbo-A loans
 
—

 
—

 
—

 
—

 
—

 
—

 
97,939

 
103,342

 
—

 
—

 
97,939

 
103,342

Total private issue
 
—

 
—

 
—

 
—

 
—

 
—

 
168,819

 
179,042

 
—

 
—

 
168,819

 
179,042

Total residential mortgage-backed securities
 
7,174,193

 
7,259,504

 
—

 
—

 
—

 
—

 
168,819

 
179,042

 
—

 
—

 
7,343,012

 
7,438,546

Commercial mortgage-backed securities guaranteed by U.S. government agencies
 
2,129,521

 
2,115,295

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2,129,521

 
2,115,295

Other debt securities
 
—

 
—

 
4,400

 
4,231

 
30,101

 
30,297

 
—

 
—

 
—

 
—

 
34,501

 
34,528

Perpetual preferred stock
 
—

 
—

 
—

 
—

 
11,406

 
12,588

 
10,765

 
12,142

 
—

 
—

 
22,171

 
24,730

Equity securities and mutual funds
 
—

 
—

 
4

 
505

 
—

 
—

 
—

 
—

 
19,503

 
19,548

 
19,507

 
20,053

Total available for sale securities
 
$
9,304,737

 
$
9,375,823

 
$
45,371

 
$
47,096

 
$
53,012

 
$
54,110

 
$
179,584

 
$
191,184

 
$
30,962

 
$
30,933

 
$
9,613,666

 
$
9,699,146

1 
U.S. government and government sponsored enterprises are not rated by the nationally-recognized rating agencies as these securities are guaranteed by agencies of the U.S. government or government-sponsored enterprises.
At June 30, 2014, the entire portfolio of privately issued residential mortgage-backed securities was rated below investment grade. The gross unrealized loss on these securities totaled $486 thousand. Ratings by the nationally-recognized rating agencies are subjective in nature and accordingly ratings can vary significantly amongst the agencies. Limitations generally expressed by the rating agencies include statements that ratings do not predict the specific percentage default likelihood over any given period of time and that ratings do not opine on expected loss severity of an obligation should the issuer default. As such, the impairment of securities rated below investment grade was evaluated to determine if we expect not to recover the entire amortized cost basis of the security. This evaluation was based on projections of estimated cash flows based on individual loans underlying each security using current and anticipated increases in unemployment and default rates, decreases in housing prices and estimated liquidation costs at foreclosure.

The primary assumptions used in this evaluation were:

 
June 30,
2014
 
December 31,
2013
 
June 30,
2013
 
 
 
 
 
 
Unemployment rate
Held constant at 6.7% over the next 12 months and remains at 6.7% thereafter.
 
Increasing to 7.3% over the next 12 months and remain at 7.3% thereafter.
 
Increasing to 8% over the next 12 months and remain at 8% thereafter.
Housing price appreciation/depreciation
Starting with current depreciated housing prices based on information derived from the FHFA1, appreciating 4% over the next 12 months, then flat for the following 12 months and then appreciating at 2% per year thereafter.
 
Starting with current depreciated housing prices based on information derived from the FHFA1, appreciating 4% over the next 12 months, then flat for the following 12 months and then appreciating at 2% per year thereafter.
 
Starting with current depreciated housing prices based on information derived from the FHFA1, appreciating 5% over the next 12 months, then flat for he following 12 months and then appreciating at 2% per year thereafter.
Estimated liquidation costs
Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.
 
Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.
 
Reflect actual historical liquidations costs observed on Jumbo and Alt-A residential mortgage loans in securities owned by the Company.
Discount rates
Estimated cash flows were discounted at rates that range from 2.00% to 6.25% based on our current expected yields.
 
Estimated cash flows were discounted at rates that range from 2.00% to 6.25% based on our current expected yields.
 
Estimated cash flows were discounted at rates that range from 2.00% to 6.25% based on our current expected yields.

1 
Federal Housing Finance Agency

We also consider the current loan-to-value ratio and remaining credit enhancement as part of the assessment of the cash flows available to recover the amortized cost of the debt securities. Each factor is considered in the evaluation.

The Company calculates the current loan-to-value ratio for each mortgage-backed security using loan-level data. The current loan-to-value ratio is the current outstanding loan amount divided by an estimate of the current home value. The current home value is derived from FHFA data. FHFA provides historical information on home price depreciation at both the Metropolitan Statistical Area and state level.  This information is matched to each loan to estimate the home price depreciation. Data is accumulated from the loan level to determine the current loan-to-value ratio for the security as a whole.

Remaining credit enhancement is the amount of credit enhancement available to absorb current projected losses within the pool of loans that support the security. The Company acquires the benefit of credit enhancement by investing in senior or super-senior tranches for many of our residential mortgage-backed securities. Subordinated tranches held by other investors are specifically designed to absorb losses before the senior or super-senior tranches, which effectively increases the typical credit support for these types of bonds. Current projected losses consider depreciation of home prices based on FHFA data, estimated costs and additional losses to liquidate collateral and delinquency status of the individual loans underlying the security.

Credit loss impairment is recorded as a charge to earnings. Additional impairment based on the difference between the total unrealized loss and the estimated credit loss on these securities is charged against other comprehensive income, net of deferred taxes. No credit loss impairments were recognized in earnings on privately issued residential mortgage-backed securities during the three months ended June 30, 2014.

A distribution of the amortized cost (after recognition of the other-than-temporary impairment), fair value and credit loss impairments recognized on our privately issued residential mortgage-backed securities is as follows (in thousands, except for number of securities):
 
 
 
 
 
 
 
 
Credit Losses Recognized
 
 
 
 
 
 
 
 
Three months ended
 
 
 
 
 
 
 
 
 
 
June 30, 2014
 
Life-to-date
 
 
Number of Securities
 
Amortized Cost
 
Fair Value
 
Number of
Securities
 
Amount
 
Number of Securities
 
Amount
Alt-A
 
14

 
$
70,880

 
$
75,700

 
—

 
$
—

 
14

 
$
36,127

Jumbo-A
 
30

 
97,939

 
103,342

 
—

 
—

 
29

 
18,220

Total
 
44

 
$
168,819

 
$
179,042

 
—

 
$
—

 
43

 
$
54,347



Impaired equity securities, including perpetual preferred stocks, are evaluated based on management's ability and intent to hold the securities until fair value recovers over periods not to exceed three years. The assessment of the ability and intent to hold these securities focuses on the liquidity needs, asset/liability management objectives and securities portfolio objectives. Factors considered when assessing recovery include forecasts of general economic conditions and specific performance of the issuer, analyst ratings and credit spreads for preferred stocks which have debt-like characteristics. The Company has evaluated the near-term prospects of the investments in relation to the severity and duration of the impairment and based on that evaluation has the ability and intent to hold these investments until a recovery in fair value. Accordingly, all impairment of equity securities was considered temporary at June 30, 2014.

The following is a tabular roll forward of the amount of credit-related OTTI recognized on available for sale debt securities in earnings (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2014
 
2013
 
2014
 
2013
Balance of credit-related OTTI recognized on available for sale debt, beginning of period
 
$
54,347

 
$
75,475

 
$
67,346

 
$
75,228

Additions for credit-related OTTI not previously recognized
 
—

 
552

 
—

 
552

Additions for increases in credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost
 
—

 
—

 
—

 
247

Reductions for change in intent to hold before recovery
 
—

 
—

 
—

 
—

Sales
 
—

 
—

 
(12,999
)
 
—

Balance of credit-related OTTI recognized on available for sale debt securities, end of period
 
$
54,347

 
$
76,027

 
$
54,347

 
$
76,027



Additions above exclude other-than-temporary impairment recorded due to change in intent to hold before recovery.
Fair Value Option Securities
 
Fair value option securities represent securities which the Company has elected to carry at fair value and are separately identified on the Consolidated Balance Sheets. Changes in the fair value are recognized in earnings as they occur. Certain residential mortgage-backed securities issued by U.S. government agencies and derivative contracts are held as an economic hedge of the mortgage servicing rights. In addition, certain corporate debt securities are economically hedged by derivative contracts to manage interest rate risk. Derivative contracts that have not been designated as hedging instruments effectively modify these fixed rate securities into variable rate securities.

The fair value and net unrealized gain (loss) included in fair value option securities is as follows (in thousands):
 
 
June 30, 2014
 
December 31, 2013
 
June 30, 2013
 
 
Fair Value
 
Net Unrealized Gain (Loss)
 
Fair Value
 
Net Unrealized Gain (Loss)
 
Fair
Value
 
Net Unrealized Gain (Loss)
U.S. agency residential mortgage-backed securities
 
$
181,205

 
$
(1,720
)
 
$
157,431

 
$
(8,378
)
 
$
203,816

 
$
(8,048
)
Other securities
 
4,469

 
387

 
9,694

 
209

 
1,940

 
(8
)
Total
 
$
185,674

 
$
(1,333
)
 
$
167,125

 
$
(8,169
)
 
$
205,756

 
$
(8,056
)



Restricted Equity Securities

Restricted equity securities include stock we are required to hold as members of the Federal Reserve system and the Federal Home Loan Banks ("FHLB"). Restricted equity securities are carried at cost as these securities do not have a readily determined fair value because ownership of these shares are restricted and lacks a market. A summary of restricted equity securities follows (in thousands):

 
June 30, 2014
 
December 31, 2013
 
June 30, 2013
Federal Reserve stock
$
33,971

 
$
33,742

 
$
33,695

Federal Home Loan Bank stock
57,242

 
51,498

 
124,152

Total
$
91,213

 
$
85,240

 
$
157,847