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INVESTMENT SECURITIES | 6 Months Ended
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Jun. 30, 2014
INVESTMENT SECURITIES |
INVESTMENT SECURITIES | NOTE 6 — INVESTMENT SECURITIES The following tables present the amortized cost and fair value by major categories of available-for-sale securities:
|  |  |  | Gross |  | Gross |  | Estimated |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair |
|  | Cost |  | Gains |  | Losses |  | Value |
|  | (In thousands) |
As of June 30, 2014 |  |  |  |  |  |  |  |  |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 450,149 |  | $ | 791 |  | $ | (1,628 | ) | $ | 449,312 |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 441,747 |  | 938 |  | (4,086 | ) | 438,599 |
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 112,607 |  | 513 |  | (1,363 | ) | 111,757 |
Residential mortgage-backed securities |  | 798,915 |  | 8,108 |  | (9,057 | ) | 797,966 |
Municipal securities |  | 289,200 |  | 4,926 |  | (4,647 | ) | 289,479 |
Other residential mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade |  | 57,065 |  | 557 |  | (416 | ) | 57,206 |
Other commercial mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade |  | 51,000 |  | 463 |  | — |  | 51,463 |
Corporate debt securities: |  |  |  |  |  |  |  |  |
Investment grade |  | 211,144 |  | 1,172 |  | (1,446 | ) | 210,870 |
Non-investment grade |  | 19,953 |  | 131 |  | (3,505 | ) | 16,579 |
Other securities |  | 102,383 |  | 4,542 |  | (504 | ) | 106,421 |
Total investment securities available-for-sale |  | $ | 2,534,163 |  | $ | 22,141 |  | $ | (26,652 | ) | $ | 2,529,652 |
As of December 31, 2013 |  |  |  |  |  |  |  |  |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 495,053 |  | $ | 201 |  | $ | (3,622 | ) | $ | 491,632 |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 406,807 |  | 242 |  | (12,726 | ) | 394,323 |
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 182,257 |  | 1,062 |  | (4,449 | ) | 178,870 |
Residential mortgage-backed securities |  | 892,435 |  | 7,729 |  | (14,927 | ) | 885,237 |
Municipal securities |  | 297,390 |  | 1,122 |  | (17,533 | ) | 280,979 |
Other residential mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade |  | 48,129 |  | — |  | (1,802 | ) | 46,327 |
Other commercial mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade |  | 51,000 |  | 617 |  | — |  | 51,617 |
Corporate debt securities: |  |  |  |  |  |  |  |  |
Investment grade |  | 312,726 |  | 613 |  | (3,344 | ) | 309,995 |
Non-investment grade |  | 20,668 |  | 62 |  | (5,629 | ) | 15,101 |
Other securities |  | 80,025 |  | 555 |  | (864 | ) | 79,716 |
Total investment securities available-for-sale |  | $ | 2,786,490 |  | $ | 12,203 |  | $ | (64,896 | ) | $ | 2,733,797 |
The Company did not have any investment securities held-to-maturity as of June 30, 2014 and December 31, 2013. The fair values of the investment securities are generally determined by independent external pricing service providers who have experience in valuing these securities and by comparison to and/or average of quoted market prices obtained from independent external brokers. The Company performs a monthly analysis on the pricing service quotes and the broker quotes received from third parties to ensure that the prices represent a reasonable estimate of fair value. The procedures include, but are not limited to, initial and ongoing review of third party pricing methodologies, review of pricing trends and monitoring of trading volumes. The Company assesses whether the prices received from independent brokers represent a reasonable estimate of fair value through the use of observable market inputs including comparable trades, the yield curve, spreads and, when available, market indices. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon available market data, the price received from third parties is adjusted accordingly. Prices from third party pricing services are often unavailable for securities that are rarely traded or are traded only in privately negotiated transactions. As a result, certain securities are priced via independent broker quotations that utilize inputs that may be difficult to corroborate with observable market based data. Additionally, the majority of these independent broker quotations are non-binding. There were no OTTI credit losses for the three and six months ended June 30, 2014 and 2013. The OTTI credit losses mainly relate to the pooled trust preferred securities recorded in prior periods. The following table shows the Company’s rollforward of the amount related to OTTI credit losses for the periods ended:
|  | Three Months Ended |  | Six Months Ended |
|  | June 30, |  | June 30, |
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |
|  | (In thousands) |
Beginning balance |  | $ | 115,511 |  | $ | 115,511 |  | $ | 115,511 |  | $ | 115,511 |
Addition of other-than-temporary impairment that was not previously recognized |  | — |  | — |  | — |  | — |
Additional increases to the amount related to the credit loss for which an other-than-temporary impairment was previously recognized |  | — |  | — |  | — |  | — |
Reduction for securities sold |  | — |  | — |  | — |  | — |
Ending balance |  | $ | 115,511 |  | $ | 115,511 |  | $ | 115,511 |  | $ | 115,511 |
The Company recorded $671 thousand and $5.3 million of gross gains from the sales of investment securities during the three months ended June 30, 2014 and 2013, respectively. The tax expense on the sale of investment securities available-for-sale amounted to $282 thousand and $2.2 million for the three months ended June 30, 2014 and 2013, respectively. Total net proceeds for these sales were $21.6 million and $128.9 million for the three months ended June 30, 2014 and 2013, respectively. During the six months ended June 30, 2014, the Company recorded $4.2 million of gross gains and $127 thousand of gross losses resulting in a net income statement impact of $4.1 million of gains on sales of investment securities. The gross $127 thousand of losses resulted from the investment securities acquired from MetroCorp which were sold immediately after the acquisition closed. In comparison, the Company recorded $10.9 million of gross gains and no gross losses on sales of investment securities during the six months ended June 30, 2013. The tax expense on the sales of investment securities available-for-sale amounted to $1.7 million and $4.6 million for the six months ended June 30, 2014 and 2013, respectively. Total net proceeds for these sales were $351.8 million and $325.7 million for the six months ended June 30, 2014 and 2013, respectively. The following tables present the Company’s investment portfolio’s gross unrealized losses and related fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2014 and December 31, 2013:
|  | Less Than 12 Months |  | 12 Months or More |  | Total |
|  | Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized |
|  | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses |
|  | (In thousands) |
As of June 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 30,630 |  | $ | (40 | ) | $ | 184,740 |  | $ | (1,588 | ) | $ | 215,370 |  | $ | (1,628 | )
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 33,829 |  | (882 | ) | 171,913 |  | (3,204 | ) | 205,742 |  | (4,086 | )
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 23,683 |  | (513 | ) | 43,550 |  | (850 | ) | 67,233 |  | (1,363 | )
Residential mortgage-backed securities |  | 205,095 |  | (1,992 | ) | 306,292 |  | (7,065 | ) | 511,387 |  | (9,057 | )
Municipal securities |  | 3,949 |  | (15 | ) | 138,062 |  | (4,632 | ) | 142,011 |  | (4,647 | )
Other residential mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | — |  | — |  | 14,485 |  | (416 | ) | 14,485 |  | (416 | )
Corporate debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 19,943 |  | (57 | ) | 89,752 |  | (1,389 | ) | 109,695 |  | (1,446 | )
Non-investment grade |  | — |  | — |  | 14,660 |  | (3,505 | ) | 14,660 |  | (3,505 | )
Other securities |  | 16,160 |  | (440 | ) | 2,904 |  | (64 | ) | 19,064 |  | (504 | )
Total investment securities available-for-sale |  | $ | 333,289 |  | $ | (3,939 | ) | $ | 966,358 |  | $ | (22,713 | ) | $ | 1,299,647 |  | $ | (26,652 | )
|  | Less Than 12 Months |  | 12 Months or More |  | Total |
|  | Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized |
|  | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses |
|  | (In thousands) |
As of December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 337,248 |  | $ | (3,622 | ) | $ | — |  | $ | — |  | $ | 337,248 |  | $ | (3,622 | )
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 387,097 |  | (12,726 | ) | — |  | — |  | 387,097 |  | (12,726 | )
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 114,754 |  | (3,280 | ) | 16,065 |  | (1,169 | ) | 130,819 |  | (4,449 | )
Residential mortgage-backed securities |  | 502,285 |  | (10,570 | ) | 92,540 |  | (4,357 | ) | 594,825 |  | (14,927 | )
Municipal securities |  | 173,782 |  | (10,765 | ) | 47,892 |  | (6,768 | ) | 221,674 |  | (17,533 | )
Other residential mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 46,328 |  | (1,802 | ) | — |  | — |  | 46,328 |  | (1,802 | )
Corporate debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | 193,482 |  | (1,538 | ) | 79,442 |  | (1,806 | ) | 272,924 |  | (3,344 | )
Non-investment grade |  | — |  | — |  | 14,422 |  | (5,629 | ) | 14,422 |  | (5,629 | )
Other securities |  | 48,098 |  | (864 | ) | — |  | — |  | 48,098 |  | (864 | )
Total investment securities available-for-sale |  | $ | 1,803,074 |  | $ | (45,167 | ) | $ | 250,361 |  | $ | (19,729 | ) | $ | 2,053,435 |  | $ | (64,896 | )
Unrealized Losses The majority of the total unrealized losses related to securities are related to residential agency mortgage-backed securities, municipal securities and government sponsored debt securities. As of June 30, 2014, residential agency mortgage-backed securities, municipal securities and government sponsored debt securities represented 32%, 11% and 17% of the total investment securities available-for-sale portfolio, respectively. As of December 31, 2013, residential agency mortgage-backed securities, municipal securities, and government sponsored debt securities represented approximately 32%, 10% and 14% of the total investment securities available-for-sale portfolio, respectively. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their current amortized cost basis. As such, the Company does not deem any of the securities as of June 30, 2014 and December 31, 2013 to be other-than-temporarily impaired. As of June 30, 2014, there were 37 securities that have been in a continuous unrealized loss position for less than twelve months. The securities in an unrealized loss position for less than twelve months include 22 residential agency mortgage-backed securities, 3 U.S. Treasury securities, 5 commercial agency mortgage-backed securities, 2 municipal securities, 2 government sponsored debt securities, 1 investment grade corporate debt securities and 2 other securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. As of June 30, 2014, there were 168 securities, not including the 37 securities above, that have been in a continuous unrealized loss position for twelve months or more. These securities are comprised of 79 municipal securities with a total fair value of $138.1 million, 44 residential agency mortgage-backed securities with a fair value of $306.3 million, 5 government sponsored debt securities with a fair value of $171.9 million, 2 other residential mortgage-backed securities with a total fair value of $14.5 million, 6 investment grade corporate debt securities with a fair value of $89.8 million, 4 non-investment grade corporate debt securities with a fair value of $14.7 million, 9 commercial agency mortgage-backed securities with a fair value of $43.6 million, 18 U.S. Treasury securities with a fair value of $184.7 million, and 1 other security with a fair value of $2.9 million. The unrealized losses on these securities are primarily attributed to yield curve movement, together with the widened liquidity spread and credit spread. The issuers of these securities have not, to our knowledge, established any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. As of December 31, 2013, there were 65 securities which have been in a continuous unrealized loss position for twelve months or more. These securities are comprised of 32 municipal securities with a total fair value of $47.9 million, 21 residential agency mortgage-backed securities with a total fair value of $92.5 million, 5 trust preferred securities with a total fair value of $14.4 million, 4 investment grade corporate debt securities with a total fair value of $79.4 million and 3 commercial agency mortgage-backed securities with a total fair value of $16.1 million. As of December 31, 2013, there were also 239 securities, not including the 65 securities above, which have been in a continuous unrealized loss position for less than twelve months. The securities in an unrealized loss position for less than twelve months include 94 municipal securities, 55 residential agency mortgage-backed securities, 33 U.S. Treasury securities, 19 commercial agency mortgage-backed securities, 16 government sponsored debt securities, 8 investment grade corporate debt securities, 5 other residential mortgage-backed securities and 9 other securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. Investment Securities Maturities The scheduled maturities of investment securities at June 30, 2014 are presented as follows:
|  | Amortized |  | Estimated |
|  | Cost |  | Fair Value |
|  | (In thousands) |
Due within one year |  | $ | 457,710 |  | $ | 451,738 |
Due after one year through five years |  | 557,768 |  | 558,346 |
Due after five years through ten years |  | 549,307 |  | 553,528 |
Due after ten years |  | 969,378 |  | 966,040 |
Total investment securities available-for-sale |  | $ | 2,534,163 |  | $ | 2,529,652 |
Actual maturities of mortgage-backed securities can differ from contractual maturities because borrowers have the right to prepay obligations. In addition, such factors as prepayments and interest rates may affect the yields on the carrying values of mortgage-backed securities.

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