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INVESTMENT SECURITIES | 9 Months Ended
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Sep. 30, 2014
INVESTMENT SECURITIES |
INVESTMENT SECURITIES | NOTE 6 — INVESTMENT SECURITIES The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and fair value by major categories of available-for-sale securities:
|  |  |  | Gross |  | Gross |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair |
|  | Cost |  | Gains |  | Losses |  | Value |
|  |  |  | (In thousands) |  |  |
As of September 30, 2014 |  |  |  |  |  |  |  |  |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 605,672 |  | $ | 328 |  | $ | (2,353 | ) | $ | 603,647 |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 416,746 |  | 522 |  | (4,287 | ) | 412,981 |
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 125,933 |  | 1,188 |  | (1,554 | ) | 125,567 |
Residential mortgage-backed securities |  | 757,637 |  | 8,003 |  | (8,058 | ) | 757,582 |
Municipal securities |  | 293,148 |  | 5,984 |  | (2,535 | ) | 296,597 |
Other residential mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade (1) |  | 54,949 |  | 665 |  | (356 | ) | 55,258 |
Other commercial mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade (1) |  | 51,000 |  | 127 |  | — |  | 51,127 |
Corporate debt securities: |  |  |  |  |  |  |  |  |
Investment grade (1) |  | 211,143 |  | 1,127 |  | (1,445 | ) | 210,825 |
Non-investment grade (1) |  | 19,937 |  | 802 |  | (2,963 | ) | 17,776 |
Other securities |  | 60,658 |  | 1,184 |  | (535 | ) | 61,307 |
Total investment securities available-for-sale |  | $ | 2,596,823 |  | $ | 19,930 |  | $ | (24,086 | ) | $ | 2,592,667 |
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 (1) |  | 48,129 |  | — |  | (1,802 | ) | 46,327 |
Other commercial mortgage-backed securities: |  |  |  |  |  |  |  |  |
Investment grade (1) |  | 51,000 |  | 617 |  | — |  | 51,617 |
Corporate debt securities: |  |  |  |  |  |  |  |  |
Investment grade (1) |  | 312,726 |  | 613 |  | (3,344 | ) | 309,995 |
Non-investment grade (1) |  | 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 |
(1) Investment securities rated BBB- or higher by S&P or Baa3 or higher by Moody’s are considered investment grade. Conversely, investment securities rated lower than BBB- by S&P or lower than Baa3 by Moody’s are considered non-investment grade. Declines in the fair value of securities below their cost that are deemed to be other than temporary impairment (OTTI) are recognized in earnings to the extent the impairment is related to credit losses. The amount of impairment related to factors other than credit losses are reflected in other comprehensive income. As of September 30, 2014, cumulative OTTI credit losses of $115.5 million, primarily related to the pooled trust preferred securities, had been recorded in the fiscal years 2012 and prior. There were no OTTI losses recorded for the three and nine months ended September 30, 2014 and 2013. Management does not have the intent to sell and it is more likely than not that the Company will not be required to sell the securities presented in the table above before recovery of the remaining amortized cost. The following table presents sales of investment securities for the three and nine months ended September 30, 2014 and 2013:
|  | Three Months Ended |  | Nine Months Ended |
|  | September 30, |  | September 30, |
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |
|  |  |  | (In thousands) |  |  |
Proceeds from sales |  | $ | 43,788 |  | $ | 60,387 |  | $ | 395,630 |  | $ | 386,108 |
Gross realized gains |  | 2,514 |  | 1,084 |  | 6,730 |  | 12,006 |
Gross realized losses |  | — |  | — |  | 127 | (1) | — |
Related tax expense |  | $ | 1,056 |  | $ | 455 |  | $ | 2,773 |  | $ | 5,043 |
(1) The gross $127 thousand of losses resulted from the investment securities acquired from MetroCorp which were sold immediately after the acquisition closed. 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 September 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 September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 130,631 |  | $ | (276 | ) | $ | 183,673 |  | $ | (2,077 | ) | $ | 314,304 |  | $ | (2,353 | )
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 108,393 |  | (1,281 | ) | 172,113 |  | (3,006 | ) | 280,506 |  | (4,287 | )
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 52,082 |  | (655 | ) | 28,859 |  | (899 | ) | 80,941 |  | (1,554 | )
Residential mortgage-backed securities |  | 107,182 |  | (616 | ) | 326,003 |  | (7,442 | ) | 433,185 |  | (8,058 | )
Municipal securities |  | 5,260 |  | (14 | ) | 108,407 |  | (2,521 | ) | 113,667 |  | (2,535 | )
Other residential mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | — |  | — |  | 14,054 |  | (356 | ) | 14,054 |  | (356 | )
Corporate debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment grade |  | — |  | — |  | 109,695 |  | (1,445 | ) | 109,695 |  | (1,445 | )
Non-investment grade |  | — |  | — |  | 15,180 |  | (2,963 | ) | 15,180 |  | (2,963 | )
Other securities |  | 16,065 |  | (535 | ) | — |  | — |  | 16,065 |  | (535 | )
Total investment securities available-for-sale |  | $ | 419,613 |  | $ | (3,377 | ) | $ | 957,984 |  | $ | (20,709 | ) | $ | 1,377,597 |  | $ | (24,086 | )
|  | 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 At each reporting date, the Company examines all individual securities that are in an unrealized loss position for other-than-temporary impairment. Specific investment related factors, such as the nature of the investments, the severity and duration of the loss, the probability of collecting all amounts due, the analysis of the issuers of the securities and whether there has been any cause for default on the securities and any change in the rating of the securities by various rating agencies, are examined to assess impairment. Additionally, the Company evaluates whether the creditworthiness of the issuer calls the realization of contractual cash flows into question. The Company takes into consideration the financial resources, intent and its overall ability to hold the securities and not be required to sell them until their fair values recover. The majority of the total unrealized losses related to securities are related to residential agency mortgage-backed securities, government sponsored debt securities and non-investment grade corporate debt securities. As of September 30, 2014, residential agency mortgage-backed securities, government sponsored debt securities and non-investment grade corporate debt securities represented 29%, 16% and 1%, respectively, of the total investment securities available-for-sale portfolio. As of December 31, 2013, residential agency mortgage-backed securities, government sponsored debt securities, and non-investment grade corporate debt securities represented approximately 32%, 14% and 1%, respectively, of the total investment securities available-for-sale portfolio. 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. Management does not have the intent to sell any of the securities presented in the table above and believes that it is more likely than not that the Company will not have to sell any of such securities before a recovery of the amortized cost. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, management believes the impairments detailed in the table above are temporary and no impairment loss has been recorded in the Company’s consolidated statements of income for the three or nine months ended September 30, 2014 or the twelve months ended December 31, 2013. For complete descriptions of the factors the Company considers when analyzing securities for impairment, see Note 1 (Summary of Operations and Significant Accounting Policies) and Note 5 (Investment Securities) to the consolidated financial statements in the Company’s 2013 Annual Report. Investment Securities Maturities The following table presents the scheduled maturities of investment securities as of September 30, 2014:
|  | Amortized |  | Estimated |
|  | Cost |  | Fair Value |
|  | (In thousands) |
Due within one year |  | $ | 393,006 |  | $ | 387,737 |
Due after one year through five years |  | 744,848 |  | 745,916 |
Due after five years through ten years |  | 519,814 |  | 521,439 |
Due after ten years |  | 939,155 |  | 937,575 |
Total investment securities available-for-sale |  | $ | 2,596,823 |  | $ | 2,592,667 |
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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