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Investment Securities | 9 Months Ended
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Sep. 30, 2011
Investment Securities |
Investment Securities |
Note 6 - Investment Securities The Company classifies debt and equity securities into one of three categories: held-to maturity, available-for-sale, or trading. Such securities are reassessed for appropriate classification at each reporting date. Securities classified as “held-to-maturity” are carried at amortized cost for financial statement reporting, while securities classified as “available-for-sale” and “trading” are carried at their fair value. Unrealized holding gains and losses are included in net income for those securities classified as “trading”, while unrealized holding gains and losses related to those securities classified as “available-for-sale” are excluded from net income and reported net of tax as other comprehensive income (loss) and accumulated other comprehensive income (loss) until realized, or in the case of losses, when deemed other than temporary. The amortized cost and estimated fair value by type of investment security at September 30, 2011 are as follows:
|  | Held to Maturity |
|  | Amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Estimated fair value |  | Carrying value |
|  | (Dollars in Thousands) |
Other securities |  | $ | 2,575 |  | — |  | — |  | $ | 2,575 |  | $ | 2,575 |
Total investment securities |  | $ | 2,575 |  | — |  | — |  | $ | 2,575 |  | $ | 2,575 |
|  | Available for Sale |
|  | Amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Estimated fair value |  | Carrying value (1) |
|  | (Dollars in Thousands) |
Residential mortgage-backed securities |  | $ | 4,616,720 |  | $ | 144,020 |  | $ | (11,159 | ) | $ | 4,749,581 |  | $ | 4,749,581 |
Obligations of states and political subdivisions |  | 210,178 |  | 15,257 |  | (920 | ) | 224,515 |  | 224,515 |
Equity securities |  | 13,825 |  | 1,031 |  | (39 | ) | 14,817 |  | 14,817 |
Total investment securities |  | $ | 4,840,723 |  | $ | 160,308 |  | $ | (12,118 | ) | $ | 4,988,913 |  | $ | 4,988,913 |
(1) Included in the carrying value of residential mortgage-backed securities are $2,958,000 of mortgage-backed securities issued by Ginnie Mae, $1,751,104 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $40,477 issued by non-government entities The amortized cost and estimated fair value by type of investment security at December 31, 2010 are as follows:
|  | Held to Maturity |
|  | Amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Estimated fair value |  | Carrying value |
|  | (Dollars in Thousands) |
Other securities |  | $ | 2,450 |  | $ | — |  | $ | — |  | $ | 2,450 |  | $ | 2,450 |
Total investment securities |  | $ | 2,450 |  | $ | — |  | $ | — |  | $ | 2,450 |  | $ | 2,450 |
|  | Available for Sale |
|  | Amortized cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Estimated fair value |  | Carrying value (1) |
|  | (Dollars in Thousands) |
U.S. Treasury securities |  | $ | 1,327 |  | $ | — |  | $ | — |  | $ | 1,327 |  | $ | 1,327 |
Residential mortgage-backed securities |  | 4,876,573 |  | 77,741 |  | (29,846 | ) | 4,924,468 |  | 4,924,468 |
Obligations of states and political subdivisions |  | 150,122 |  | 636 |  | (4,761 | ) | 145,997 |  | 145,997 |
Equity securities |  | 13,825 |  | 864 |  | (24 | ) | 14,665 |  | 14,665 |
Total investment securities |  | $ | 5,041,847 |  | $ | 79,241 |  | $ | (34,631 | ) | $ | 5,086,457 |  | $ | 5,086,457 |
(1) Included in the carrying value of residential mortgage-backed securities are $2,326,378 of mortgage-backed securities issued by Ginnie Mae, $2,552,062 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $46,028 issued by non-government entities The amortized cost and estimated fair value of investment securities at September 30, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.
|  | Held to Maturity |  | Available for Sale |
|  | Amortized Cost |  | Estimated fair value |  | Amortized Cost |  | Estimated fair value |
|  | (Dollars in Thousands) |
Due in one year or less |  | $ | 1,250 |  | $ | 1,250 |  | $ | — |  | $ | — |
Due after one year through five years |  | 1,325 |  | 1,325 |  | — |  | — |
Due after five years through ten years |  | — |  | — |  | 4,795 |  | 4,882 |
Due after ten years |  | — |  | — |  | 205,383 |  | 219,633 |
Residential mortgage-backed securities |  | — |  | — |  | 4,616,720 |  | 4,749,581 |
Equity securities |  | — |  | — |  | 13,825 |  | 14,817 |
Total investment securities |  | $ | 2,575 |  | $ | 2,575 |  | $ | 4,840,723 |  | $ | 4,988,913 |
Residential mortgage-backed securities are securities issued by Freddie Mac, Fannie Mae, Ginnie Mae or non-government entities. Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. Government. Investments in mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government, however, the Company believes that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008. The amortized cost and fair value of available for sale investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $2,575,377,000 and $2,672,065,000 at September 30, 2011. Proceeds from the sale of securities available-for-sale were $152,013,000 and $926,869,000 for the three and nine months ended September 30, 2011, which included $150,325,000 and $920,569,000 of mortgage-backed securities. Gross gains of $6,588,000 and $9,481,000 and gross losses of $(1,000) and $(33,000) were realized on the sales for the three and nine months ended September 30, 2011, respectively. Proceeds from the sale of securities available-for-sale were $17,001,000 and $1,068,184,000 for the three and nine months ended September 30, 2010, which included $15,137,000 and $1,057,815,000 of mortgage-backed securities. Gross gains of $14,000 and $30,857,000 and gross losses of $(1,000) and $(7,000) were realized on the sales for the three and nine months ended September 30, 2010, respectively. Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2011, were as follows:
|  | Less than 12 months |  | 12 months or more |  | Total |
|  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |
|  | (Dollars in Thousands) |
Available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities |  | $ | — |  | $ | — |  | $ | 40,477 |  | $ | (11,159 | ) | $ | 40,477 |  | $ | (11,159 | )
Obligations of states and political subdivisions |  | 5,519 |  | (202 | ) | 3,208 |  | (718 | ) | 8,727 |  | (920 | )
Other equity securities |  | — |  | — |  | 37 |  | (39 | ) | 37 |  | (39 | )
|  | $ | 5,519 |  | $ | (202 | ) | $ | 43,722 |  | $ | (11,916 | ) | $ | 49,241 |  | $ | (12,118 | )
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2010 were as follows:
|  | Less than 12 months |  | 12 months or more |  | Total |
|  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |
|  | (Dollars in Thousands) |
Available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities |  | $ | 1,166,720 |  | $ | (19,192 | ) | $ | 46,028 |  | $ | (10,654 | ) | $ | 1,212,748 |  | $ | (29,846 | )
Obligations of states and political subdivisions |  | 97,701 |  | (4,666 | ) | 355 |  | (95 | ) | 98,056 |  | (4,761 | )
Equity securities |  | 4,988 |  | (12 | ) | 63 |  | (12 | ) | 5,051 |  | (24 | )
|  | $ | 1,269,409 |  | $ | (23,870 | ) | $ | 46,446 |  | $ | (10,761 | ) | $ | 1,315,855 |  | $ | (34,631 | )
The unrealized losses on investments in residential mortgage-backed securities are primarily caused by changes in market interest rates. Residential mortgage-backed securities are primarily securities issued by Freddie Mac, Fannie Mae and Ginnie Mae. Investments in mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. Government. Investments in mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government; however, the Company believes the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008. The decrease in fair value on residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae is due to market interest rates. The Company has no intent to sell and will more than likely not be required to sell before a market price recovery or maturity of the securities; therefore, it is the conclusion of the Company that the investments in residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae are not considered other-than-temporarily impaired. In addition, the Company has a small investment in non-agency residential mortgage-backed securities that have strong credit backgrounds and include additional credit enhancements to protect the Company from losses arising from high foreclosure rates. These securities have additional market volatility beyond economically induced interest rate events. It is the conclusion of the Company that the investments in non-agency residential mortgage-backed securities are other-than-temporarily impaired due to both credit and other than credit issues. Impairment charges of $286,000 ($185,900, after tax) and $701,000 ($455,650, after tax) were recorded for the three and nine months ended September 30, 2011. Impairment charges of $531,000 ($345,150, after tax) and $7,992,000 ($5,194,800, after tax) were recorded for the three and nine months ended September 30, 2010. The impairment charge represents the credit related impairment on the securities. The unrealized losses on investments in other securities are caused by fluctuations in market interest rates. The underlying cash obligations of the securities are guaranteed by the entity underwriting the debt instrument. It is the belief of the Company that the entity issuing the debt will honor its interest payment schedule, as well as the full debt at maturity. The securities are purchased by the Company for their economic value. The decrease in fair value is primarily due to market interest rates and not other factors, and because the Company has no intent to sell and will more than likely not be required to sell before a market price recovery or maturity of the securities, it is the conclusion of the Company that the investments are not considered other-than-temporarily impaired. The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the three months ended September 30, 2011 (Dollars in Thousands):
Balance at June 30, 2011 |  | $ | 8,831 |
Impairment charges recognized during period |  | 286 |
Balance at September 30, 2011 |  | $ | 9,117 |
The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the nine months ended September 30, 2011 (Dollars in Thousands):
Balance at December 31, 2010 |  | $ | 8,416 |
Impairment charges recognized during period |  | 701 |
Balance at September 30, 2011 |  | $ | 9,117 |
The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the three months ended September 30, 2010 (Dollars in Thousands):
Balance at June 30, 2010 |  | $ | 7,461 |
Impairment charges recognized during period |  | 531 |
Balance at September 30, 2010 |  | $ | 7,992 |
The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the nine months ended September 30, 2010 (Dollars in Thousands):
Balance at December 31, 2009 |  | $ | — |
Impairment charges recognized during period |  | 7,992 |
Balance at September 30, 2010 |  | $ | 7,992 |

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- Definition Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27405-111563 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Equity Security -URI http://asc.fasb.org/extlink&oid=6511694 -Topic 320 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27161-111563 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Debt Security -URI http://asc.fasb.org/extlink&oid=6509901 -Topic 320 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 115 -Paragraph 3, 19, 20, 21, 22, 137 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27232-111563 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27357-111563 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27290-111563 + Details
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