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Investment Securities
 3 Months Ended
Mar. 31, 2012
Investment Securities [Abstract]  
INVESTMENT SECURITIES
3. INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are summarized below. The majority of securities held are publicly traded, and the estimated fair values were obtained from an independent pricing service based upon market quotes.

 

                                         
    March 31, 2012  
    Amortized
Cost		     Gross
Unrealized
Holding
Gain 		    Gross
Unrealized
Holding
Loss 		    Fair Value     Total
Percent		  
    (Dollars in thousands)  

Investment Securities Available-for-Sale:

                                        

Government agency & government-sponsored enterprises

   $ 37,191     $ 175     $ (4 )    $ 37,362       1.57 % 

Residential mortgage-backed securities

     918,726       20,300       (135 )      938,891       39.58 % 

CMO’s / REMIC’s – Residential

     729,815       10,437       (1,050 )      739,202       31.15 % 

Municipal bonds

     605,114       42,251       (623 )      646,742       27.26 % 

Other securities

     10,457       75       —         10,532       0.44 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Investment Securities

   $ 2,301,303     $ 73,238     $ (1,812 )    $ 2,372,729       100.00 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                         
    December 31, 2011  
    Amortized
Cost		     Gross
Unrealized
Holding
Gain		     Gross
Unrealized
Holding
Loss		     Fair Value     Total
Percent		  
    (Dollars in thousands)  

Investment Securities Available-for-Sale:

                                        

Government agency & government-sponsored enterprises

   $ 46,273     $ 234     $ —       $ 46,507       2.11 % 

Residential mortgage-backed securities

     869,847       18,487       (334 )      888,000       40.33 % 

CMO’s / REMIC’s – Residential

     594,866       10,307       (665 )      604,508       27.46 % 

Municipal bonds

     608,575       43,665       (203 )      652,037       29.62 % 

Other securities

     10,468       10       (4 )      10,474       0.48 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Investment Securities

   $ 2,130,029     $ 72,703     $ (1,206 )    $ 2,201,526       100.00 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Approximately 72% of the available-for-sale portfolio at March 31, 2012 represents securities issued by the U.S government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. The remaining CMO/REMICs are backed by agency-pooled collateral or whole loan collateral. All non-agency available-for-sale CMO/REMIC issues held are rated investment grade or better by either Standard & Poor’s or Moody’s, as of March 31, 2012 and December 31, 2011. We have $4.0 million in CMO/REMIC’s backed by whole loans issued by private-label companies (non-government sponsored).

There were zero realized gains or losses for the three months ended March 31, 2012 and 2011.

 

Composition of the Fair Value and Gross Unrealized Losses of Securities:

 

                                                 
    March 31, 2012  
    Less than 12 months     12 months or longer     Total  
Description of Securities   Fair Value     Gross
Unrealized
Holding
Losses		     Fair Value     Gross
Unrealized
Holding
Losses		     Fair Value     Gross
Unrealized
Holding
Losses		  
    (Dollars in thousands)  
             

Held-To-Maturity

                                                

CMO

   $ 2,280     $ —       $ —       $ —       $ 2,280     $ —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Available-for-Sale

                                                

Government agency

   $ 10,977     $ 4     $ —       $ —       $ 10,977     $ 4  

Residential mortgage-backed securities

     55,729       135       —         —         55,729       135  

CMO/REMICs – Residential

     196,395       1,050       —         —         196,395       1,050  

Municipal bonds

     31,823       623       —         —         31,823       623  

Other Securities

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 294,924     $ 1,812     $ —       $ —       $ 294,924     $ 1,812  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
   
    December 31, 2011  
    Less than 12 months     12 months or longer     Total  
Description of Securities   Fair Value     Gross
Unrealized
Holding
Losses		     Fair Value     Gross
Unrealized
Holding
Losses		     Fair Value     Gross
Unrealized
Holding
Losses		  
    (Dollars in thousands)  
             

Held-To-Maturity

                                                

CMO

   $ 2,383     $ —       $ —       $ —       $ 2,383     $ —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Available-for-Sale

                                                

Government agency

   $ —       $ —       $ —       $ —       $ —       $ —    

Residential mortgage-backed securities

     75,754       334       —         —         75,754       334  

CMO/REMICs – Residential

     133,471       665       —         —         133,471       665  

Municipal bonds

     22,184       203       —         —         22,184       203  

Other Securities

     2,500       4       —         —         2,500       4  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 233,909     $ 1,206     $ —       $ —       $ 233,909     $ 1,206  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The tables above show the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2012 and December 31, 2011. The Company has reviewed individual securities to determine whether a decline in fair value below the amortized cost basis is other-than-temporary.

The following summarizes our analysis of these securities and the unrealized losses. This assessment was based on the following factors: i) the length of the time and the extent to which the fair value has been less than amortized cost; ii) adverse condition specifically related to the security, an industry, or a geographic area and whether or not the Company expects to recover the entire amortized cost, iii) historical and implied volatility of the fair value of the security; iv) the payment structure of the security and the likelihood of the issuer being able to make payments in the future; v) failure of the issuer of the security to make scheduled interest or principal payments, vi) any changes to the rating of the security by a rating agency, and vii) recoveries or additional declines in fair value subsequent to the balance sheet date.

CMO Held-to-Maturity – We have one investment security classified as held-to-maturity. This security was issued by Countrywide Financial and is collateralized by Alt-A mortgages. The mortgages are primarily fixed-rate, 30-year loans, originated in early 2006 with average FICO scores of 715 and an average LTV of 71% at origination. The security was a senior security in the securitization, was rated triple AAA at origination and was supported by subordinate securities. This security is classified as held-to-maturity as we have both the intent and ability to hold this debt security to maturity as the amount of the security, $2.3 million, is not significant to our liquidity needs. We acquired this security in February 2008 at a price of 98.25%. The significant decline in the fair value of the security first appeared in August 2008 as the current financial crisis in the markets occurred and the market for securities collateralized by Alt-A mortgages diminished.

 

As of March 31, 2012, the unrealized loss on this security was zero and the fair value on the security was 57% of the current par value. The security is rated non-investment grade. We evaluated the security for an other-than-temporary decline in fair value as of March 31, 2012. The key assumptions include default rates, severities and prepayment rates. This security was determined to be credit impaired during 2009 due to continued degradation in expected cash flows primarily due to higher loss forecasts. We determined the amount of the credit impairment by discounting the expected future cash flows of the underlying collateral. In 2009, we recognized an other-than-temporary impairment of $2.0 million reduced by $1.7 million for the non-credit portion which was reflected in other comprehensive income. The remaining loss of $323,000 was recognized in earnings for the year ended December 31, 2009. This Alt-A bond, with a book value of $2.3 million as of March 31, 2012, has had $1.9 million in net impairment losses to date. These losses have been recorded as a reduction to noninterest income.

There were no changes in credit-related other-than temporary impairment recognized in earnings for the three months ended March 31, 2012 and 2011.

Government Agency & Government-Sponsored Enterprise – The government agency bonds are backed by the full faith and credit of Agencies of the U.S. Government. These securities are bullet securities, that is, they have a defined maturity date on which the principal is paid. The contractual term of these investments provides that the Company will receive the face value of the bond at maturity which will equal the amortized cost of the bond. Interest is received throughout the life of the security. There was no loss greater than 12 months on these securities at March 31, 2012.

Mortgage-Backed Securities and CMO/REMICs – Almost all of the mortgage-backed and CMO/REMICs securities are issued by the government-sponsored enterprises such as Ginnie Mae, Fannie Mae and Freddie Mac. These securities are collateralized or backed by the underlying residential mortgages. All mortgage-backed securities are considered to be rated investment grade with an average life of approximately 3.0 years. The contractual cash flows of 99.76% of these investments have the implied guarantee of U.S. government-sponsored agencies. The remaining 0.24% are issued by banks. Accordingly, it is expected the securities would not be settled at a price less than the amortized cost of the bonds. At March 31, 2012, there was no unrealized loss greater than 12 months.

Municipal Bonds – The majority of our municipal bonds are insured by the largest bond insurance companies with maturities of approximately 9.8 years. There were zero securities with an unrealized loss greater than 12 months and all municipal securities were performing at March 31, 2012. The Company diversifies its holdings by owning selections of securities from different issuers and by holding securities from geographically diversified municipal issuers, thus reducing the Company’s exposure to any single adverse event. Because we believe the decline in fair value is attributable to the changes in interest rates and not credit quality and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized costs, which may be at maturity, management does not consider these investments to be other than temporarily impaired at Mach 31, 2012.

We are continually monitoring the quality of our municipal bond portfolio in light of the current financial problems exhibited by certain monoline insurance companies. Many of the securities that would not be rated without insurance are pre-refunded and/or are general obligation bonds. We continue to monitor municipalities to determine any audit or performance issues. We use outside brokers to assist us in these analyses. Based on our monitoring of the municipal marketplace, to our knowledge, none of the municipalities are exhibiting financial problems that would lead us to believe that there is an OTTI for any given security.

At March 31, 2012 and December 31, 2011, investment securities having an amortized cost of approximately $2.30 billion and $1.85 billion, respectively, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at March 31, 2012, by contractual maturity, are shown below. Although mortgage-backed securities and CMO/REMICs have contractual maturities through 2041, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed securities and CMO/REMICs are included in maturity categories based upon estimated prepayment speeds.

 

 

                         
    Available-for-sale  
    Amortized
Cost		     Fair
Value		     Weighted-
Average
Yield		  
    (Dollars in thousands)  

Due in one year or less

   $ 108,908     $ 110,725       3.60 % 

Due after one year through five years

     1,921,408       1,970,933       2.62 % 

Due after five years through ten years

     235,086       251,431       3.79 % 

Due after ten years

     35,901       39,640       3.64 % 
   

 

 

    

 

 

          
    $ 2,301,303     $ 2,372,729       2.80 % 
   

 

 

    

 

 

          

The investment in FHLB stock is periodically evaluated for impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through March 31, 2012.