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Investment Securities | 3 Months Ended
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Mar. 31, 2015
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | 4. 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, 2015 |
|  | Amortized Cost |  |  | Gross Unrealized Holding Gain |  |  | Gross Unrealized Holding Loss |  |  | Fair Value |  |  | Total Percent |
|  | (Dollars in thousands) |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  | $ | 334,025 |  |  | $ | 140 |  |  | $ | (4,299 | ) |  | $ | 329,866 |  |  |  | 10.89 | %
Residential mortgage-backed securities |  |  | 1,807,036 |  |  |  | 49,360 |  |  |  | (1,242 | ) |  |  | 1,855,154 |  |  |  | 61.26 | %
CMOs / REMICs - residential |  |  | 279,918 |  |  |  | 8,406 |  |  |  | (80 | ) |  |  | 288,244 |  |  |  | 9.52 | %
Municipal bonds |  |  | 528,464 |  |  |  | 21,910 |  |  |  | (530 | ) |  |  | 549,844 |  |  |  | 18.16 | %
Other securities |  |  | 5,000 |  |  |  | 181 |  |  |  | — |  |  |  | 5,181 |  |  |  | 0.17 | %
Total |  | $ | 2,954,443 |  |  | $ | 79,997 |  |  | $ | (6,151 | ) |  | $ | 3,028,289 |  |  |  | 100.00 | %
|  | December 31, 2014 |
|  | Amortized Cost |  |  | Gross Unrealized Holding Gain |  |  | Gross Unrealized Holding Loss |  |  | Fair Value |  |  | Total Percent |
|  | (Dollars in thousands) |
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  | $ | 339,071 |  |  | $ | — |  |  | $ | (8,228 | ) |  | $ | 330,843 |  |  |  | 10.55 | %
Residential mortgage-backed securities |  |  | 1,884,370 |  |  |  | 36,154 |  |  |  | (3,028 | ) |  |  | 1,917,496 |  |  |  | 61.12 | %
CMOs / REMICs - residential |  |  | 297,318 |  |  |  | 7,050 |  |  |  | (277 | ) |  |  | 304,091 |  |  |  | 9.69 | %
Municipal bonds |  |  | 557,823 |  |  |  | 22,463 |  |  |  | (645 | ) |  |  | 579,641 |  |  |  | 18.48 | %
Other securities |  |  | 5,000 |  |  |  | 87 |  |  |  | — |  |  |  | 5,087 |  |  |  | 0.16 | %
Total |  | $ | 3,083,582 |  |  | $ | 65,754 |  |  | $ | (12,178 | ) |  | $ | 3,137,158 |  |  |  | 100.00 | %
Approximately 82% of the available-for-sale portfolio at March 31, 2015 represents securities issued by the U.S government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. 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, 2015 and December 31, 2014. The Bank had $304,000 in CMOs/REMICs backed by whole loans issued by private-label companies (nongovernment sponsored). The tables below 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, 2015 and December 31, 2014. Management has reviewed individual securities to determine whether a decline in fair value below the amortized cost basis is other-than temporary.
|  | March 31, 2015 |
|  | Less Than 12 Months |  |  | 12 Months or Longer |  |  | Total |
| Fair Value |  |  | Gross Unrealized Holding Losses |  |  | Fair Value |  |  | Gross Unrealized Holding Losses |  |  | Fair Value |  |  | Gross Unrealized Holding Losses |
|  | (Dollars in thousands) |
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  | $ | 14,558 |  |  | $ | 3 |  |  | $ | 289,548 |  |  | $ | 4,296 |  |  | $ | 304,106 |  |  | $ | 4,299 |
Residential mortgage-backed securities |  |  | — |  |  |  | — |  |  |  | 128,416 |  |  |  | 1,242 |  |  |  | 128,416 |  |  |  | 1,242 |
CMOs / REMICs - residential |  |  | — |  |  |  | — |  |  |  | 6,679 |  |  |  | 80 |  |  |  | 6,679 |  |  |  | 80 |
Municipal bonds |  |  | 4,152 |  |  |  | 47 |  |  |  | 23,917 |  |  |  | 483 |  |  |  | 28,069 |  |  |  | 530 |
Other securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 18,710 |  |  | $ | 50 |  |  | $ | 448,560 |  |  | $ | 6,101 |  |  | $ | 467,270 |  |  | $ | 6,151 |
|  | December 31, 2014 |
|  | Less Than 12 Months |  |  | 12 Months or Longer |  |  | Total |
| Fair Value |  |  | Gross Unrealized Holding Losses |  |  | Fair Value |  |  | Gross Unrealized Holding Losses |  |  | Fair Value |  |  | Gross Unrealized Holding Losses |
|  | (Dollars in thousands) |
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  | $ | 22,224 |  |  | $ | 28 |  |  | $ | 307,873 |  |  | $ | 8,200 |  |  | $ | 330,097 |  |  | $ | 8,228 |
Residential mortgage-backed securities |  |  | 19,636 |  |  |  | 4 |  |  |  | 145,681 |  |  |  | 3,024 |  |  |  | 165,317 |  |  |  | 3,028 |
CMOs / REMICs - residential |  |  | — |  |  |  | — |  |  |  | 31,143 |  |  |  | 277 |  |  |  | 31,143 |  |  |  | 277 |
Municipal bonds |  |  | 1,953 |  |  |  | 23 |  |  |  | 24,812 |  |  |  | 622 |  |  |  | 26,765 |  |  |  | 645 |
Other securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 43,813 |  |  | $ | 55 |  |  | $ | 509,509 |  |  | $ | 12,123 |  |  | $ | 553,322 |  |  | $ | 12,178 |
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 — The Company has one investment security classified as held-to-maturity. This security was issued by Countrywide Financial and is collateralized by Alt-A (limited documentation) 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 the Bank has both the intent and ability to hold this debt security to maturity. The Bank 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 at the time the crisis in the financial markets occurred and the market for securities collateralized by Alt-A mortgages diminished. As of March 31, 2015, the unrealized loss on this security was zero and the current fair value on the security was 78.76% of the current par value. This Alt-A bond, with a book value of $1.5 million as of March 31, 2015, has $1.9 million in net impairment losses to date. These losses have been recorded as a reduction to noninterest income. The security is rated non-investment grade. We evaluated the security for an other-than-temporary decline in fair value as of March 31, 2015. The key assumptions include default rates, loss severities and prepayment rates. There were no changes in credit related other-than temporary impairment (“OTTI”) recognized in earnings for the quarter ended March 31, 2015 and 2014. Government Agency & Government-Sponsored Enterprise— The government agency bonds are backed by the full faith and credit of agencies of the U.S. Government. While the Government-Sponsored Enterprise bonds are not expressly guaranteed by the U.S. Government, they are currently being supported by the U.S. Government under a conservatorship arrangement with the Government-Sponsored Enterprises. As of March 31, 2015, approximately $140.9 million in U.S. government agency bonds are callable. 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. Mortgage-Backed Securities and CMOs/REMICs— Almost all of the Company’s available-for-sale mortgage-backed and CMOs/REMICs securities are issued by Government Agencies or 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 a weighted average life of approximately 3.8 years. Of the total MBS/CMO, 99.99% have the implied guarantee of U.S. Government-Sponsored Agencies and Enterprises. The remaining .01% 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. Municipal Bonds—The majority of the Company’s municipal bonds, with a weighted-average life of approximately 8.4 years, are insured by the largest bond insurance companies. 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. The decline in fair value is attributable to the changes in interest rates and not credit quality. Since 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, these investments are not considered other than temporarily impaired at March 31, 2015. On an ongoing basis, we monitor 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, which includes a review of the respective municipalities’ audited financial statements to determine whether there are 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 OTTI for any given security. At March 31, 2015 and December 31, 2014, investment securities having a carrying value of approximately $2.99 billion and $3.11 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, 2015, by contractual maturity, are shown in the table below. Although mortgage-backed securities and CMOs/REMICs have contractual maturities through 2043, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed securities and CMOs/REMICs are included in maturity categories based upon estimated prepayment speeds.
|  | March 31, 2015 |
|  | Amortized Cost |  |  | Fair Value |
|  | (Dollars in thousands) |
Available-for-sale: |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 160,730 |  |  | $ | 164,801 |
Due after one year through five years |  |  | 1,946,053 |  |  |  | 2,009,028 |
Due after five years through ten years |  |  | 727,902 |  |  |  | 730,599 |
Due after ten years |  |  | 119,758 |  |  |  | 123,861 |
Total |  | $ | 2,954,443 |  |  | $ | 3,028,289 |
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, 2015.

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