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INVESTMENT SECURITIES
 9 Months Ended
Sep. 30, 2012
INVESTMENT SECURITIES  
INVESTMENT SECURITIES

4.   INVESTMENT SECURITIES

 

A summary of available for sale and held to maturity investment securities are as follows:

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

unrealized

 

unrealized

 

fair

 

 

 

cost

 

gains

 

losses

 

value

 

 

 

(Dollars in thousands)

 

September 30, 2012

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities debt securities

 

$

313,675

 

$

3,322

 

$

—

 

$

316,997

 

States and political subdivisions debt securities

 

159,913

 

3,397

 

(486

)

162,824

 

U.S. Government sponsored entities mortgage-backed securities

 

945,751

 

22,163

 

(215

)

967,699

 

Corporate securities

 

49,069

 

2,060

 

—

 

51,129

 

Other

 

849

 

48

 

—

 

897

 

Total

 

$

1,469,257

 

$

30,990

 

$

(701

)

$

1,499,546

 

 

 

 

 

 

 

 

 

 

 

Held to Maturity

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities mortgage-backed securities

 

$

163,733

 

$

1,279

 

$

—

 

$

165,012

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities debt securities

 

$

370,184

 

$

2,993

 

$

—

 

$

373,177

 

States and political subdivisions debt securities

 

12,265

 

729

 

—

 

12,994

 

U.S. Government sponsored entities mortgage-backed securities

 

1,077,146

 

20,981

 

(825

)

1,097,302

 

Corporate securities

 

8,403

 

148

 

—

 

8,551

 

Other

 

985

 

—

 

(15

)

970

 

Total

 

$

1,468,983

 

$

24,851

 

$

(840

)

$

1,492,994

 

 

 

 

 

 

 

 

 

 

 

Held to Maturity

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities mortgage-backed securities

 

$

931

 

$

45

 

$

—

 

$

976

 

 

The amortized cost and estimated fair value of investment securities at September 30, 2012 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

 

September 30, 2012

 

 

 

Amortized
Cost

 

Estimated Fair
Value

 

 

 

(Dollars in thousands)

 

Available for Sale

 

 

 

 

 

Due in one year or less

 

$

185,755

 

$

186,405

 

Due after one year through five years

 

156,724

 

160,820

 

Due after five years through ten years

 

54,947

 

56,418

 

Due after ten years

 

125,231

 

127,307

 

Mortage-backed securities

 

945,751

 

967,699

 

Other

 

849

 

897

 

Total

 

$

1,469,257

 

$

1,499,546

 

 

 

 

 

 

 

Held to Maturity

 

 

 

 

 

Mortage-backed securities

 

$

163,733

 

$

165,012

 

 

We sold certain available for sale investment securities during the three and nine months ended September 30, 2012 for gross proceeds of $127.4 million and $130.1 million, respectively. Gross realized gains and losses on the sales of the available for sale investment securities were $1.7 million and $0.9 million, respectively, during the three and nine months ended September 30, 2012. The specific identification method was used as the basis for determining the cost of all securities sold.

 

During the nine months ended September 30, 2011, we sold certain available for sale investment securities for gross proceeds of $5.3 million. We did not sell any available for sale securities during the third quarter of 2011. Gross realized gains and losses on the sales of the available for sale investment securities during the nine months ended September 30, 2011 were $0.3 million and nil, respectively. The specific identification method was also used as the basis for determining the cost of all securities sold.

 

In the third quarter of 2012, we completed an investment securities portfolio repositioning to reduce net interest income volatility and enhance the potential for prospective earnings and an improved net interest margin. In connection with the repositioning, we sold $124.7 million in available-for-sale mortgage-backed securities with an average net yield of 0.60% and a weighted average life of 1.3 years and reinvested the proceeds in $133.2 million of investment securities with an average yield of 1.88% and a weighted average life of 5.3 years. The new securities were classified in the held-to-maturity portfolio and a net gain of $0.7 million was realized on the transaction.

 

Investment securities of $869.6 million and $938.0 million at September 30, 2012 and December 31, 2011, respectively, were pledged to secure public funds on deposit, securities sold under agreements to repurchase and other long-term and short-term borrowings. None of these securities were pledged to a secured party that has the right to sell or repledge the collateral as of the same periods.

 

Provided below is a summary of the 59 and nine investment securities which were in an unrealized loss position at September 30, 2012 and December 31, 2011, respectively.

 

 

 

Less than 12 months

 

12 months or longer

 

Total

 

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

Description of Securities

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

 

 

(Dollars in thousands)

 

At September 30, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions debt securities

 

$

48,262

 

$

(486

)

$

—

 

$

—

 

$

48,262

 

$

(486

)

U.S. Government sponsored entities mortgage-backed securities

 

90,746

 

(215

)

—

 

—

 

90,746

 

(215

)

Total temporarily impaired securities

 

$

139,008

 

$

(701

)

$

—

 

$

—

 

$

139,008

 

$

(701

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities mortgage-backed securities

 

$

144,520

 

$

(825

)

$

—

 

$

—

 

$

144,520

 

$

(825

)

Other

 

970

 

(15

)

—

 

—

 

970

 

(15

)

Total temporarily impaired securities

 

$

145,490

 

$

(840

)

$

—

 

$

—

 

$

145,490

 

$

(840

)

 

Unrealized losses for all investment securities are reviewed to determine whether the losses are deemed “other-than-temporary impairment” (“OTTI”). Investment securities are evaluated for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary. In conducting this assessment, we evaluate a number of factors including, but not limited to:

 

·                  The length of time and the extent to which fair value has been less than the amortized cost basis;

·                  Adverse conditions specifically related to the security, an industry, or a geographic area;

·                  The historical and implied volatility of the fair value of the security;

·                  The payment structure of the debt security and the likelihood of the issuer being able to make payments;

·                  Failure of the issuer to make scheduled interest or principal payments;

·                  Any rating changes by a rating agency; and

·                  Recoveries or additional decline in fair value subsequent to the balance sheet date.

 

The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses.

 

The declines in market value were primarily attributable to changes in interest rates and disruptions in the credit and financial markets. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, we do not consider these investments to be other-than-temporarily impaired.