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SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
6 Months Ended
Jun. 30, 2014
SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY  
SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

NOTE 4. SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

 

The following is a summary of securities available for sale and held to maturity:

 

(In thousands)

 

Amortized Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

June 30, 2014

 

 

 

 

 

 

 

 

 

Securities available for sale

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

Municipal bonds and obligations

 

$

133,188

 

$

4,739

 

$

(513

)

$

137,414

 

Government-guaranteed residential mortgage-backed securities

 

79,095

 

787

 

(159

)

79,723

 

Government-sponsored residential mortgage-backed securities

 

796,407

 

5,956

 

(5,272

)

797,091

 

Trust preferred securities

 

15,763

 

1,170

 

(1,276

)

15,657

 

Other bonds and obligations

 

3,237

 

1

 

(73

)

3,165

 

Total debt securities

 

1,027,690

 

12,653

 

(7,293

)

1,033,050

 

Marketable equity securities

 

45,139

 

3,194

 

(715

)

47,618

 

Total securities available for sale

 

1,072,829

 

15,847

 

(8,008

)

1,080,668

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity

 

 

 

 

 

 

 

 

 

Municipal bonds and obligations

 

4,259

 

 

 

4,259

 

Government-sponsored residential mortgage-backed securities

 

71

 

3

 

 

74

 

Tax advantaged economic development bonds

 

38,509

 

1,377

 

(199

)

39,687

 

Other bonds and obligations

 

339

 

 

 

339

 

Total securities held to maturity

 

43,178

 

1,380

 

(199

)

44,359

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,116,007

 

$

17,227

 

$

(8,207

)

$

1,125,027

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

 

 

 

 

 

 

 

 

 

Securities available for sale

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

Municipal bonds and obligations

 

$

77,852

 

$

1,789

 

$

(1,970

)

$

77,671

 

Government-guaranteed residential mortgage-backed securities

 

78,885

 

544

 

(658

)

78,771

 

Government-sponsored residential mortgage-backed securities

 

531,441

 

2,000

 

(10,783

)

522,658

 

Corporate bonds

 

40,945

 

157

 

(1,822

)

39,280

 

Trust preferred securities

 

16,927

 

1,249

 

(1,565

)

16,611

 

Other bonds and obligations

 

3,250

 

 

(166

)

3,084

 

Total debt securities

 

749,300

 

5,739

 

(16,964

)

738,075

 

Marketable equity securities

 

20,042

 

2,266

 

(335

)

21,973

 

Total securities available for sale

 

769,342

 

8,005

 

(17,299

)

760,048

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity

 

 

 

 

 

 

 

 

 

Municipal bonds and obligations

 

4,244

 

 

 

4,244

 

Government-sponsored residential mortgage-backed securities

 

73

 

2

 

 

75

 

Tax advantaged economic development bonds

 

40,260

 

1,255

 

(414

)

41,101

 

Other bonds and obligations

 

344

 

 

 

344

 

Total securities held to maturity

 

44,921

 

1,257

 

(414

)

45,764

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

814,263

 

$

9,262

 

$

(17,713

)

$

805,812

 

 

The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities, segregated by contractual maturity at June 30, 2014 are presented below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.  Mortgage-backed securities are shown in total, as their maturities are highly variable.  Equity securities have no maturity and are also shown in total.

 

 

 

Available for sale

 

Held to maturity

 

 

 

Amortized

 

Fair

 

Amortized

 

Fair

 

(In thousands)

 

Cost

 

Value

 

Cost

 

Value

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

 

$

 

$

 

$

1,423

 

$

1,423

 

Over 1 year to 5 years

 

1,258

 

1,278

 

17,241

 

18,131

 

Over 5 years to 10 years

 

17,922

 

18,245

 

11,558

 

11,546

 

Over 10 years

 

133,008

 

136,713

 

12,885

 

13,185

 

Total bonds and obligations

 

152,188

 

156,236

 

43,107

 

44,285

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities

 

45,139

 

47,618

 

 

 

Residential mortgage-backed securities

 

875,502

 

876,814

 

71

 

74

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,072,829

 

$

1,080,668

 

$

43,178

 

$

44,359

 

 

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:

 

 

 

Less Than Twelve Months

 

Over Twelve Months

 

Total

 

 

 

Gross

 

 

 

Gross

 

 

 

Gross

 

 

 

 

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

(In thousands)

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds and obligations

 

$

2

 

$

401

 

$

511

 

$

12,503

 

$

513

 

$

12,904

 

Government-guaranteed residential mortgage-backed securities

 

43

 

11,313

 

116

 

4,437

 

159

 

15,750

 

Government-sponsored residential mortgage-backed securities

 

1,022

 

151,880

 

4,250

 

160,445

 

5,272

 

312,325

 

Trust preferred securities

 

 

 

1,276

 

2,288

 

1,276

 

2,288

 

Other bonds and obligations

 

1

 

53

 

72

 

2,937

 

73

 

2,990

 

Total debt securities

 

1,068

 

163,647

 

6,225

 

182,610

 

7,293

 

346,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities

 

472

 

17,514

 

243

 

2,757

 

715

 

20,271

 

Total securities available for sale

 

1,540

 

181,161

 

6,468

 

185,367

 

8,008

 

366,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax advantaged economic development bonds

 

 

 

199

 

7,932

 

199

 

7,932

 

Total securities held to maturity

 

 

 

199

 

7,932

 

199

 

7,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,540

 

$

181,161

 

$

6,667

 

$

193,299

 

$

8,207

 

$

374,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds and obligations

 

$

1,657

 

$

17,776

 

$

313

 

$

1,854

 

$

1,970

 

$

19,630

 

Government guaranteed residential mortgage-backed securities

 

658

 

35,631

 

 

 

658

 

35,631

 

Government-sponsored residential mortgage-backed securities

 

10,783

 

423,203

 

 

 

10,783

 

423,203

 

Corporate bonds

 

1,822

 

29,124

 

 

 

1,822

 

29,124

 

Trust preferred securities

 

 

 

1,565

 

2,039

 

1,565

 

2,039

 

Other bonds and obligations

 

166

 

3,082

 

 

 

166

 

3,082

 

Total debt securities

 

15,086

 

508,816

 

1,878

 

3,893

 

16,964

 

512,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities

 

117

 

1,653

 

218

 

1,782

 

335

 

3,435

 

Total securities available for sale

 

15,203

 

510,469

 

2,096

 

5,675

 

17,299

 

516,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax advantaged economic development bonds

 

57

 

9,429

 

357

 

7,901

 

414

 

17,330

 

Total securities held to maturity

 

57

 

9,429

 

357

 

7,901

 

414

 

17,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

15,260

 

$

519,898

 

$

2,453

 

$

13,576

 

$

17,713

 

$

533,474

 

 

Debt Securities

 

The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of June 30, 2014, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover. The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios were not other-than-temporarily impaired at June 30, 2014:

 

AFS municipal bonds and obligations

 

At June 30, 2014, 19 of the total 193 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 3.8% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market.  At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk.  There were no material underlying credit downgrades during the second quarter of 2014.  All securities are performing.

 

AFS residential mortgage-backed securities

 

At June 30, 2014, 55 out of the total 240 securities in the Company’s portfolios of AFS residential mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 1.6% of the amortized cost of securities in unrealized loss positions within the AFS portfolio. The Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”) guarantee the contractual cash flows of all of the Company’s residential mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the past quarter. All securities are performing.

 

AFS trust preferred securities

 

At June 30, 2014, 2 out of the total 5 securities in the Company’s portfolio of AFS trust preferred securities were in unrealized loss positions. Aggregate unrealized losses represented 35.8% of the amortized cost of securities in unrealized loss positions. The Company’s evaluation of the present value of expected cash flows on these securities supports its conclusions about the recoverability of the securities’ amortized cost basis. Of the 2 securities, 1 security is investment grade rated.  The Company reviews the financial strength of all of the single issue trust issuers and has concluded that the amortized cost remains supported by the market value of these securities and they are performing.

 

At June 30, 2014, $1.1 million of the total unrealized losses was attributable to a $2.8 million investment in a Mezzanine Class B tranche of a $360 million pooled trust preferred security collateralized by banking and insurance entities. The Company evaluated the security, with a Level 3 fair value of $1.4 million, for potential other-than-temporary-impairment (“OTTI”) at June 30, 2014 and determined that OTTI was not evident based on both the Company’s ability and intent to hold the security until the recovery of its remaining amortized cost and the protection from credit loss afforded by $44 million in excess subordination above current and projected losses. The security is performing.

 

AFS other bonds and obligations

 

At June 30, 2014, 4 of the total 8 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 2.4% of the amortized cost of securities in unrealized loss positions. The securities are investment grade rated and there were no material underlying credit downgrades during the second quarter of 2014. All securities are performing.

 

HTM tax advantaged economic development bonds

 

At June 30, 2014, 1 of the total 7 securities in the Company’s portfolio of tax advantaged economic development bonds was in an unrealized loss position. Aggregate unrealized losses represented 2.5% of the amortized cost of securities in unrealized loss positions. The Company has the intent of maintaining these bonds to recovery. These securities are performing.  The Company expects to receive all future cash flows associated with these securities.

 

Marketable Equity Securities

 

In evaluating its marketable equity securities portfolio for OTTI, the Company considers its ability to more likely than not hold an equity security to recovery.  The Company additionally considers other various factors including the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer.  Any OTTI is recognized immediately through earnings.

 

At June 30, 2014, 9 out of the total 29 securities in the Company’s portfolio of marketable equity securities were in an unrealized loss position. The unrealized loss represented 3.4% of the amortized cost of the securities. The Company has the ability and intent to hold the securities until a recovery of their cost basis and does not consider the securities other-than-temporarily impaired at June 30, 2014.  As new information becomes available in future periods, changes to the Company’s assumptions may be warranted and could lead to a different conclusion regarding the OTTI of these securities.