Securities |
4. Securities
The amortized cost and fair value of securities, excluding trading securities, are summarized as follows (in thousands). No securities were classified as held to maturity at December 31, 2013.
|
|
Available for Sale |
|
|
|
|
|
Gross |
|
Gross |
|
|
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
|
|
September 30, 2014 |
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
U.S. Treasury securities |
|
$ |
44,709 |
|
$ |
149 |
|
$ |
(64 |
) |
$ |
44,794 |
|
U.S. government agencies: |
|
|
|
|
|
|
|
|
|
Bonds |
|
637,882 |
|
1,397 |
|
(18,522 |
) |
620,757 |
|
Residential mortgage-backed securities |
|
53,780 |
|
1,626 |
|
(401 |
) |
55,005 |
|
Collateralized mortgage obligations |
|
100,938 |
|
137 |
|
(4,093 |
) |
96,982 |
|
Corporate debt securities |
|
95,251 |
|
4,795 |
|
(128 |
) |
99,918 |
|
States and political subdivisions |
|
141,813 |
|
1,917 |
|
(1,007 |
) |
142,723 |
|
Commercial mortgage-backed securities |
|
596 |
|
60 |
|
— |
|
656 |
|
Equity securities |
|
20,558 |
|
3,425 |
|
— |
|
23,983 |
|
Note receivable |
|
44,522 |
|
5,327 |
|
— |
|
49,849 |
|
Warrant |
|
12,068 |
|
— |
|
(634 |
) |
11,434 |
|
Totals |
|
$ |
1,152,117 |
|
$ |
18,833 |
|
$ |
(24,849 |
) |
$ |
1,146,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale |
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
|
|
December 31, 2013 |
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
U.S. Treasury securities |
|
$ |
43,684 |
|
$ |
82 |
|
$ |
(238 |
) |
$ |
43,528 |
|
U.S. government agencies: |
|
|
|
|
|
|
|
|
|
Bonds |
|
717,909 |
|
550 |
|
(55,727 |
) |
662,732 |
|
Residential mortgage-backed securities |
|
59,936 |
|
735 |
|
(584 |
) |
60,087 |
|
Collateralized mortgage obligations |
|
124,502 |
|
349 |
|
(4,390 |
) |
120,461 |
|
Corporate debt securities |
|
72,376 |
|
4,610 |
|
(378 |
) |
76,608 |
|
States and political subdivisions |
|
162,955 |
|
388 |
|
(6,508 |
) |
156,835 |
|
Commercial mortgage-backed securities |
|
691 |
|
69 |
|
— |
|
760 |
|
Equity securities |
|
20,067 |
|
2,012 |
|
— |
|
22,079 |
|
Note receivable |
|
42,674 |
|
5,235 |
|
— |
|
47,909 |
|
Warrant |
|
12,068 |
|
76 |
|
— |
|
12,144 |
|
Totals |
|
$ |
1,256,862 |
|
$ |
14,106 |
|
$ |
(67,825 |
) |
$ |
1,203,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity |
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
|
|
September 30, 2014 |
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
U.S. Treasury securities |
|
$ |
25,010 |
|
$ |
— |
|
$ |
(1 |
) |
$ |
25,009 |
|
U.S. government agencies: |
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities |
|
30,183 |
|
275 |
|
— |
|
30,458 |
|
Collateralized mortgage obligations |
|
58,825 |
|
— |
|
(528 |
) |
58,297 |
|
States and political subdivisions |
|
6,121 |
|
30 |
|
(14 |
) |
6,137 |
|
Totals |
|
$ |
120,139 |
|
$ |
305 |
|
$ |
(543 |
) |
$ |
119,901 |
|
Available for sale securities included 1,475,387 shares of SWS common stock, a $50.0 million aggregate principal amount note issued by SWS and a warrant to purchase 8,695,652 shares of SWS common stock (the “SWS Warrant”). SWS issued the note in July 2011 under a credit agreement pursuant to a senior unsecured loan from Hilltop. The note bore interest at a rate of 8.0% per annum, was prepayable by SWS subject to certain conditions after three years, and had a maturity of five years. The SWS Warrant provided for the purchase of 8,695,652 shares of SWS common stock at an exercise price of $5.75 per share, subject to anti-dilution adjustments. On October 2, 2014, as discussed in Note 23 to the consolidated financial statements, Hilltop exercised the SWS Warrant in full and paid the aggregate exercise price by the automatic elimination of the $50.0 million aggregate principal amount note due to Hilltop under the credit agreement. Consequently, Hilltop beneficially owned approximately 21% of the outstanding shares of SWS common stock as of October 4, 2014.
Information regarding securities that were in an unrealized loss position is shown in the following tables (dollars in thousands).
|
|
September 30, 2014 |
|
December 31, 2013 |
|
|
|
Number of |
|
|
|
Unrealized |
|
Number of |
|
|
|
Unrealized |
|
|
|
Securities |
|
Fair Value |
|
Losses |
|
Securities |
|
Fair Value |
|
Losses |
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
4 |
|
$ |
7,378 |
|
$ |
52 |
|
6 |
|
$ |
12,748 |
|
$ |
238 |
|
Unrealized loss for twelve months or longer |
|
2 |
|
2,005 |
|
12 |
|
— |
|
— |
|
— |
|
|
|
6 |
|
9,383 |
|
64 |
|
6 |
|
12,748 |
|
238 |
|
U.S. government agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
5 |
|
64,792 |
|
208 |
|
35 |
|
526,817 |
|
45,274 |
|
Unrealized loss for twelve months or longer |
|
27 |
|
439,772 |
|
18,314 |
|
5 |
|
90,931 |
|
10,453 |
|
|
|
32 |
|
504,564 |
|
18,522 |
|
40 |
|
617,748 |
|
55,727 |
|
Residential mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
— |
|
— |
|
— |
|
2 |
|
2,194 |
|
54 |
|
Unrealized loss for twelve months or longer |
|
4 |
|
10,870 |
|
401 |
|
3 |
|
9,309 |
|
530 |
|
|
|
4 |
|
10,870 |
|
401 |
|
5 |
|
11,503 |
|
584 |
|
Collateralized mortgage obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
1 |
|
10,915 |
|
69 |
|
7 |
|
84,054 |
|
4,320 |
|
Unrealized loss for twelve months or longer |
|
8 |
|
63,839 |
|
4,024 |
|
2 |
|
4,995 |
|
70 |
|
|
|
9 |
|
74,754 |
|
4,093 |
|
9 |
|
89,049 |
|
4,390 |
|
Corporate debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
4 |
|
4,837 |
|
21 |
|
7 |
|
10,754 |
|
378 |
|
Unrealized loss for twelve months or longer |
|
1 |
|
1,891 |
|
107 |
|
— |
|
— |
|
— |
|
|
|
5 |
|
6,728 |
|
128 |
|
7 |
|
10,754 |
|
378 |
|
States and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
1 |
|
500 |
|
— |
|
46 |
|
30,245 |
|
669 |
|
Unrealized loss for twelve months or longer |
|
96 |
|
64,343 |
|
1,007 |
|
150 |
|
96,882 |
|
5,839 |
|
|
|
97 |
|
64,843 |
|
1,007 |
|
196 |
|
127,127 |
|
6,508 |
|
Warrants: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
1 |
|
11,434 |
|
634 |
|
— |
|
— |
|
— |
|
Unrealized loss for twelve months or longer |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
1 |
|
11,434 |
|
634 |
|
— |
|
— |
|
— |
|
Total available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
16 |
|
99,856 |
|
984 |
|
103 |
|
666,812 |
|
50,933 |
|
Unrealized loss for twelve months or longer |
|
138 |
|
582,720 |
|
23,865 |
|
160 |
|
202,117 |
|
16,892 |
|
|
|
154 |
|
$ |
682,576 |
|
$ |
24,849 |
|
263 |
|
$ |
868,929 |
|
$ |
67,825 |
|
|
|
September 30, 2014 |
|
December 31, 2013 |
|
|
|
Number of |
|
|
|
Unrealized |
|
Number of |
|
|
|
Unrealized |
|
|
|
Securities |
|
Fair Value |
|
Losses |
|
Securities |
|
Fair Value |
|
Losses |
|
Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
1 |
|
$ |
25,009 |
|
$ |
1 |
|
— |
|
$ |
— |
|
$ |
— |
|
Unrealized loss for twelve months or longer |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
1 |
|
25,009 |
|
1 |
|
— |
|
— |
|
— |
|
Collateralized mortgage obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
2 |
|
58,297 |
|
528 |
|
— |
|
— |
|
— |
|
Unrealized loss for twelve months or longer |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
2 |
|
58,297 |
|
528 |
|
— |
|
— |
|
— |
|
States and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
6 |
|
3,411 |
|
14 |
|
— |
|
— |
|
— |
|
Unrealized loss for twelve months or longer |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
6 |
|
3,411 |
|
14 |
|
— |
|
— |
|
— |
|
Total held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss for less than twelve months |
|
9 |
|
86,717 |
|
543 |
|
— |
|
— |
|
— |
|
Unrealized loss for twelve months or longer |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
9 |
|
$ |
86,717 |
|
$ |
543 |
|
— |
|
$ |
— |
|
$ |
— |
|
During the three and nine months ended September 30, 2014 and 2013, the Company did not record any other-than-temporary impairments. While all of the investments are monitored for potential other-than-temporary impairment, the Company’s analysis and experience indicate that these available for sale investments generally do not present a significant risk of other-than-temporary-impairment, as fair value should recover over time. Factors considered in the Company’s analysis include the reasons for the unrealized loss position, the severity and duration of the unrealized loss position, credit worthiness, and forecasted performance of the investee. While some of the securities held in the investment portfolio have decreased in value since the date of acquisition, the severity of loss and the duration of the loss position are not believed to be significant enough to warrant other-than-temporary impairment of the securities. The Company does not intend, nor is it likely that the Company will be required, to sell these securities before the recovery of the cost basis. Therefore, management does not believe any other-than-temporary impairments exist at September 30, 2014.
Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties. The amortized cost and fair value of securities, excluding trading and available for sale equity securities and the available for sale SWS Warrant, at September 30, 2014 are shown by contractual maturity below (in thousands).
|
|
Available for Sale |
|
Held to Maturity |
|
|
|
Amortized |
|
|
|
Amortized |
|
|
|
|
|
Cost |
|
Fair Value |
|
Cost |
|
Fair Value |
|
Due in one year or less |
|
$ |
122,236 |
|
$ |
122,520 |
|
$ |
— |
|
$ |
— |
|
Due after one year through five years |
|
116,726 |
|
125,768 |
|
25,010 |
|
25,009 |
|
Due after five years through ten years |
|
65,790 |
|
67,928 |
|
1,203 |
|
1,203 |
|
Due after ten years |
|
659,425 |
|
641,825 |
|
4,918 |
|
4,934 |
|
|
|
964,177 |
|
958,041 |
|
31,131 |
|
31,146 |
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities |
|
53,780 |
|
55,005 |
|
30,183 |
|
30,458 |
|
Collateralized mortgage obligations |
|
100,938 |
|
96,982 |
|
58,825 |
|
58,297 |
|
Commercial mortgage-backed securities |
|
596 |
|
656 |
|
— |
|
— |
|
|
|
$ |
1,119,491 |
|
$ |
1,110,684 |
|
$ |
120,139 |
|
$ |
119,901 |
|
The Company realized net gains from its trading securities portfolio of $0.2 million and $1.6 million during the three and nine months ended September 30, 2014, respectively, and a net gain of $0.1 million and a net loss of $2.6 million during the three and nine months ended September 30, 2013, respectively, which are recorded as a component of other noninterest income within the consolidated statements of operations.
Securities with a carrying amount of $910.2 million and $1.0 billion (with a fair value of $929.3 million and $938.1 million, respectively) at September 30, 2014 and December 31, 2013, were pledged to secure public and trust deposits, federal funds purchased and securities sold under agreements to repurchase, and for other purposes as required or permitted by law.
Mortgage-backed securities and collateralized mortgage obligations consist principally of Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) pass-through and participation certificates. GNMA securities are guaranteed by the full faith and credit of the United States, while FNMA and FHLMC securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States.
At September 30, 2014 and December 31, 2013, NLC had investments on deposit in custody for various state insurance departments with carrying values of $9.3 million and $9.4 million, respectively.
|