Note 4. Securities

At September 30, 2013, the Company had total securities of $8.60 billion, comprised of securities available-for-sale at fair value of $6.90 billion, securities held-to-maturity at amortized cost of $1.65 billion and trading securities at fair value of $51.5 million. At December 31, 2012, the Company had total securities of $10.72 billion, comprised of securities available-for-sale at fair value of $9.21 billion, securities held-to-maturity at amortized cost of $1.40 billion and trading securities at fair value of $115.1 million.

The following is a summary of amortized cost and estimated fair value for the major categories of securities available-for-sale and securities held-to-maturity at September 30, 2013 and December 31, 2012:

			Gross		Gross
	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
September 30, 2013
Securities available-for-sale:
U.S. Treasury	$	35,400	$	25	$	—		$	35,425
Federal agency - Debt	1,007,019		1,078		(5,650		)	1,002,447
Federal agency - MBS	192,345		7,054		(2,226		)	197,173
CMOs - Federal agency	4,773,336		40,818		(71,570		)	4,742,584
CMOs - Non-agency	44,484		213		(1,385		)	43,312
State and municipal	466,633		10,490		(1,337		)	475,786
Other debt securities	393,377		5,220		(6,241		)	392,356
Total debt securities	6,912,594		64,898		(88,409		)	6,889,083
Equity securities and mutual funds	337		5,710		—			6,047
Total securities available-for-sale	$	6,912,931	$	70,608	$	(88,409	)	$	6,895,130

Securities held-to-maturity (1):
Federal agency - Debt	$	140,020	$	182	$	(4,305	)	$	135,897
Federal agency - MBS	359,952		1,187		(9,753		)	351,386
CMOs - Federal agency	849,600		3,567		(18,158		)	835,009
State and municipal	299,948		660		(14,826		)	285,782
Total securities held-to-maturity	$	1,649,520	$	5,596	$	(47,042	)	$	1,608,074

December 31, 2012
Securities available-for-sale:
U.S. Treasury	$	20,393	$	7	$	(3	)	$	20,397
Federal agency - Debt	2,344,374		5,031		(203		)	2,349,202
Federal agency - MBS	653,428		39,673		(69		)	693,032
CMOs - Federal agency	5,233,126		91,165		(6,038		)	5,318,253
CMOs - Non-agency	62,975		662		(2,124		)	61,513
State and municipal	437,266		17,447		(239		)	454,474
Other debt securities	305,340		7,945		(5,868		)	307,417
Total debt securities	9,056,902		161,930		(14,544		)	9,204,288
Equity securities and mutual funds	336		1,365		—			1,701
Total securities available-for-sale	$	9,057,238	$	163,295	$	(14,544	)	$	9,205,989

Securities held-to-maturity (1):
Federal agency - Debt	$	97,183	$	4,032	$	—		$	101,215
Federal agency - MBS	303,642		11,490		(182		)	314,950
CMOs - Federal agency	745,980		28,973		(382		)	774,571
State and municipal	251,598		5,122		(857		)	255,863
Total securities held-to-maturity	$	1,398,403	$	49,617	$	(1,421	)	$	1,446,599

(1) Securities held-to-maturity are presented in the consolidated balance sheets at amortized cost.

Proceeds from sales of securities available-for-sale were $584.7 million and $1.84 billion for the three and nine months ended September 30, 2013, respectively, compared with $1.0 million and $6.2 million for the three and nine months ended September 30, 2012, respectively. There were no sales of securities held-to-maturity during the three and nine months ended September 30, 2013 and September 30, 2012. The following table provides the gross realized gains and losses on the sales and calls of securities (including trading securities):

	For the three months ended						For the nine months ended
	September 30,						September 30,
(in thousands)	2013			2012			2013			2012
Gross realized gains	$	17,533		$	1,315		$	24,369		$	1,851
Gross realized losses	(11,745		)	(459		)	(11,745		)	(825		)
Net realized gains	$	5,788		$	856		$	12,624		$	1,026

Interest income on securities for the three months ended September 30, 2013 and 2012 is comprised of: (i) taxable interest income of $35.5 million and $40.0 million, respectively (ii) nontaxable interest income of $4.5 million and $4.1 million, respectively, and (iii) dividend income of $19 thousand and $0.1 million, respectively. Interest income on securities for the nine months ended September 30, 2013 and 2012 is comprised of: (i) taxable interest income of $112.1 million and $120.8 million, respectively (ii) nontaxable interest income of $13.3 million and $12.0 million, respectively, and (iii) dividend income of $0.1 million and $0.3 million, respectively.

The following table provides the expected remaining maturities of debt securities included in the securities portfolio at September 30, 2013, except for maturities of mortgage-backed securities which are allocated according to the average life of expected cash flows. Average expected maturities will differ from contractual maturities because of the amortizing nature of the loan collateral and prepayment behavior of borrowers.

(in thousands)	One year or less		Over 1 year through 5 years		Over 5 years through 10 years		Over 10 years		Total

Securities available-for-sale:
U.S. Treasury	$	12,078	$	23,347	$	—	$	—	$	35,425
Federal agency - Debt	317,377		625,652		59,418		—		1,002,447
Federal agency - MBS	—		68,967		128,206		—		197,173
CMOs - Federal agency	128,236		3,706,036		908,312		—		4,742,584
CMOs - Non-agency	111		9,218		33,983		—		43,312
State and municipal	39,865		355,575		72,650		7,696		475,786
Other	12,726		292,812		86,818		—		392,356
Total debt securities available-for-sale	$	510,393	$	5,081,607	$	1,289,387	$	7,696	$	6,889,083

Amortized cost	$	507,840	$	5,082,693	$	1,314,292	$	7,769	$	6,912,594

Securities held-to-maturity:
Federal agency - Debt	$	—	$	7,000	$	60,022	$	72,998	$	140,020
Federal agency - MBS	—		14,646		340,827		4,479		359,952
CMOs - Federal agency	—		181,723		667,877		—		849,600
State and municipal	659		8,749		142,020		148,520		299,948
Total debt securities held-to-maturity at amortized cost	$	659	$	212,118	$	1,210,746	$	225,997	$	1,649,520

Impairment Assessment

The Company performs a quarterly assessment of the debt and equity securities in its investment portfolio that have an unrealized loss to determine whether the decline in the fair value of these securities below their cost is other-than-temporary. Impairment of debt securities is considered other-than-temporary when it becomes probable that an investor will be unable to collect all amounts due according to the contractual terms of the security. Impairment of equity securities is considered other-than-temporary when uncertainty exists as to whether an investor will be able to recover the cost of an investment. The Company’s impairment assessment takes into consideration the following factors as applicable to the security being analyzed: the length of time and the extent to which the market value has been less than cost; the financial condition and near-term prospects of the issuer, including events specific to the issuer or industry; defaults or deferrals of scheduled interest, principal or dividend payments; external credit ratings and recent downgrades; and whether the Company intends to sell the security and whether it is more likely than not it will be required to sell the security prior to recovery of its amortized cost basis. If a decline in fair value is judged to be other than temporary, the cost basis of the individual security is written down to fair value which then becomes the new cost basis. The new cost basis is not adjusted for subsequent recoveries in fair value.

When there are credit losses associated with an impaired debt security and the Company does not have the intent to sell the security and it is more likely than not that it will not have to sell the security before recovery of its cost basis, the Company will separate the amount of the impairment into the amount that is credit-related and the amount related to non-credit factors. The credit-related impairment is recognized in Net impairment loss recognized in earnings in the consolidated statements of income. The non-credit-related impairment is recognized in AOCI.

Securities Deemed to be Other-Than-Temporarily Impaired

The Company recorded impairment losses in earnings on securities available-for-sale of $0.1 million and $0.3 million for the three and nine months ended September 30, 2013, respectively. Impairment losses of $39 thousand and $0.2 million were recognized in earnings for the three and nine months ended September 30, 2012. There was no non-credit related other-than-temporary impairment recognized in AOCI on securities available-for-sale at September 30, 2013. The Company recognized $1.5 million of non-credit-related other-than-temporary impairment in AOCI on securities available-for-sale at September 30, 2012. No impairment losses were recognized in earnings or AOCI for securities held-to-maturity during the three and nine months ended September 30, 2013 and 2012.

The following table summarizes the changes in cumulative credit-related other-than-temporary impairment recognized in earnings for debt securities for the three and nine months ended September 30, 2013 and 2012. Credit-related other-than-temporary impairment that was recognized in earnings is reflected as an “Initial credit-related impairment” if the period reported is the first time the security had a credit impairment. A credit-related other-than-temporary impairment is reflected as a “Subsequent credit-related impairment” if the period reported is not the first time the security had a credit impairment. Cumulative impairment is reduced for securities with previously recognized credit-related impairment that were sold or redeemed during the period. Cumulative impairment is further adjusted for other changes in expected cash flows.

	For the three months ended September 30,						For the nine months ended September 30,
(in thousands)	2013			2012			2013			2012
Balance, beginning of period	$	3,654		$	17,366		$	16,486		$	17,531
Subsequent credit-related impairment	144			39			326			217
Reduction for securities sold or redeemed	—			(537		)	(12,761		)	(537		)
Reduction for increase in expected cash flows on securities for which OTTI was previously recognized	(421		)	(267		)	(674		)	(610		)
Balance, end of period	$	3,377		$	16,601		$	3,377		$	16,601

Non-Agency CMOs

The Company held $33.8 million of variable rate non-agency CMOs at September 30, 2013. The Company determined that one non-agency CMO with a fair value of $6.0 million was other-than-temporarily impaired at September 30, 2013. These CMOs have a fixed interest rate for an initial period after which they become variable-rate instruments with annual rate resets. For purposes of projecting future cash flows, the current fixed coupon was used through the reset date for each security. The prevailing LIBOR/Treasury forward curve as of the measurement date was used to project all future floating-rate cash flows based on the characteristics of each security. Other factors considered in the projection of future cash flows include the current level of subordination from other CMO classes, anticipated prepayment rates, cumulative defaults and loss given default. The Company recognized $0.1 million and $0.3 million of credit-related impairment losses in earnings on its investment in one variable rate non-agency CMO for the three and nine months ended September 30, 2013, respectively. Impairment losses of $39 thousand and $0.2 million were recognized in earnings on variable rate non-agency CMOs for the three and nine months ended September 30, 2012. No other-than-temporary impairment was recognized in AOCI on the impaired CMO security at September 30, 2013. The non-credit portion of other-than-temporarily impairment recognized at September 30, 2012 was attributed to external market conditions, primarily the lack of liquidity in these securities, resulting in an increase in interest rate spreads for these securities. The Company also holds $9.5 million in fixed rate non-agency CMOs at September 30, 2013, none of which have experienced any other-than-temporary impairment.

The following table provides a summary of the gross unrealized losses and fair value of investment securities that are not deemed to be other-than-temporarily impaired aggregated by investment category and length of time that the securities have been in a continuous unrealized loss position as of September 30, 2013 and December 31, 2012. The table also includes investment securities that had both a credit-related impairment recognized in earnings and a non-credit-related impairment recognized in AOCI.

	Less than 12 months				12 months or greater				Total
(in thousands)	Fair Value		Estimated Unrealized Loss		Fair Value		Estimated Unrealized Loss		Fair Value		Estimated Unrealized Loss
September 30, 2013
Securities available-for-sale:
Federal agency - Debt	$	611,954	$	5,650	$	—	$	—	$	611,954	$	5,650
Federal agency - MBS (1)	45,176		2,226		45		—		45,221		2,226
CMOs - Federal agency	2,774,796		69,757		96,544		1,813		2,871,340		71,570
CMOs - Non-agency	14,620		517		8,432		868		23,052		1,385
State and municipal	90,545		328		46,216		1,009		136,761		1,337
Other debt securities	118,698		1,231		15,372		5,010		134,070		6,241
Total securities available-for-sale	$	3,655,789	$	79,709	$	166,609	$	8,700	$	3,822,398	$	88,409

Securities held-to-maturity:
Federal agency - Debt	$	128,715	$	4,305	$	—	$	—	$	128,715	$	4,305
Federal agency - MBS	231,160		9,753		—		—		231,160		9,753
CMOs - Federal agency	583,595		18,158		—		—		583,595		18,158
State and municipal	229,562		14,826		—		—		229,562		14,826
Total securities held-to-maturity	$	1,173,032	$	47,042	$	—	$	—	$	1,173,032	$	47,042

(1) The estimated gross unrealized loss for federal agency MBS securities in a continuous unrealized loss position of 12 months or greater was an insignificant amount as of September 30, 2013.

	Less than 12 months				12 months or greater				Total
(in thousands)	Fair Value		Estimated Unrealized Loss		Fair Value		Estimated Unrealized Loss		Fair Value		Estimated Unrealized Loss
December 31, 2012
Securities available-for-sale:
U.S. Treasury	$	5,096	$	3	$	—	$	—	$	5,096	$	3
Federal agency - Debt	346,136		203		—		—		346,136		203
Federal agency - MBS (1)	50,932		69		46		—		50,978		69
CMOs - Federal agency	1,413,367		5,994		13,565		44		1,426,932		6,038
CMOs - Non-agency	—		—		25,484		2,124		25,484		2,124
State and municipal	85,550		225		810		14		86,360		239
Other debt securities	39,877		49		16,038		5,819		55,915		5,868
Total securities available-for-sale	$	1,940,958	$	6,543	$	55,943	$	8,001	$	1,996,901	$	14,544

Securities held-to-maturity:
Federal agency - MBS	$	31,514	$	182	$	—	$	—	$	31,514	$	182
CMOs - Federal agency	60,998		382		—		—		60,998		382
State and municipal	64,344		857		—		—		64,344		857
Total securities held-to-maturity	$	156,856	$	1,421	$	—	$	—	$	156,856	$	1,421

(1) The estimated gross unrealized loss for federal agency MBS securities in a continuous unrealized loss position of 12 months or greater was an insignificant amount as of December 31, 2012.

At September 30, 2013, the Company had $3.82 billion of securities available-for-sale and $1.17 billion of securities held-to-maturity in an unrealized loss position. The debt securities in an unrealized loss position totaled 688 and included 32 federal agency debt securities, 26 federal agency MBS securities, 161 federal agency CMOs, 6 non-agency CMOs, 454 state and municipal securities and 9 other debt securities. The increase in unrealized losses on debt securities from year-end 2012 is attributed to higher market interest rates in the current period.

Other debt securities include the Company’s investment in one highly-rated corporate debt and collateralized bond obligation backed by trust preferred securities (“CDOs”) issued by a geographically diverse pool of small- and medium-sized financial institutions. The CDO held in securities available-for-sale at September 30, 2013 is the most senior tranche of the issue. Trading activity for the type of CDO held by the Company has been limited since 2008. Accordingly, the fair value of this security was determined using an internal pricing model that incorporates assumptions about discount rates in an illiquid market, projected cash flows and collateral performance. The CDO had a $5.0 million net unrealized loss at September 30, 2013, which the Company attributes to the illiquid credit markets. The CDO has collateral that well exceeds the outstanding debt. The security valuation reflects the current and prospective performance of the issuers whose debt is contained in the asset pools. The Company expects to receive all remaining contractual principal and interest payments due on its CDO. Additionally, the Company does not intend to sell this security, and it is not more likely than not that it will be required to sell the security before it recovers the cost basis of its investment.

At December 31, 2012, the Company had $2.00 billion of securities available-for-sale in an unrealized loss position, consisting of $1.98 billion of temporarily impaired securities and $16.2 million of securities that had non-credit related impairment recognized in AOCI. At December 31, 2012, the Company had $156.9 million of securities held-to-maturity in an unrealized loss position. At December 31, 2012, the Company had 231 debt securities available-for-sale and held-to-maturity in an unrealized loss position. The debt securities in an unrealized loss position include 2 U.S. Treasury note, 8 federal agency debt securities, 7 federal agency MBS, 53 federal agency CMOs, 4 non-agency CMOs, 152 state and municipal securities and 5 other debt securities.