|
Note 3. Investment Securities
Investment securities available-for-sale were as follows:
|
|
|
Amortized |
|
Gross |
|
Gross |
|
|
|
|
(Dollars in thousands) |
|
Cost |
|
Unrealized Gains |
|
Unrealized Losses |
|
Fair Value |
|
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and Federal agencies securities |
|
$ |
356,144 |
|
$ |
10,475 |
|
$ |
(113 |
) |
$ |
366,506 |
|
|
U.S. States and political subdivisions securities |
|
104,498 |
|
6,187 |
|
(674 |
) |
110,011 |
|
|
Mortgage-backed securities — Federal agencies |
|
315,188 |
|
11,806 |
|
(74 |
) |
326,920 |
|
|
Corporate debt securities |
|
36,461 |
|
386 |
|
(186 |
) |
36,661 |
|
|
Foreign government and other securities |
|
5,699 |
|
32 |
|
(1 |
) |
5,730 |
|
|
Total debt securities |
|
817,990 |
|
28,886 |
|
(1,048 |
) |
845,828 |
|
|
Marketable equity securities |
|
2,346 |
|
2,338 |
|
(5 |
) |
4,679 |
|
|
Total investment securities available-for-sale |
|
$ |
820,336 |
|
$ |
31,224 |
|
$ |
(1,053 |
) |
$ |
850,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and Federal agencies securities |
|
$ |
442,612 |
|
$ |
5,546 |
|
$ |
(849 |
) |
$ |
447,309 |
|
|
U.S. States and political subdivisions securities |
|
147,679 |
|
4,381 |
|
(1,753 |
) |
150,307 |
|
|
Mortgage-backed securities — Federal agencies |
|
309,046 |
|
7,854 |
|
(232 |
) |
316,668 |
|
|
Corporate debt securities |
|
45,778 |
|
182 |
|
(345 |
) |
45,615 |
|
|
Foreign government and other securities |
|
5,732 |
|
18 |
|
(34 |
) |
5,716 |
|
|
Total debt securities |
|
950,847 |
|
17,981 |
|
(3,213 |
) |
965,615 |
|
|
Marketable equity securities |
|
1,254 |
|
2,152 |
|
(3 |
) |
3,403 |
|
|
Total investment securities available-for-sale |
|
$ |
952,101 |
|
$ |
20,133 |
|
$ |
(3,216 |
) |
$ |
969,018 |
|
At September 30, 2011 and December 31, 2010, the residential mortgage-backed securities we held consisted primarily of GNMA, FNMA and FHLMC pass-through certificates which are guaranteed by those respective agencies of the United States government (or Government Sponsored Enterprise, GSEs).
The contractual maturities of debt securities available-for-sale at September 30, 2011 are shown below. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
(Dollars in thousands) |
|
Amortized Cost |
|
Fair Value |
|
|
Due in one year or less |
|
$ |
37,493 |
|
$ |
37,748 |
|
|
Due after one year through five years |
|
334,790 |
|
343,533 |
|
|
Due after five years through ten years |
|
123,342 |
|
131,124 |
|
|
Due after ten years |
|
7,177 |
|
6,503 |
|
|
Mortgage-backed securities |
|
315,188 |
|
326,920 |
|
|
Total debt securities available-for-sale |
|
$ |
817,990 |
|
$ |
845,828 |
|
The following table shows the gross realized gains and losses on sale of securities from the securities available-for-sale portfolio, including marketable equity securities. Realized gains and losses on the sales of all securities are computed using the specific identification cost basis. The gross gains and losses in the first nine months of 2011 primarily reflect the sale of municipal, Farmer Mac, FHLB, corporate and FFCB debt securities. The sale of municipal securities was to reduce credit risk exposure in certain states. The action to sell agency securities was to improve future yield. There was no impact to other than temporary impairment (OTTI) as a result of the 2011 sales. The gross gains and losses in the first nine months of 2010 primarily reflect the disposition of FNMA and FHLMC debt securities. There were no OTTI write-downs in 2011 or 2010.
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
(Dollars in thousands) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
Gross realized gains |
|
$ |
63 |
|
$ |
— |
|
$ |
1,662 |
|
$ |
292 |
|
|
Gross realized losses |
|
(46 |
) |
(24 |
) |
(284 |
) |
(36 |
) |
|
Net realized gains (losses) |
|
$ |
17 |
|
$ |
(24 |
) |
$ |
1,378 |
|
$ |
256 |
|
There were net losses of $19 thousand for the nine months ended September 30, 2011 and no gains or losses for the nine months ended September 30, 2010 on $0.12 million and $0.14 million in trading securities outstanding at September 30, 2011 and at December 31, 2010, respectively.
The following tables summarize our gross unrealized losses and fair value by investment category and age:
|
|
|
Less than 12 Months |
|
12 months or Longer |
|
Total |
|
|
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
|
(Dollars in thousands) |
|
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
|
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and Federal agencies securities |
|
$ |
39,887 |
|
$ |
(113 |
) |
$ |
— |
|
$ |
— |
|
$ |
39,887 |
|
$ |
(113 |
) |
|
U.S. States and political subdivisions securities |
|
— |
|
— |
|
6,503 |
|
(674 |
) |
6,503 |
|
(674 |
) |
|
Mortgage-backed securities - Federal agencies |
|
19,777 |
|
(59 |
) |
3,965 |
|
(14 |
) |
23,742 |
|
(73 |
) |
|
Corporate debt securities |
|
10,245 |
|
(72 |
) |
3,410 |
|
(115 |
) |
13,655 |
|
(187 |
) |
|
Foreign government and other securities |
|
1,004 |
|
(1 |
) |
— |
|
— |
|
1,004 |
|
(1 |
) |
|
Total debt securities |
|
70,913 |
|
(245 |
) |
13,878 |
|
(803 |
) |
84,791 |
|
(1,048 |
) |
|
Marketable equity securities |
|
4 |
|
(1 |
) |
3 |
|
(4 |
) |
7 |
|
(5 |
) |
|
Total investment securities available-for-sale |
|
$ |
70,917 |
|
$ |
(246 |
) |
$ |
13,881 |
|
$ |
(807 |
) |
$ |
84,798 |
|
$ |
(1,053 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and Federal agencies securities |
|
$ |
158,497 |
|
$ |
(849 |
) |
$ |
— |
|
$ |
— |
|
$ |
158,497 |
|
$ |
(849 |
) |
|
U.S. States and political subdivisions securities |
|
9,226 |
|
(246 |
) |
9,055 |
|
(1,507 |
) |
18,281 |
|
(1,753 |
) |
|
Mortgage-backed securities - Federal agencies |
|
23,351 |
|
(213 |
) |
4,887 |
|
(19 |
) |
28,238 |
|
(232 |
) |
|
Corporate debt securities |
|
26,407 |
|
(345 |
) |
— |
|
— |
|
26,407 |
|
(345 |
) |
|
Foreign government and other securities |
|
3,015 |
|
(34 |
) |
— |
|
— |
|
3,015 |
|
(34 |
) |
|
Total debt securities |
|
220,496 |
|
(1,687 |
) |
13,942 |
|
(1,526 |
) |
234,438 |
|
(3,213 |
) |
|
Marketable equity securities |
|
— |
|
— |
|
5 |
|
(3 |
) |
5 |
|
(3 |
) |
|
Total investment securities available-for-sale |
|
$ |
220,496 |
|
$ |
(1,687 |
) |
$ |
13,947 |
|
$ |
(1,529 |
) |
$ |
234,443 |
|
$ |
(3,216 |
) |
The initial indication of OTTI for both debt and equity securities is a decline in fair value below amortized cost. Quarterly, the impaired securities are analyzed on a qualitative and quantitative basis in determining OTTI. Declines in the fair value of available-for-sale debt securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of impairment related to other factors is recognized in other comprehensive income. In estimating OTTI impairment losses, we consider among other things, (i) the length of time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) whether it is more likely than not that we will not have to sell any such securities before a recovery of cost.
At September 30, 2011, we do not have the intent to sell any of the available-for-sale securities in the table above and believe that it is more likely than not that we will not have to sell any such securities before an anticipated recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased and market illiquidity on auction rate securities which are reflected in U.S. States and Political subdivisions securities. The fair value is expected to recover on all debt securities as they approach their maturity date or repricing date or if market yields for such investments decline. We do not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of September 30, 2011, we believe the impairments detailed in the table above are temporary and no impairment loss has been realized in our consolidated statements of income.
At September 30, 2011 and December 31, 2010, investment securities with carrying values of $275.36 million and $299.88 million, respectively, were pledged as collateral to secure government deposits, security repurchase agreements, and for other purposes. |