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Investment securities
9 Months Ended
Sep. 30, 2011
Investment securities [Abstract] 
Investment securities
3. Investment securities

The amortized cost and estimated fair value of investment securities were as follows:

 

                                 
    Amortized
cost		     Gross
unrealized
gains		     Gross
unrealized
losses		     Estimated
fair value		  
    (in thousands)  

September 30, 2011

                                

Investment securities available for sale:

                                

U.S. Treasury and federal agencies

   $ 69,668       1,360       —       $ 71,028  

Obligations of states and political subdivisions

     45,805       1,029       42       46,792  

Mortgage-backed securities:

                                

Government issued or guaranteed

     3,708,714       168,551       227       3,877,038  

Privately issued residential

     1,441,491       7,136       233,549       1,215,078  

Privately issued commercial

     19,446       —         2,617       16,829  

Collateralized debt obligations

     44,064       10,141       2,851       51,354  

Other debt securities

     216,635       4,164       39,946       180,853  

Equity securities

     171,357       8,530       2,981       176,906  
   

 

 

    

 

 

    

 

 

    

 

 

  
      5,717,180       200,911       282,213       5,635,878  
   

 

 

    

 

 

    

 

 

    

 

 

  

Investment securities held to maturity:

                                

Obligations of states and political subdivisions

     184,472       6,942       19       191,395  

Mortgage-backed securities:

                                

Government issued or guaranteed

     686,908       28,507       —         715,415  

Privately issued

     278,433       —         100,052       178,381  

Other debt securities

     12,024       —         —         12,024  
   

 

 

    

 

 

    

 

 

    

 

 

  
      1,161,837       35,449       100,071       1,097,215  
   

 

 

    

 

 

    

 

 

    

 

 

  

Other securities

     376,082       —         —         376,082  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,255,099       236,360       382,284     $ 7,109,175  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

December 31, 2010

                                

Investment securities available for sale:

                                

U.S. Treasury and federal agencies

   $ 61,772       1,680       18     $ 63,434  

Obligations of states and political subdivisions

     59,921       561       57       60,425  

Mortgage-backed securities:

                                

Government issued or guaranteed

     3,146,054       161,298       1,111       3,306,241  

Privately issued residential

     1,677,064       10,578       252,081       1,435,561  

Privately issued commercial

     25,357       —         2,950       22,407  

Collateralized debt obligations

     95,080       24,754       9,078       110,756  

Other debt securities

     310,017       26,883       38,000       298,900  

Equity securities

     119,112       5,098       8,442       115,768  
   

 

 

    

 

 

    

 

 

    

 

 

  
      5,494,377       230,852       311,737       5,413,492  
   

 

 

    

 

 

    

 

 

    

 

 

  

Investment securities held to maturity:

                                

Obligations of states and political subdivisions

     191,119       1,944       694       192,369  

Mortgage-backed securities:

                                

Government issued or guaranteed

     808,108       14,061       —         822,169  

Privately issued

     312,537       —         114,397       198,140  

Other debt securities

     12,575       —         —         12,575  
   

 

 

    

 

 

    

 

 

    

 

 

  
      1,324,339       16,005       115,091       1,225,253  
   

 

 

    

 

 

    

 

 

    

 

 

  

Other securities

     412,709       —         —         412,709  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,231,425       246,857       426,828     $ 7,051,454  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

Gross realized gains on investment securities were $90 thousand and $150 million for the three-month and nine-month periods ended September 30, 2011, respectively. Gross realized losses were not significant in 2011. Gross realized gains and losses on investment securities were not significant during the three-month and nine-month periods ended September 30, 2010. During the second quarter of 2011, the Company sold residential mortgage-backed securities guaranteed by the Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) having an aggregate amortized cost of approximately $1.0 billion which resulted in a gain of $66 million (pre-tax). The Company also sold trust preferred securities and collateralized debt obligations during the second quarter of 2011 having an aggregate amortized cost of $136 million and $100 million, respectively, which resulted in gains of $25 million (pre-tax) and $20 million (pre-tax), respectively. During the first quarter of 2011, the Company sold residential mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac having an aggregate amortized cost of approximately $484 million which resulted in a gain of $39 million (pre-tax).

The Company recognized $10 million and $52 million of pre-tax other-than-temporary impairment losses during the three- and nine-month periods ended September 30, 2011, respectively, related to privately issued mortgage-backed securities. The impairment charges were recognized in light of deterioration of real estate values and continued high levels of delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. Other-than-temporary impairment losses on investment securities of $10 million and $59 million (pre-tax) were recognized by the Company for the three- and nine-month periods ended September 30, 2010. Approximately $12 million of the losses recognized in the second quarter of 2010 related to American Depositary Shares of Allied Irish Banks, p.l.c. (“AIB ADSs”) which were obtained in M&T’s acquisition of a subsidiary of AIB in 2003. The remaining losses in 2010 related to certain privately issued residential mortgage-backed securities and collateralized debt obligations backed by pooled trust preferred securities. The impairment charges related to the AIB ADSs were recognized due to mounting credit and other losses incurred by AIB and significant dilution of AIB common shareholders based on the Irish government’s significant ownership position. The impairment charges related to the privately issued residential mortgage-backed securities were recognized in light of deterioration of housing values in the residential real estate market and a rise in delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. The other-than-temporary impairment losses on debt securities represent management’s estimate of credit losses inherent in the securities considering projected cash flows using assumptions of delinquency rates, loss severities, and other estimates of future collateral performance. The following table displays changes in credit losses for debt securities recognized in earnings for the three months and nine months ended September 30, 2011 and 2010.

 

      000000000       000000000  
    Three months ended September 30  
    2011     2010  
    (in thousands)  

Beginning balance

   $ 298,141       314,263  

Additions for credit losses not previously recognized

     9,642       9,532  

Reductions for increases in cash flows

     (90 )      (108 ) 

Reductions for bond charge-offs

     (23,127 )      (11,812 ) 
   

 

 

    

 

 

  
     

Ending balance

   $ 284,566       311,875  
   

 

 

    

 

 

  

 

      000000000       000000000  
    Nine months ended September 30  
    2011     2010  
    (in thousands)  

Beginning balance

   $ 327,912       284,513  

Additions for credit losses not previously recognized

     52,213       46,721  

Reductions for increases in cash flows

     (5,110 )      (450 ) 

Reductions for bond charge-offs

     (90,449 )      (18,909 ) 
   

 

 

    

 

 

  
     

Ending balance

   $ 284,566       311,875  
   

 

 

    

 

 

  

At September 30, 2011, the amortized cost and estimated fair value of debt securities by contractual maturity were as follows:

 

                 
    Amortized cost     Estimated
fair value		  
    (in thousands)  

Debt securities available for sale:

                

Due in one year or less

   $          23,908       23,994  

Due after one year through five years

     77,765       79,896  

Due after five years through ten years

     15,648       16,947  

Due after ten years

     258,851       229,190  
   

 

 

    

 

 

  
      376,172       350,027  

Mortgage-backed securities available for sale

     5,169,651       5,108,945  
   

 

 

    

 

 

  
    $ 5,545,823       5,458,972  
   

 

 

    

 

 

  
     

Debt securities held to maturity:

                

Due in one year or less

   $ 23,957       24,144  

Due after one year through five years

     21,814       22,731  

Due after five years through ten years

     134,730       140,377  

Due after ten years

     15,995       16,167  
   

 

 

    

 

 

  
      196,496       203,419  

Mortgage-backed securities held to maturity

     965,341       893,796  
   

 

 

    

 

 

  
    $ 1,161,837       1,097,215  
   

 

 

    

 

 

  

 

A summary of investment securities that as of September 30, 2011 and December 31, 2010 had been in a continuous unrealized loss position for less than twelve months and those that had been in a continuous unrealized loss position for twelve months or longer follows:

 

                                 
    Less than 12 months     12 months or more  
    Fair value     Unrealized
losses		     Fair value     Unrealized
losses		  
    (in thousands)  

September 30, 2011

                                

Investment securities available for sale:

                                

Obligations of states and political subdivisions

   $ 656       (5 )      2,389       (37 ) 

Mortgage-backed securities:

                                

Government issued or guaranteed

     46,184       (167 )      3,523       (60 ) 

Privately issued residential

     295,370       (8,164 )      803,491       (225,385 ) 

Privately issued commercial

     —         —         16,829       (2,617 ) 

Collateralized debt obligations

     2,549       (531 )      4,684       (2,320 ) 

Other debt securities

     77,028       (5,252 )      72,961       (34,694 ) 

Equity securities

     9,189       (2,981 )      —         —    
   

 

 

    

 

 

    

 

 

    

 

 

  
      430,976       (17,100 )      903,877       (265,113 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Investment securities held to maturity:

                                

Obligations of states and political subdivisions

     1,542       (11 )      184       (8 ) 

Privately issued mortgage-backed securities

     2,791       (1,116 )      175,590       (98,936 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  
      4,333       (1,127 )      175,774       (98,944 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 435,309       (18,227 )      1,079,651       (364,057 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

                                 
    Less than 12 months     12 months or more  
    Fair value     Unrealized
losses		     Fair value     Unrealized
losses		  
          (in thousands)        

December 31, 2010

                                

Investment securities available for sale:

                                

U.S. Treasury and federal agencies

   $ 27,289       (18 )      —         —    

Obligations of states and political subdivisions

     3,712       (18 )      2,062       (39 ) 

Mortgage-backed securities:

                                

Government issued or guaranteed

     68,507       (1,079 )      2,965       (32 ) 

Privately issued residential

     61,192       (1,054 )      1,057,315       (251,027 ) 

Privately issued commercial

     —         —         22,407       (2,950 ) 

Collateralized debt obligations

     12,462       (6,959 )      6,004       (2,119 ) 

Other debt securities

     2,134       (10 )      88,969       (37,990 ) 

Equity securities

     5,326       (3,721 )      673       (4,721 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  
      180,622       (12,859 )      1,180,395       (298,878 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Investment securities held to maturity:

                                

Obligations of states and political subdivisions

     76,318       (638 )      467       (56 ) 

Privately issued mortgage-backed securities

     —         —         198,140       (114,397 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  
      76,318       (638 )      198,607       (114,453 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 256,940       (13,497 )      1,379,002       (413,331 ) 
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The Company owned 317 individual investment securities with aggregate gross unrealized losses of $382 million at September 30, 2011. Approximately $234 million of the unrealized losses pertained to available-for-sale privately issued residential mortgage-backed securities with a cost basis of $1.3 billion. The Company also had $43 million of unrealized losses on available-for-sale trust preferred securities issued by financial institutions and securities backed by trust preferred securities having a cost basis of $200 million. Based on a review of each of the securities in the investment securities portfolio at September 30, 2011, with the exception of the aforementioned securities for which other-than-temporary impairment losses were recognized, the Company concluded that it expected to recover the amortized cost basis of its investment. As of September 30, 2011, the Company does not intend to sell nor is it anticipated that it would be required to sell any of its impaired investment securities. At September 30, 2011, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $376 million of cost method investment securities.