Investment securities

6 Months Ended

Jun. 30, 2012

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)
June 30, 2012
Investment securities available for sale:
U.S. Treasury and federal agencies	$	55,484		1,115		—	$	56,599
Obligations of states and political subdivisions		34,007		569		8		34,568
Mortgage-backed securities:
Government issued or guaranteed		3,840,610		218,117		227		4,058,500
Privately issued residential		1,252,709		5,254		189,571		1,068,392
Privately issued commercial		13,048		—		921		12,127
Collateralized debt obligations		43,749		13,079		1,730		55,098
Other debt securities		158,153		2,034		31,258		128,929
Equity securities		112,337		10,926		3,422		119,841
		5,510,097		251,094		227,137		5,534,054
Investment securities held to maturity:
Obligations of states and political subdivisions		187,936		8,375		30		196,281
Mortgage-backed securities:
Government issued or guaranteed		733,912		31,929		—		765,841
Privately issued		255,291		317		97,220		158,388
Other debt securities		11,326		—		—		11,326
		1,188,465		40,621		97,250		1,131,836
Other securities		334,781		—		—		334,781
Total	$	7,033,343		291,715		324,387	$	7,000,671
December 31, 2011
Investment securities available for sale:
U.S. Treasury and federal agencies	$	69,468		1,255		—	$	70,723
Obligations of states and political subdivisions		39,518		771		20		40,269
Mortgage-backed securities:
Government issued or guaranteed		4,344,116		177,392		275		4,521,233
Privately issued residential		1,369,371		6,373		239,488		1,136,256
Privately issued commercial		17,679		—		2,650		15,029
Collateralized debt obligations		43,834		11,154		2,488		52,500
Other debt securities		216,700		4,588		44,443		176,845
Equity securities		211,737		8,468		4,500		215,705
		6,312,423		210,001		293,864		6,228,560
Investment securities held to maturity:
Obligations of states and political subdivisions		188,680		9,141		28		197,793
Mortgage-backed securities:
Government issued or guaranteed		608,533		24,881		—		633,414
Privately issued		268,642		—		99,140		169,502
Other debt securities		11,853		—		—		11,853
		1,077,708		34,022		99,168		1,012,562
Other securities		366,886		—		—		366,886
Total	$	7,757,017		244,023		393,032	$	7,608,008

Gross realized gains on investment securities were $111 million and $150 million for the three-month and six-month periods ended June 30, 2011. Gross realized gains were not significant in 2012. Gross realized losses on investment securities were not significant during the three-month and six-month periods ended June 30, 2012 or 2011. During the second quarter of 2011, the Company sold residential mortgage-backed securities guaranteed by the Federal National Mortgage Association (“Fannie Mae”) and the 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 pre-tax other-than-temporary impairment losses of $16 million and $28 million during the three months and six months ended June 30, 2012, respectively, and $27 million and $43 million during the three months and six months ended June 30, 2011, respectively, related to privately issued mortgage-backed securities. The impairment charges were recognized in light of deterioration of real estate values and a rise in delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. The other-than-temporary losses represent management’s estimate of credit losses inherent in the debt securities considering projected cash flows using assumptions of delinquency rates, loss severities, and other estimates for future collateral performance.

The following table displays changes in credit losses associated with debt securities for which other-than-temporary impairment losses have been previously recognized in earnings for the three months and six months ended June 30, 2012 and 2011:

	Three months ended June 30
	2012			2011
	(in thousands)
Beginning balance	$	267,473			322,719
Additions for credit losses not previously recognized		16,173			26,530
Reductions for increases in cash flows		—			(4,881	)
Reductions for realized losses		(19,449	)		(46,227	)
Ending balance	$	264,197			298,141
	Six months ended June 30
	2012			2011
	(in thousands)
Beginning balance	$	285,399			327,912
Additions for credit losses not previously recognized		27,659			42,571
Reductions for increases in cash flows		—			(5,020	)
Reductions for realized losses		(48,861	)		(67,322	)
Ending balance	$	264,197			298,141

At June 30, 2012, 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	$	33,314		33,367
Due after one year through five years		40,715		42,082
Due after five years through ten years		11,098		11,886
Due after ten years		206,266		187,859
		291,393		275,194
Mortgage-backed securities available for sale		5,106,367		5,139,019
	$	5,397,760		5,414,213
Debt securities held to maturity:
Due in one year or less	$	30,983		31,166
Due after one year through five years		40,576		42,599
Due after five years through ten years		114,797		120,839
Due after ten years		12,906		13,003
		199,262		207,607
Mortgage-backed securities held to maturity		989,203		924,229
	$	1,188,465		1,131,836

A summary of investment securities that as of June 30, 2012 and December 31, 2011 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)
June 30, 2012
Investment securities available for sale:
Obligations of states and political subdivisions	$	171		(1	)		678		(7	)
Mortgage-backed securities:
Government issued or guaranteed		15,936		(70	)		9,951		(157	)
Privately issued residential		126,139		(1,861	)		841,748		(187,710	)
Privately issued commercial		—		—			12,127		(921	)
Collateralized debt obligations		3,106		(39	)		5,349		(1,691	)
Other debt securities		16,858		(2,053	)		74,206		(29,205	)
Equity securities		8,118		(1,389	)		2,193		(2,033	)
		170,328		(5,413	)		946,252		(221,724	)
Investment securities held to maturity:
Obligations of states and political subdivisions		5,598		(23	)		169		(7	)
Privately issued mortgage-backed securities		—		—			157,659		(97,220	)
		5,598		(23	)		157,828		(97,227	)
Total	$	175,926		(5,436	)		1,104,080		(318,951	)
December 31, 2011
Investment securities available for sale:
Obligations of states and political subdivisions	$	—		—			1,228		(20	)
Mortgage-backed securities:
Government issued or guaranteed		38,492		(190	)		6,017		(85	)
Privately issued residential		297,133		(14,188	)		751,077		(225,300	)
Privately issued commercial		—		—			15,029		(2,650	)
Collateralized debt obligations		2,871		(335	)		4,863		(2,153	)
Other debt securities		72,637		(9,883	)		73,635		(34,560	)
Equity securities		9,883		(4,500	)		—		—
		421,016		(29,096	)		851,849		(264,768	)
Investment securities held to maturity:
Obligations of states and political subdivisions		3,084		(4	)		1,430		(24	)
Privately issued mortgage-backed securities		1,883		(592	)		167,139		(98,548	)
		4,967		(596	)		168,569		(98,572	)
Total	$	425,983		(29,692	)		1,020,418		(363,340	)

The Company owned 290 individual investment securities with aggregate gross unrealized losses of $324 million at June 30, 2012. Approximately $288 million of the unrealized losses pertained to privately issued mortgage-backed securities with a cost basis of $1.4 billion. The Company also had $33 million of unrealized losses on trust preferred securities issued by financial institutions, securities backed by trust preferred securities issued by financial institutions and other entities, and other debt securities having a cost basis of $133 million. Based on a review of each of the remaining securities in the investment securities portfolio at June 30, 2012, 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 June 30, 2012, 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 June 30, 2012, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $335 million of cost method investment securities.