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Investment Securities
 12 Months Ended
Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
NOTE C – INVESTMENT SECURITIES
The following tables present the amortized cost and estimated fair values of investment securities as of December 31:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
(in thousands)
2013 Available for Sale
 
 
 
 
 
 
 
Equity securities
$
33,922

 
$
12,355

 
$
(76
)
 
$
46,201

U.S. Government securities
525

 
—

 
—

 
525

U.S. Government sponsored agency securities
720

 
7

 
(1
)
 
726

State and municipal securities
281,810

 
6,483

 
(3,444
)
 
284,849

Corporate debt securities
100,468

 
5,685

 
(7,404
)
 
98,749

Collateralized mortgage obligations
1,069,138

 
8,036

 
(44,776
)
 
1,032,398

Mortgage-backed securities
949,328

 
13,881

 
(17,497
)
 
945,712

Auction rate securities
172,299

 
234

 
(13,259
)
 
159,274

 
$
2,608,210

 
$
46,681

 
$
(86,457
)
 
$
2,568,434

2012 Held to Maturity
 
 
 
 
 
 
 
Mortgage-backed securities
$
292

 
$
27

 
$
—

 
$
319

 
 
 
 
 
 
 
 
2012 Available for Sale
 
 
 
 
 
 
 
Equity securities
$
45,530

 
$
5,016

 
$
(918
)
 
$
49,628

U.S. Government securities
325

 
—

 
—

 
325

U.S. Government sponsored agency securities
2,376

 
21

 
—

 
2,397

State and municipal securities
301,842

 
13,763

 
(86
)
 
315,519

Corporate debt securities
112,162

 
7,858

 
(7,178
)
 
112,842

Collateralized mortgage obligations
1,195,234

 
16,008

 
(123
)
 
1,211,119

Mortgage-backed securities
847,790

 
31,831

 
—

 
879,621

Auction rate securities
174,026

 
—

 
(24,687
)
 
149,339

 
$
2,679,285

 
$
74,497

 
$
(32,992
)
 
$
2,720,790



Securities carried at $1.7 billion and $1.8 billion as of December 31, 2013 and 2012 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Available for sale equity securities include common stocks of financial institutions ($40.6 million at December 31, 2013 and $44.2 million at December 31, 2012) and other equity investments ($5.6 million at December 31, 2013 and $5.4 million at December 31, 2012).
As of December 31, 2013, the financial institutions stock portfolio had a cost basis of $28.5 million and a fair value of $40.6 million, including an investment in a single financial institution with a cost basis of $20.0 million and a fair value of $29.3 million. This investment accounted for 72.1% of the Corporation's investments in the common stocks of publicly traded financial institutions. No other investment in the financial institutions stock portfolio exceeded 5% of the portfolio's fair value.
The amortized cost and estimated fair value of debt securities as of December 31, 2013, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Amortized
Cost
 
Estimated
Fair Value
 
(in thousands)
 
 
Due in one year or less
$
31,717

 
$
31,846

Due from one year to five years
63,649

 
67,311

Due from five years to ten years
200,862

 
202,764

Due after ten years
259,594

 
242,202

 
555,822

 
544,123

Collateralized mortgage obligations
1,069,138

 
1,032,398

Mortgage-backed securities
949,328

 
945,712

 
$
2,574,288

 
$
2,522,233


The following table presents information related to gains and losses on the sales of equity and debt securities, and losses recognized for other-than-temporary impairment of investments:
 
Gross
Realized
Gains
 
Gross
Realized
Losses
 
Other-
than-
temporary
Impairment
Losses
 
Net
Gains (Losses)
 
(in thousands)
2013:
 
 
 
 
 
 
 
Equity securities
$
3,787

 
$
(28
)
 
$
(27
)
 
$
3,732

Debt securities
4,391

 
(22
)
 
(97
)
 
4,272

Total
$
8,178

 
$
(50
)
 
$
(124
)
 
$
8,004

2012:
 
 
 
 
 
 
 
Equity securities
$
1,215

 
$
—

 
$
(356
)
 
$
859

Debt securities
2,620

 
—

 
(453
)
 
2,167

Total
$
3,835

 
$
—

 
$
(809
)
 
$
3,026

2011:
 
 
 
 
 
 
 
Equity securities
$
835

 
$
—

 
$
(1,212
)
 
$
(377
)
Debt securities
6,655

 
(19
)
 
(1,698
)
 
4,938

Total
$
7,490

 
$
(19
)
 
$
(2,910
)
 
$
4,561



The following table presents a summary of other-than-temporary impairment charges recorded as decreases to investment securities gains on the consolidated statements of income, by investment security type:
 
2013
 
2012
 
2011
 
(in thousands)
Equity securities - financial institution stocks
$
27

 
$
356

 
$
1,212

Pooled trust preferred securities
97

 
19

 
1,406

Auction rate securities
—

 
434

 
292

Total debt securities
97

 
453

 
1,698

Total other-than-temporary impairment charges
$
124

 
$
809

 
$
2,910



Other-than-temporary impairment charges related to financial institutions stocks were due to the severity and duration of the declines in fair values of certain bank stock holdings, in conjunction with management’s evaluation of the near-term prospects of each specific issuer. The credit related other-than-temporary impairment charges for debt securities were determined based on expected cash flows models.
The following table presents changes in the cumulative credit related other-than-temporary impairment charges, recognized as components of earnings, for debt securities still held by the Corporation at December 31:
 
2013
 
2012
 
2011
 
(in thousands)
Balance of cumulative credit losses on debt securities, beginning of year
$
(23,079
)
 
$
(22,781
)
 
$
(27,560
)
Additions for credit losses recorded which were not previously recognized as components of earnings
(97
)
 
(453
)
 
(1,698
)
Reductions for securities sold
2,468

 
—

 
6,400

Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security
17

 
155

 
77

Balance of cumulative credit losses on debt securities, end of year
$
(20,691
)
 
$
(23,079
)
 
$
(22,781
)


The following table presents the gross unrealized losses and estimated fair values of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2013:
 
Less Than 12 months
 
12 Months or Longer
 
Total
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
 
(in thousands)
U.S. Government sponsored agency securities
$
—

 
$
—

 
$
48

 
$
(1
)
 
$
48

 
$
(1
)
State and municipal securities
57,360

 
(3,132
)
 
3,203

 
(312
)
 
60,563

 
(3,444
)
Corporate debt securities
7,473

 
(236
)
 
37,642

 
(7,168
)
 
45,115

 
(7,404
)
Collateralized mortgage obligations
732,774

 
(42,837
)
 
21,070

 
(1,939
)
 
753,844

 
(44,776
)
Mortgage-backed securities
669,546

 
(17,497
)
 
—

 
—

 
669,546

 
(17,497
)
Auction rate securities
—

 
—

 
157,806

 
(13,259
)
 
157,806

 
(13,259
)
Total debt securities
1,467,153

 
(63,702
)
 
219,769

 
(22,679
)
 
1,686,922

 
(86,381
)
Equity securities
—

 
—

 
903

 
(76
)
 
903

 
(76
)
 
$
1,467,153

 
$
(63,702
)
 
$
220,672

 
$
(22,755
)
 
$
1,687,825

 
$
(86,457
)


The Corporation’s mortgage-backed securities and collateralized mortgage obligations have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the declines in market values of state and municipal securities, collateralized mortgage obligations and mortgage-backed securities are attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, the Corporation did not consider those investments to be other-than-temporarily impaired as of December 31, 2013.
The unrealized holding losses on student loan auction rate securities, also known as auction rate certificates (ARCs) are attributable to liquidity issues resulting from the failure of periodic auctions. As of December 31, 2013, approximately $151 million, or 95%, of the ARCs were rated above investment grade, with approximately $8 million, or 5%, AAA rated and $104 million, or 65%, AA rated. Approximately $8 million, or 5%, of ARCs were either not rated or rated below investment grade by at least one ratings agency. Of this amount, approximately $5 million, or 61%, of the loans underlying these ARCs have principal payments which are guaranteed by the federal government. In total, approximately $155 million, or 98%, of the loans underlying the ARCs have principal payments which are guaranteed by the federal government. As of December 31, 2013, all ARCs were current and making scheduled interest payments. Based on management’s evaluations, ARCs with a fair value of $159.3 million were not subject to any other-than-temporary impairment charges as of December 31, 2013. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
The majority of the Corporation’s available for sale corporate debt securities are issued by financial institutions. The following table presents the amortized cost and estimated fair values of corporate debt securities as of December 31:
 
2013
 
2012
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
(in thousands)
Single-issuer trust preferred securities
$
47,481

 
$
40,531

 
$
56,834

 
$
51,656

Subordinated debt
47,405

 
50,327

 
47,286

 
51,747

Pooled trust preferred securities
2,997

 
5,306

 
5,530

 
6,927

Corporate debt securities issued by financial institutions
97,883

 
96,164

 
109,650

 
110,330

Other corporate debt securities
2,585

 
2,585

 
2,512

 
2,512

Available for sale corporate debt securities
$
100,468

 
$
98,749

 
$
112,162

 
$
112,842



The Corporation’s investments in single-issuer trust preferred securities had an unrealized loss of $7.0 million as of December 31, 2013. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities in 2013, 2012 or 2011. The Corporation held six single-issuer trust preferred securities that were rated below investment grade by at least one ratings agency, with an amortized cost of $13.5 million and an estimated fair value of $11.3 million as of December 31, 2013. The majority of the single-issuer trust preferred securities rated below investment grade were rated BB or Ba. Single-issuer trust preferred securities with an amortized cost of $4.7 million and an estimated fair value of $3.8 million as of December 31, 2013 were not rated by any ratings agency.
The Corporation held eight pooled trust preferred securities, as of December 31, 2013, with an amortized cost of $3.0 million and an estimated fair value of $5.3 million, that were rated below investment grade by at least one ratings agency, with ratings ranging from C to Ca. For each of these securities, the class of securities held by the Corporation was below the most senior tranche, with the Corporation’s interests being subordinate to other investors in the pool. The Corporation determines the fair value of pooled trust preferred securities based on quotes provided by third-party brokers.

The amortized cost of pooled trust preferred securities is the purchase price of the securities, net of cumulative credit related other-than-temporary impairment charges, determined using an expected cash flow model. The most significant input to the expected cash flow model is the expected payment deferral rate for each pooled trust preferred security. The Corporation evaluates the financial metrics, such as capital ratios and non-performing asset ratios, of the individual financial institution issuers that comprise each pooled trust preferred security to estimate its expected deferral rate.
Based on management's evaluations, corporate debt securities with a fair value of $98.7 million were not subject to any additional other-than-temporary impairment charges as of December 31, 2013. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.