Investment Securities

The following table presents the amortized cost and estimated fair values of investment securities, which were all classified as available for sale:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
March 31, 2014
Equity securities	$	34,231	$	11,524	$	(21	)	$	45,734
U.S. Government securities	526		—		—			526
U.S. Government sponsored agency securities	275		6		(1		)	280
State and municipal securities	278,019		7,190		(1,756		)	283,453
Corporate debt securities	100,348		6,292		(6,088		)	100,552
Collateralized mortgage obligations	1,031,968		7,638		(32,869		)	1,006,737
Mortgage-backed securities	914,502		13,582		(11,881		)	916,203
Auction rate securities	159,379		2		(11,668		)	147,713
	$	2,519,248	$	46,234	$	(64,284	)	$	2,501,198



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
December 31, 2013
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

Securities carried at $1.8 billion as of March 31, 2014 and $1.7 billion as of December 31, 2013 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Equity securities include common stocks of financial institutions ($39.8 million at March 31, 2014 and $40.6 million at December 31, 2013) and other equity investments ($5.9 million at March 31, 2014 and $5.6 million at December 31, 2013).

As of March 31, 2014, the financial institutions stock portfolio had a cost basis of $28.5 million and a fair value of $39.8 million, including an investment in a single financial institution with a cost basis of $20.0 million and a fair value of $27.9 million. The fair value of this investment accounted for 70.1% of the fair value of the Corporation's investments in the common stocks of publicly traded financial institutions. No other investment within the financial institutions stock portfolio exceeded 5% of the portfolio's fair value.

The amortized cost and estimated fair values of debt securities as of March 31, 2014, 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		$	30,424	$	30,517
Due from one year to five years		67,544		71,350
Due from five years to ten years		199,377		203,240
Due after ten years		241,202		227,417
		538,547		532,524
Mortgage-backed securities		914,502		916,203
Collateralized mortgage obligations		1,031,968		1,006,737
		$	2,485,017	$	2,455,464

There were no losses recognized for the other-than-temporary impairment of investments during the three months ended March 31, 2014 and 2013. The following table presents information related to the gross realized gains and losses on the sales of equity and debt securities:



	Gross Realized Gains		Gross Realized Losses			Net Gains
Three months ended March 31, 2014	(in thousands)
Equity securities	$	1	$	—		$	1
Debt securities	322		(323		)	(1		)
Total	$	323	$	(323	)	$	—
Three months ended March 31, 2013
Equity securities	$	1,139	$	—		$	1,139
Debt securities	1,334		—			1,334
Total	$	2,473	$	—		$	2,473

The following table presents a summary of the cumulative credit related other-than-temporary impairment charges, recognized as components of earnings, for debt securities held by the Corporation at March 31, 2014 and 2013:



	Three months ended March 31
	2014			2013
	(in thousands)
Balance of cumulative credit losses on debt securities, beginning of period	$	(20,691	)	$	(23,079	)
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	4			—
Balance of cumulative credit losses on debt securities, end of period	$	(20,687	)	$	(23,079	)

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, at March 31, 2014:



	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	$	—	$	—		$	50	$	(1	)	$	50	$	(1	)
State and municipal securities	50,286		(1,510		)	3,996		(246		)	54,282		(1,756		)
Corporate debt securities	3,939		(58		)	38,804		(6,030		)	42,743		(6,088		)
Collateralized mortgage obligations	416,584		(13,921		)	313,758		(18,948		)	730,342		(32,869		)
Mortgage-backed securities	621,165		(11,881		)	—		—			621,165		(11,881		)
Auction rate securities	—		—			147,619		(11,668		)	147,619		(11,668		)
Total debt securities	1,091,974		(27,370		)	504,227		(36,893		)	1,596,201		(64,263		)
Equity securities	3		(1		)	118		(20		)	121		(21		)
	$	1,091,977	$	(27,371	)	$	504,345	$	(36,913	)	$	1,596,322	$	(64,284	)

The Corporation’s collateralized mortgage obligations and mortgage-backed securities 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 decline in market value of these securities is 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 does not consider these investments to be other-than-temporarily impaired as of March 31, 2014.

The unrealized holding losses on auction rate securities, or auction rate certificates (ARCs), are attributable to liquidity issues resulting from the failure of periodic auctions. The Corporation had previously purchased ARCs for investment management and trust customers as short-term investments with fair values that could be derived based on periodic auctions under normal market conditions. During 2008 and 2009, the Corporation purchased ARCs from these customers due to the failure of these periodic auctions, which made these previously short-term investments illiquid.

As of March 31, 2014, approximately $143 million, or 97%, of the ARCs were rated above investment grade, with approximately $6 million, or 4%, AAA rated and $103 million, or 70%, AA rated. Approximately $4 million, or 3%, of ARCs were either not rated or rated below investment grade by at least one ratings agency. Of this amount, approximately $3 million, or 59%, of the student loans underlying these ARCs have principal payments which are guaranteed by the federal government. In total, approximately $146 million, or 99%, of the student loans underlying the ARCs have principal payments that are guaranteed by the federal government.

During the first quarter of 2014, the Corporation sold ARCs with a total book value of $11.9 million, with no gain or loss upon sale. As of March 31, 2014, all ARCs were current and making scheduled interest payments. Based on management’s evaluations, ARCs with a fair value of $147.7 million were not subject to any other-than-temporary impairment charges as of March 31, 2014. 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.

For its investments in equity securities, particularly its investments in stocks of financial institutions, management evaluates the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Corporation’s ability and intent to hold those investments for a reasonable period of time sufficient for a recovery of fair value, the Corporation does not consider those investments with unrealized holding losses as of March 31, 2014 to be other-than-temporarily impaired.

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 value of corporate debt securities:



	March 31, 2014				December 31, 2013
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)
Single-issuer trust preferred securities	$	47,502	$	41,879	$	47,481	$	40,531
Subordinated debt	47,436		50,429		47,405		50,327
Pooled trust preferred securities	2,825		5,659		2,997		5,306
Corporate debt securities issued by financial institutions	97,763		97,967		97,883		96,164
Other corporate debt securities	2,585		2,585		2,585		2,585
Available for sale corporate debt securities	$	100,348	$	100,552	$	100,468	$	98,749

The Corporation’s investments in single-issuer trust preferred securities had an unrealized loss of $5.6 million at March 31, 2014. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities during the three months ended March 31, 2014 or 2013. Six of the Corporation's 22 single-issuer trust preferred securities 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 $11.7 million at March 31, 2014. All of the single-issuer trust preferred securities rated below investment grade were rated BB or Ba. Three single-issuer trust preferred securities with an amortized cost of $4.7 million and an estimated fair value of $3.8 million at March 31, 2014 were not rated by any ratings agency.

As of March 31, 2014, all eight of the Corporation's pooled trust preferred securities, with an amortized cost of $2.8 million and an estimated fair value of $5.7 million, were rated below investment grade by at least one ratings agency, with ratings ranging from C to Ca. 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 flows model. The most significant input to the expected cash flows 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 assets 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 $100.6 million were not subject to any additional other-than-temporary impairment charges as of March 31, 2014. 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.