

NOTE 3 – INVESTMENT SECURITIES

The following tables present the amortized cost and estimated fair values of investment securities, which were all classified as available for sale, as of December 31:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
2017
U.S. Government sponsored agency securities	$	5,962	$	2	$	(26	)	$	5,938
State and municipal securities	405,860		5,638		(2,549		)	408,949
Corporate debt securities	96,353		2,832		(1,876		)	97,309
Collateralized mortgage obligations	611,927		491		(9,795		)	602,623
Residential mortgage-backed securities	1,132,080		3,957		(15,241		)	1,120,796
Commercial mortgage-backed securities	215,351		—		(2,596		)	212,755
Auction rate securities	107,410		—		(8,742		)	98,668
Total debt securities	2,574,943		12,920		(40,825		)	2,547,038
Equity securities	776		142		—			918
Total	$	2,575,719	$	13,062	$	(40,825	)	$	2,547,956

2016
U.S. Government sponsored agency securities	$	132	$	2	$	—		$	134
State and municipal securities	405,274		2,043		(15,676		)	391,641
Corporate debt securities	112,016		1,978		(4,585		)	109,409
Collateralized mortgage obligations	604,095		1,943		(12,178		)	593,860
Residential mortgage-backed securities	1,328,192		6,546		(16,900		)	1,317,838
Commercial mortgage-backed securities	25,100		—		(537		)	24,563
Auction rate securities	107,215		—		(9,959		)	97,256
Total debt securities	2,582,024		12,512		(59,835		)	2,534,701
Equity securities	12,231		12,295		—			24,526
Total	$	2,594,255	$	24,807	$	(59,835	)	$	2,559,227

Securities carried at $1.8 billion at both December 31, 2017 and 2016 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

The amortized cost and estimated fair values of debt securities as of December 31, 2017, 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	$	16,837	$	16,920
Due from one year to five years	33,191		33,565
Due from five years to ten years	112,181		113,164
Due after ten years	453,376		447,215
	615,585		610,864
Residential mortgage-backed securities⁽¹⁾	1,132,080		1,120,796
Commercial mortgage-backed securities⁽¹⁾	215,351		212,755
Collateralized mortgage obligations ⁽¹⁾	611,927		602,623
Total debt securities	$	2,574,943	$	2,547,038


⁽¹⁾	Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans.

The following table presents information related to gross gains and losses on the sales of equity and debt securities:



	Gross Realized Gains		Gross Realized Losses			Net Gains (Losses)
	(in thousands)
2017:
Equity securities	$	13,558	$	—		$	13,558
Debt securities	315		(4,802		)	(4,487		)
Total	$	13,873	$	(4,802	)	$	9,071
2016:
Equity securities	$	2,005	$	(10	)	$	1,995
Debt securities	581		(26		)	555
Total	$	2,586	$	(36	)	$	2,550
2015:
Equity securities	$	6,496	$	(1	)	$	6,495
Debt securities	2,571		—			2,571
Total	$	9,067	$	(1	)	$	9,066

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 December 31:



	2017			2016			2015
	(in thousands)
Balance of cumulative credit losses on debt securities, beginning of year	$	(11,510	)	$	(11,510	)	$	(16,242	)
Reductions for securities sold during the period	—			—			4,730
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—			2
Balance of cumulative credit losses on debt securities, end of year	$	(11,510	)	$	(11,510	)	$	(11,510	)

The credit related other-than-temporary impairment charges for debt securities were determined based on expected cash flows models.

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, 2017. There were no gross unrealized losses on equity securities as of December 31, 2017.



	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	$	5,830	$	(26	)	$	—	$	—		$	5,830	$	(26	)
State and municipal securities	11,650		(50		)	118,297		(2,499		)	129,947		(2,549		)
Corporate debt securities	4,544		(48		)	32,163		(1,828		)	36,707		(1,876		)
Collateralized mortgage obligations	303,932		(2,408		)	187,690		(7,387		)	491,622		(9,795		)
Residential mortgage-backed securities	511,378		(4,348		)	500,375		(10,893		)	1,011,753		(15,241		)
Commercial mortgage-backed securities	190,985		(2,118		)	21,770		(478		)	212,755		(2,596		)
Auction rate securities	—		—			98,668		(8,742		)	98,668		(8,742		)
Total	$	1,028,319	$	(8,998	)	$	958,963	$	(31,827	)	$	1,987,282	$	(40,825	)

For comparative purposes, the following table presents gross unrealized losses and the estimated fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2016.



	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)
State and municipal securities	$	247,509	$	(15,676	)	$	—	$	—		$	247,509	$	(15,676	)
Corporate debt securities	11,922		(110		)	34,629		(4,475		)	46,551		(4,585		)
Collateralized mortgage obligations	166,905		(3,899		)	258,237		(8,279		)	425,142		(12,178		)
Mortgage-backed securities	1,137,510		(17,437		)	—		—			1,137,510		(17,437		)
Auction rate securities	—		—			97,256		(9,959		)	97,256		(9,959		)
Total	$	1,563,846	$	(37,122	)	$	390,122	$	(22,713	)	$	1,953,968	$	(59,835	)

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 fair 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 did not consider these investments to be other-than-temporarily impaired as of December 31, 2017.

As of December 31, 2017, all student loan auction rate certificates ("ARCs") were rated above investment grade. All of the loans underlying the ARCs have principal payments which are guaranteed by the federal government. All of the loans were current and making scheduled payments and, based on management’s evaluations, were not subject to any other-than-temporary impairment charges as of December 31, 2017. 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:



	2017				2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Single-issuer trust preferred securities	$	31,335	$	30,703	$	43,746	$	39,829
Subordinated debt	49,013		49,533		46,231		46,723
Senior notes	12,031		12,392		18,037		18,433
Pooled trust preferred securities	—		707		—		422
Corporate debt securities issued by financial institutions	92,379		93,335		108,014		105,407
Other corporate debt securities	3,974		3,974		4,002		4,002
Available for sale corporate debt securities	$	96,353	$	97,309	$	112,016	$	109,409

Single-issuer trust preferred securities had an unrealized loss of $632,000 as of December 31, 2017. Four of the 18 single-issuer trust preferred securities held were rated below investment grade by at least one ratings agency, with an amortized cost of $4.9 million and an estimated fair value of $4.7 million as of December 31, 2017. All of the single-issuer trust preferred securities rated below investment grade were rated "BB" or "Ba." Two single-issuer trust preferred securities with an amortized cost of $3.8 million and an estimated fair value of $3.1 million as of December 31, 2017 were not rated by any ratings agency.

Based on management’s evaluations, no corporate debt securities were subject to any other-than-temporary impairment charges

as of December 31, 2017. 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.