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Investment Securities
9 Months Ended
Sep. 30, 2012
Investment Securities

Note 6. Investment Securities

As of September 30, 2012, Valley had approximately $1.6 billion, $673.9 million, and $22.1 million in held to maturity, available for sale, and trading investment securities, respectively. Valley’s investment portfolios include private label mortgage-backed securities, trust preferred securities principally issued by bank holding companies (including three pooled trust preferred securities), corporate bonds primarily issued by banks, and perpetual preferred and common equity securities issued by banks. These investments may pose a higher risk of future impairment charges by Valley as a result of the unpredictable nature of the U.S. economy and its potential negative effect on the future performance of the security issuers and, if applicable, the underlying mortgage loan collateral of the security. See the “Other-Than-Temporary Impairment Analysis” section below for further discussion.

 

Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of securities held to maturity at September 30, 2012 and December 31, 2011 were as follows:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  
     (in thousands)  

September 30, 2012

          

U.S. Treasury securities

   $ 99,906       $ 16,355       $ -      $ 116,261   

Obligations of states and political subdivisions

     492,617         26,030         (77     518,570   

Residential mortgage-backed securities

     852,375         33,898         (117     886,156   

Trust preferred securities

     127,510         1,067         (17,176     111,401   

Corporate and other debt securities

     52,167         4,858         -        57,025   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total investment securities held to maturity

   $ 1,624,575       $ 82,208       $ (17,370   $ 1,689,413   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2011

          

U.S. Treasury securities

   $ 100,018       $ 13,841       $ -      $ 113,859   

Obligations of states and political subdivisions

     433,284         19,931         (14     453,201   

Residential mortgage-backed securities

     1,180,104         51,041         (152     1,230,993   

Trust preferred securities

     193,312         4,308         (22,867     174,753   

Corporate and other debt securities

     52,198         3,799         (1,606     54,391   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total investment securities held to maturity

   $ 1,958,916       $ 92,920       $ (24,639   $ 2,027,197   
  

 

 

    

 

 

    

 

 

   

 

 

 

The age of unrealized losses and fair value of related securities held to maturity at September 30, 2012 and December 31, 2011 were as follows:

 

     Less than
Twelve Months
    More than
Twelve Months
    Total  
     Fair Value      Unrealized
Losses
    Fair Value      Unrealized
Losses
    Fair Value      Unrealized
Losses
 
     (in thousands)  

September 30, 2012

               

Obligations of states and political subdivisions

   $ 11,653       $ (77   $ -       $ -      $ 11,653       $ (77

Residential mortgage-backed securities

     35,959         (117     -         -        35,959         (117

Trust preferred securities

     9,818         (37     80,119         (17,139     89,937         (17,176
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 57,430       $ (231   $ 80,119       $ (17,139   $ 137,549       $ (17,370
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2011

               

Obligations of states and political subdivisions

   $ 1,854       $ (13   $ 50       $ (1   $ 1,904       $ (14

Residential mortgage-backed securities

     33,520         (152     -         -        33,520         (152

Trust preferred securities

     35,527         (730     55,612         (22,137     91,139         (22,867

Corporate and other debt securities

     14,756         (192     7,560         (1,414     22,316         (1,606
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 85,657       $ (1,087   $ 63,222       $ (23,552   $ 148,879       $ (24,639
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

The total number of security positions in the securities held to maturity portfolio in an unrealized loss position at September 30, 2012 was 26 as compared to 28 at December 31, 2011.

At September 30, 2012, the unrealized losses reported for trust preferred securities mostly related to 10 single-issuer securities, issued by bank holding companies. Of the 10 trust preferred securities, 2 were investment grade, 3 were non-investment grade, and 5 were not rated. All single-issuer bank trust preferred securities classified as held to maturity are paying in accordance with their terms, have no deferrals of interest or defaults and, if applicable, the issuers meet the regulatory capital requirements to be considered “well-capitalized institutions” at September 30, 2012.

Management does not believe that any individual unrealized loss as of September 30, 2012 included in the table above represents other-than-temporary impairment as management mainly attributes the declines in fair value to changes in interest rates, widening credit spreads, and lack of liquidity in the market place, not credit quality or other factors. Based on a comparison of the present value of expected cash flows to the amortized cost, management believes there are no credit losses on these securities. Valley does not have the intent to sell, nor is it more likely than not that Valley will be required to sell, the securities contained in the table above before the recovery of their amortized cost basis or maturity.

As of September 30, 2012, the fair value of investments held to maturity that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $974.7 million.

The contractual maturities of investments in debt securities held to maturity at September 30, 2012 are set forth in the table below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

 

     September 30, 2012  
     Amortized      Fair  
     Cost      Value  
     (in thousands)  

Due in one year

   $ 109,488       $ 109,564   

Due after one year through five years

     43,154         44,797   

Due after five years through ten years

     240,982         267,688   

Due after ten years

     378,576         381,208   

Residential mortgage-backed securities

     852,375         886,156   
  

 

 

    

 

 

 

Total investment securities held to maturity

   $ 1,624,575       $ 1,689,413   
  

 

 

    

 

 

 

Actual maturities of debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

The weighted-average remaining expected life for residential mortgage-backed securities held to maturity was 3.3 years at September 30, 2012.

 

Available for Sale

The amortized cost, gross unrealized gains and losses and fair value of securities available for sale at September 30, 2012 and December 31, 2011 were as follows:

 

            Gross      Gross        
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     (in thousands)  

September 30, 2012

          

U.S. government agency securities

   $ 46,148       $ 1,465       $ (36   $ 47,577   

Obligations of states and political subdivisions

     16,772         229         (529     16,472   

Residential mortgage-backed securities

     463,489         10,460         (3,222     470,727   

Trust preferred securities*

     72,336         623         (14,364     58,595   

Corporate and other debt securities

     28,320         3,076         (9     31,387   

Equity securities

     50,306         731         (1,884     49,153   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total investment securities available for sale

   $ 677,371       $ 16,584       $ (20,044   $ 673,911   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2011

          

U.S. government agency securities

   $ 89,787       $ 1,204       $ (243   $ 90,748   

Obligations of states and political subdivisions

     18,893         1,322         (1     20,214   

Residential mortgage-backed securities

     304,631         10,950         (5,444     310,137   

Trust preferred securities*

     106,931         78         (36,585     70,424   

Corporate and other debt securities

     30,663         2,554         (173     33,044   

Equity securities

     47,932         1,320         (7,299     41,953   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total investment securities available for sale

   $ 598,837       $ 17,428       $ (49,745   $ 566,520   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

* Includes three pooled trust preferred securities, principally collateralized by securities issued by banks and insurance companies.

The age of unrealized losses and fair value of related securities available for sale at September 30, 2012 and December 31, 2011 were as follows:

 

     Less than     More than        
     Twelve Months     Twelve Months     Total  
            Unrealized            Unrealized            Unrealized  
     Fair Value      Losses     Fair Value      Losses     Fair Value      Losses  
     (in thousands)  

September 30, 2012

               

U.S. government agency securities

   $ 8,534       $ (4   $ 7,110       $ (32   $ 15,644       $ (36

Obligations of states and political subdivisions

     10,660         (529     -         -        10,660         (529

Residential mortgage-backed securities

     43,368         (901     21,967         (2,321     65,335         (3,222

Trust preferred securities

     1,173         (506     27,669         (13,858     28,842         (14,364

Corporate and other debt securities

     -         -        2,491         (9     2,491         (9

Equity securities

     772         (40     12,614         (1,844     13,386         (1,884
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 64,507       $ (1,980   $ 71,851       $ (18,064   $ 136,358       $ (20,044
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2011

               

U.S. government agency securities

   $ 7,980       $ (243   $ -       $ -      $ 7,980       $ (243

Obligations of states and political subdivisions

     141         (1     -         -        141         (1

Residential mortgage-backed securities

     41,673         (1,655     22,639         (3,789     64,312         (5,444

Trust preferred securities

     23,962         (1,061     44,758         (35,524     68,720         (36,585

Corporate and other debt securities

     3,243         (173     -         -        3,243         (173

Equity securities

     20,570         (4,430     12,551         (2,869     33,121         (7,299
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 97,569       $ (7,563   $ 79,948       $ (42,182   $ 177,517       $ (49,745
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

The total number of security positions in the securities available for sale portfolio in an unrealized loss position at September 30, 2012 was 55 as compared to 43 at December 31, 2011.

Of the $3.2 million unrealized losses within the residential mortgage-backed securities category of the available for sale portfolio at September 30, 2012, $1.4 million relates to three private label mortgage-backed securities that were other-than-temporarily impaired prior to September 30, 2012; for one of the securities, an additional estimated credit loss was recognized during the third quarter of 2012. The remaining $1.8 million of unrealized losses primarily relates to one investment grade private label mortgage-backed security.

The unrealized losses for trust preferred securities at September 30, 2012, in the table above relate to 3 pooled trust preferred and 12 single-issuer bank issued trust preferred securities. The unrealized losses include $5.0 million attributable to trust preferred securities issued by one bank holding company with an amortized cost of $16.5 million and a fair value of $11.5 million, and $8.1 million attributable to 3 pooled trust preferred securities with an amortized cost of $19.9 million and a fair value of $11.8 million. The trust preferred issuances by one bank holding company, initially classified as held to maturity, were found be other-than-temporarily impaired during the fourth quarter of 2011 and subsequently transferred to the available for sale portfolio at December 31, 2011. During the third quarter of 2012, Valley recognized $4.5 million of additional estimated credit impairment losses on these trust preferred securities. The three pooled trust preferred securities included one security with an unrealized loss of $6.2 million and an investment grade rating at September 30, 2012. The other two pooled trust preferred securities had non-investment grade ratings and were initially other-than-temporarily impaired in 2008 with additional estimated credit losses recognized during 2009 through 2011. See “Other-Than-Temporarily Impaired Analysis” section below for more details. All of the remaining single-issuer trust preferred securities are all paying in accordance with their terms and have no deferrals of interest or defaults.

The unrealized losses existing for more than twelve months for equity securities are almost entirely related to two perpetual preferred security positions with a combined $10.0 million amortized cost and a $1.8 million unrealized loss. At September 30, 2012, these perpetual preferred securities had investment grade ratings and are currently performing and paying quarterly dividends.

Management does not believe that any individual unrealized loss as of September 30, 2012 represents an other-than-temporary impairment, except for the previously discussed impaired private mortgage-backed security and trust preferred securities, as management mainly attributes the declines in value to changes in interest rates and recent market volatility and wider credit spreads, not credit quality or other factors. Based on a comparison of the present value of expected cash flows to the amortized cost, management believes there are no credit losses on these securities. Valley has no intent to sell, nor is it more likely than not that Valley will be required to sell, the securities contained in the table above before the recovery of their amortized cost basis or, if necessary, maturity.

As of September 30, 2012, the fair value of securities available for sale that were pledged to secure public deposits, repurchase agreements, lines of credit, and for other purposes required by law, was $356.2 million.

The contractual maturities of investment securities available for sale at September 30, 2012 are set forth in the following table. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.

     September 30, 2012  
     Amortized
Cost
     Fair
Value
 
     (in thousands)  

Due in one year

   $ 940       $ 958   

Due after one year through five years

     2,117         2,134   

Due after five years through ten years

     50,960         53,464   

Due after ten years

     109,559         97,475   

Residential mortgage-backed securities

     463,489         470,727   

Equity securities

     50,306         49,153   
     

 

 

    

 

 

 

Total investment securities available for sale

   $ 677,371       $ 673,911   
     

 

 

    

 

 

 

Actual maturities of debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

The weighted-average remaining expected life for residential mortgage-backed securities available for sale at September 30, 2012 was 7.1 years.

Other-Than-Temporary Impairment Analysis

To determine whether a security’s impairment is other-than-temporary, Valley considers several factors that include, but are not limited to the following:

 

   

The severity and duration of the decline, including the causes of the decline in fair value, such as an issuer’s credit problems, interest rate fluctuations, or market volatility;

 

   

Adverse conditions specifically related to the issuer of the security, an industry, or geographic area;

 

   

Failure of the issuer of the security to make scheduled interest or principal payments;

 

   

Any changes to the rating of the security by a rating agency or, if applicable, any regulatory actions impacting the security issuer;

 

   

Recoveries or additional declines in fair value after the balance sheet date;

 

   

Our ability and intent to hold equity security investments until they recover in value, as well as the likelihood of such a recovery in the near term; and

 

   

Our intent to sell debt security investments, or if it is more likely than not that we will be required to sell such securities before recovery of their individual amortized cost basis.

For debt securities, the primary consideration in determining whether impairment is other-than-temporary is whether or not we expect to collect all contractual cash flows.

In assessing the level of other-than-temporary impairment attributable to credit loss for debt securities, Valley compares the present value of cash flows expected to be collected with the amortized cost basis of the security. The portion of the total other-than-temporary impairment related to credit loss is recognized in earnings, while the amount related to other factors is recognized in other comprehensive income or loss. The total other-than-temporary impairment loss is presented in the consolidated statements of income, less the portion recognized in other comprehensive income or loss. Subsequent assessments may result in additional estimated credit losses on previously impaired securities. These additional estimated credit losses are recorded as reclassifications from the portion of other-than-temporary impairment previously recognized in other comprehensive income or loss to earnings in the period of such assessments. The amortized cost basis of an impaired debt security is reduced by the portion of the total impairment related to credit loss.

For residential mortgage-backed securities, Valley estimates loss projections for each security by stressing the cash flows from the individual loans collateralizing the security using expected default rates, loss severities, and prepayment speeds, in conjunction with the underlying credit enhancement (if applicable) for each security. Based on collateral and origination vintage specific assumptions, a range of possible cash flows is identified to determine whether other-than-temporary impairment exists. See the “Other-Than-Temporarily Impaired Securities” section below for further details regarding the impairment of these securities.

For the single-issuer trust preferred securities and corporate and other debt securities, Valley reviews each portfolio to determine if all the securities are paying in accordance with their terms and have no deferrals of interest or defaults. Over the past several years, an increasing number of banking institutions have been required to defer trust preferred payments and various banking institutions have been put in receivership by the FDIC. A deferral event by a bank holding company for which Valley holds trust preferred securities may require the recognition of an other-than-temporary impairment charge if Valley determines that it is more likely than not that all contractual interest and principal cash flows may not be collected. Among other factors, the probability of the collection of all interest and principal determined by Valley in its impairment analysis declines if there is an increase in the estimated deferral period of the issuer. Additionally, a FDIC receivership for any single-issuer would result in an impairment and significant loss. Including the other factors outlined above, Valley analyzes the performance of the issuers on a quarterly basis, including a review of performance data from the issuers’ most recent bank regulatory report, if applicable, to assess their credit risk and the probability of impairment of the contractual cash flows of the applicable security. All of the issuers had capital ratios at September 30, 2012 that were at or above the minimum amounts to be considered a “well-capitalized” financial institution, if applicable, and/or have maintained performance levels adequate to support the contractual cash flows of the trust preferred securities.

During the fourth quarter of 2011, Valley lengthened the estimate of the timeframe over which it could reasonably anticipate receiving the expected cash flows from the trust preferred securities issued by one deferring bank holding company resulting in an $18.3 million credit impairment charge at December 31, 2011. The issuer of the trust preferred securities has deferred interest payments on these securities since late 2009 as required by an operating agreement with its bank regulators. In assessing whether a credit loss exists for the securities of the deferring issuer, Valley considers numerous other factors, including but not limited to, such factors highlighted in the bullet points above. From the dates of deferral up to and including the bank holding company’s most recent regulatory filing, the bank issuer continued to accrue and capitalize the interest owed, but not remitted to its trust preferred security holders, and at the holding company level it reported cash and cash equivalents in excess of the cumulative amount of accrued but unpaid interest owed on all of its junior subordinated debentures related to trust preferred securities. Additionally, the bank subsidiary of the issuer continued to report capital ratios that were above the minimum amounts to be considered a “well-capitalized” financial institution in its most recent regulatory filing. However, Valley estimated a decline in the expected cash flows under one of three weighted alternative cash flow scenarios utilized to assess impairment of the securities at September 30, 2012. The cash flow scenario resulting in the decline estimates the probable cash flows based upon partial equity settlements received by shareholders of similar troubled institutions in recent merger and acquisition transactions. As a result of the decreased expected cash flow, and careful assessment of all other available factors, Valley recognized $4.5 million of additional estimated credit losses on these other-than-temporarily impaired securities in earnings for the three months ended September 30, 2012. These trust preferred securities, with a combined amortized cost of $41.8 million after credit impairment charges, had net non-credit impairment charges totaling $4.5 million (before taxes) included in accumulated other comprehensive income at September 30, 2012 and are not accruing interest. The fair value of the combined securities declined $5.3 million to $37.3 million at September 30, 2012 as compared to $42.6 million at June 30, 2012 primarily due to the reduction in expected cash flows from the securities. See Note 5 for information regarding the Level 3 valuation technique used to measure the fair value of these trust preferred securities at September 30, 2012.

For the three pooled trust preferred securities, Valley evaluates the projected cash flows from each of its tranches in the three securities to determine if they are adequate to support their future contractual principal and interest payments. Valley assesses the credit risk and probability of impairment of the contractual cash flows by projecting the default rates over the life of the security. Higher projected default rates will decrease the expected future cash flows from each security. If the projected decrease in cash flows affects the cash flows projected for the tranche held by Valley, the security would be considered to be other-than-temporarily impaired. Two of the pooled trust preferred securities were initially impaired in 2008 with additional estimated credit losses recognized during 2009 and 2011, including the $825 thousand of net impairment losses recognized during the nine months ended September 30, 2011, and are not accruing interest.

The perpetual preferred securities, reported in equity securities, are hybrid investments that are assessed for impairment by Valley as if they were debt securities. Therefore, Valley assessed the creditworthiness of each security issuer, as well as any potential change in the anticipated cash flows of the securities as of September 30, 2012. Based on this analysis, management believes the declines in fair value of these securities are attributable to a lack of liquidity in the marketplace and are not reflective of any deterioration in the creditworthiness of the issuers.

Other-Than-Temporarily Impaired Securities

The following table provides information regarding our other-than-temporary impairment losses on securities recognized in earnings for the three and nine months ended September 30, 2012 and 2011.

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2012      2011      2012      2011  
     (in thousands)  

Available for sale:

           

Residential mortgage-backed securities

   $ 172       $ -         $ 722       $ -     

Trust preferred securities

     4,525         -           4,525         825   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net impairment losses on securities recognized in earnings

   $ 4,697       $ -         $ 5,247       $ 825   
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three and nine months ended September 30, 2012, Valley recognized net impairment losses on residential mortgage backed securities in earnings, due to additional estimated credit losses on one of six previously impaired private label mortgage-backed securities. At September 30, 2012, the six impaired private label mortgage-backed securities had a combined amortized cost of $43.0 million and fair value of $41.5 million.

For the three and nine months ended September 30, 2012, Valley recognized net impairment losses related to the trust preferred securities issued by one bank holding company due to further credit deterioration in financial condition of the issuer. See “Other-Than-Temporarily Impaired Analysis” section above for further details. For the nine months ended September 30, 2011, Valley recognized net impairment losses on securities in earnings, due to additional estimated credit losses on one of the two previously impaired pooled trust preferred securities. At September 30, 2012, the impaired trust preferred securities issued by one bank holding company and the two previously impaired pooled trust preferred securities had a combined amortized cost and fair value of $47.2 million and $40.8 million, respectively, after recognition of all credit impairments.

 

Realized Gains and Losses

Gross gains (losses) realized on sales, maturities and other securities transactions related to investment securities included in earnings for the three and nine months ended September 30, 2012 and 2011 were as follows:

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  
     (in thousands)  

Sales transactions:

        

Gross gains

   $ 4,513      $ 450      $ 5,887      $ 19,418   

Gross losses

     -          -          (298     -     
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 4,513      $ 450      $ 5,589      $ 19,418   
  

 

 

   

 

 

   

 

 

   

 

 

 

Maturities and other securities transactions:

        

Gross gains

   $ 2,242      $ 414      $ 2,261      $ 622   

Gross losses

     (5,259     (1     (5,307     (6
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (3,017   $ 413      $ (3,046   $ 616   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total gains on securities transactions, net

   $ 1,496      $ 863      $ 2,543      $ 20,034   
  

 

 

   

 

 

   

 

 

   

 

 

 

Valley recognized gross losses totaling $5.3 million for the third quarter of 2012 due to the early redemption of trust preferred securities issued by one bank holding company.

The following table presents the changes in the credit loss component of cumulative other-than-temporary impairment losses on debt securities classified as either held to maturity or available for sale that Valley has recognized in earnings, for which a portion of the impairment loss (non-credit factors) was recognized in other comprehensive income for the three and nine months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  
     (in thousands)  

Balance, beginning of period

   $ 29,251      $ 11,076      $ 29,070      $ 10,500   

Additions:

        

Subsequent credit impairments

     4,697        -          5,247        825   

Reductions:

        

Accretion of credit loss impairment due to an increase in expected cash flows

     (590     (109     (959     (358
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 33,358      $ 10,967      $ 33,358      $ 10,967   
  

 

 

   

 

 

   

 

 

   

 

 

 

The credit loss component of the impairment loss represents the difference between the present value of expected future cash flows and the amortized cost basis of the security prior to considering credit losses. The beginning balance represents the credit loss component for debt securities for which other-than-temporary impairment occurred prior to each period presented. Other-than-temporary impairments recognized in earnings for credit impaired debt securities are presented as additions in two components based upon whether the current period is the first time the debt security was credit impaired (initial credit impairment) or is not the first time the debt security was credit impaired (subsequent credit impairment). The credit loss component is reduced if Valley sells, intends to sell or believes it will be required to sell previously credit impaired debt securities. Additionally, the credit loss component is reduced if (i) Valley receives cash flows in excess of what it expected to receive over the remaining life of the credit impaired debt security, (ii) the security matures or (iii) the security is fully written down.

 

Trading Securities

The fair value of trading securities (consisting of 3 single-issuer bank trust preferred securities) was $22.1 million and $21.9 million at September 30, 2012 and December 31, 2011, respectively. Interest income on trading securities totaled $442 thousand and $500 thousand for the three months ended September 30, 2012 and 2011, respectively, and $1.3 million and $1.6 million for the nine months ended September 30, 2012 and 2011, respectively.