Investment Securities

9 Months Ended

Sep. 30, 2012

Investment Securities [Abstract]

Investment Securities

NOTE 5: Investment Securities

The amortized cost and fair values of investment securities available for sale and held to maturity were as follows.

						Gross		Gross
				Amortized		unrealized		unrealized
September 30, 2012:				cost		gains		losses			Fair value
					($ in Thousands)
Investment securities available for sale:
	U.S. Treasury securities			$	1,004	$	1	$	―	$	1,005
	Federal agency securities				6		―		―		6
	Obligations of state and political subdivisions
		(municipal securities)			779,328		47,948		(105)		827,171
	Residential mortgage-related securities				3,381,526		109,479		(485)		3,490,520
	Commercial mortgage-related securities				71,965		2,760		―		74,725
	Other securities (debt and equity)				101,525		1,323		(77)		102,771
			Total investment securities available for sale	$	4,335,354	$	161,511	$	(667)	$	4,496,198

Investment securities held to maturity:
	Obligations of state and political subdivisions
		(municipal securities)		$	21,852	$	36	$	(165)	$	21,723
			Total investment securities held to maturity	$	21,852	$	36	$	(165)	$	21,723

						Gross		Gross
				Amortized		unrealized		unrealized
December 31, 2011:				cost		gains		losses			Fair value
					($ in Thousands)
Investment securities available for sale:
	U.S. Treasury securities			$	1,000	$	1	$	―	$	1,001
	Federal agency securities				24,031		18		―		24,049
	Obligations of state and political subdivisions
		(municipal securities)			797,691		49,583		(28)		847,246
	Residential mortgage-related securities				3,674,696		112,357		(1,463)		3,785,590
	Commercial mortgage-related securities				16,647		1,896		―		18,543
	Asset-backed securities(1)				188,439		―		(707)		187,732
	Other securities (debt and equity)				72,896		1,891		(1,465)		73,322
			Total investment securities available for sale	$	4,775,400	$	165,746	$	(3,663)	$	4,937,483

(1) The asset-backed securities position is largely comprised of senior, floating rate, tranches of student loan securities issued by SLM Corp (“Sallie Mae”) and guaranteed under the Federal Family Education Loan Program (“FFELP”).

The amortized cost and fair values of investment securities available for sale and held to maturity at September 30, 2012, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Available for Sale				Held to Maturity
($ in Thousands)		Amortized Cost			Fair Value	Amortized Cost			Fair Value
Due in one year or less		$	45,629	$	46,380	$	-	$	-
Due after one year through five years			231,892		240,348		-		-
Due after five years through ten years			534,809		571,046		5,785		5,771
Due after ten years			69,513		73,133		16,067		15,952
	Total debt securities		881,843		930,907		21,852		21,723
Residential mortgage-related securities			3,381,526		3,490,520		-		-
Commercial mortgage-related securities			71,965		74,725		-		-
Equity securities			20		46		-		-
	Total investment securities	$	4,335,354	$	4,496,198	$	21,852	$	21,723

The following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012.

			Less than 12 months					12 months or more						Total
			Number of	Unrealized			Fair	Number of	Unrealized			Fair	Unrealized			Fair
September 30, 2012:			Securities		Losses		Value	Securities		Losses		Value		Losses		Value
					($ in Thousands)
Investment securities available for sale:
	Obligations of state and political
		subdivisions (municipal securities)	31		(91)		11,699	2		(14)		457		(105)		12,156
	Residential mortgage-related securities		6		(421)		116,685	5		(64)		2,040		(485)		118,725
	Other debt securities		0		―		―	1		(77)		110		(77)		110
		Total		$	(512)	$	128,384		$	(155)	$	2,607	$	(667)	$	130,991
Investment securities held to maturity:
	Obligations of state and political
		subdivisions (municipal securities)	35		(165)		15,253	0		―		―		(165)		15,253
		Total		$	(165)	$	15,253		$	―	$	―	$	(165)	$	15,253

The Corporation reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment. A determination as to whether a security's decline in fair value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the other-than-temporary impairment analysis include, the length of time and extent to which the security has been in an unrealized loss position, changes in security ratings, financial condition and near-term prospects of the issuer, as well as security and industry specific economic conditions. In addition, with regards to its debt securities, the Corporation may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds, and the value of any underlying collateral. For certain debt securities in unrealized loss positions, the Corporation prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Based on the Corporation's evaluation, management does not believe any unrealized loss at September 30, 2012, represents an other-than-temporary impairment as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions, and not credit deterioration. The unrealized losses reported for residential mortgage-related securities relate to non-agency residential mortgage-related securities as well as residential mortgage-related securities issued by government agencies such as the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). At September 30, 2012, the unrealized loss position on other debt securities was attributable to a pooled trust preferred debt security. The Corporation currently does not intend to sell nor does it believe that it will be required to sell the securities contained in the above unrealized losses table before recovery of their amortized cost basis.

The following is a summary of the credit loss portion of other-than-temporary impairment recognized in earnings on debt securities for 2011 and the nine months ended September 30, 2012, respectively.

		Non-agency
		Mortgage-Related		Trust Preferred
		Securities		Debt Securities			Total
		($ in Thousands)
Balance of credit-related other-than-temporary
	impairment at December 31, 2010	$	(17,556)	$	(10,019)	$	(27,575)
Credit losses on newly identified impairment			(2)		(816)		(818)
Balance of credit-related other-than-temporary							.
	impairment at December 31, 2011	$	(17,558)	$	(10,835)	$	(28,393)
Reduction due to credit impaired securities sold			17,026		4,499		21,525
Balance of credit-related other-than-temporary
	impairment at September 30, 2012	$	(532)	$	(6,336)	$	(6,868)

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011.

				Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
December 31, 2011:			Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
				($ in Thousands)
Investment securities available for sale:
	Obligations of state and political
		subdivisions (municipal securities)	$	(10)	$	971	$	(18)	$	348	$	(28)	$	1,319
	Residential mortgage-related securities			(1,443)		186,954		(20)		1,469		(1,463)		188,423
	Asset-backed securities			(9)		4,091		(698)		174,640		(707)		178,731
	Other securities (debt and equity)			(671)		45,395		(794)		522		(1,465)		45,917
		Total	$	(2,133)	$	237,411	$	(1,530)	$	176,979	$	(3,663)	$	414,390

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stocks: The Corporation is required to maintain Federal Reserve stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. At September 30, 2012 and December 31, 2011, the Corporation had FHLB stock of $96 million and $121 million, respectively. The Corporation had Federal Reserve Bank stock of $70million at bothSeptember 30, 2012 and December 31, 2011.

The Corporation reviewed these securities for impairment, including but not limited to, consideration of operating performance, the severity and duration of market value declines, as well as its liquidity and funding position. After evaluating all of these considerations, the Corporation believes the cost of these investments will be recovered and no impairment has been recorded on these securities during 2011 or the first nine months of 2012. The FHLB of Chicago initiated tender offers for certain of its shares during the first nine months of 2012, whereby the FHLB would repurchase its shares at par. The Corporation participated in the tender offers and reduced its equity holdings in the FHLB of Chicago by $25 million.