Navy Federal Credit Union 2012 Annual Report Download - page 16

Navy Federal Credit Union12 Leading with Vision. Achieving Results. 13
2012 Financial Section
Navy Federal held $403.8 million and $374.4 million, respectively, of the Federal Home Loan Banks
(FHLB) of San Francisco and Atlanta stock as of December 31, 2012 and 2011. FHLB stock is a restricted
investment and is carried at cost, which is par value. As a member of the FHLB, Navy Federal has access
to a $9.5 billion line of credit facility.
All debt securities were reviewed individually to determine whether the unrealized losses associated with
them were caused by an other-than-temporary decline in the value of such investments. Navy Federal
makes a determination of whether unrealized losses are other-than-temporary based on the following
factors: whether Navy Federal intends to sell or hold the security until its costs can be recovered, the
nature of the security, the portion of unrealized losses that are attributable to credit losses, and the
financial condition of the issuer of the security.
Navy Federal does not intend to sell nor would Navy Federal be, more likely than not, required to sell
these securities before recovering its amortized cost basis. The unrealized losses associated with these
investments are not a result of a change in the credit quality of the issuer; rather, the losses are reflective
of changing market interest rates. Therefore, Navy Federal expects to recover the entire cost basis of
these securities.
There were 32 and 45 AFS securities in an unrealized loss position at December 31, 2012 and 2011,
respectively. Navy Federal did not hold any HTM securities in an unrealized loss position at December 31,
2012, but had four as of December 31, 2011. The following table presents these investments at fair value
and their associated gross unrealized losses broken down by the amount of time the investments have
been in a loss position:
(dollars in thousands) Less than 12 months 12 months or longer Total
December 31, 2012 Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Available-for-sale securities $ 790,095 $ (3,873) $ 30,853 $ (208) $ 820,948 $ (4,081)
Held-to-maturity securities — — — — — —
Total securities $ 790,095 $ (3,873) $ 30,853 $ (208) $ 820,948 $ (4,081)
(dollars in thousands) Less than 12 months 12 months or longer Total
December 31, 2011 Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Available-for-sale securities $ 926,683 $ (8,018) $ 40,377 $ (444) $ 967,060 $ (8,462)
Held-to-maturity securities 6,547 (23) 1,333 (3) 7,880 (26)
Total securities $ 933,230 $ (8,041) $ 41,710 $ (447) $ 974,940 $ (8,488)
During the years ended December 31, 2012 and 2011, there were no declines in the fair value of securities
held by Navy Federal that were considered other-than-temporary.
As of December 31, 2012, Navy Federal had $53.5 million in investments pledged as collateral for
borrowed funds under repurchase agreements. As of December 31, 2011, Navy Federal had no
outstanding repurchase agreements.
(dollars in thousands) Weighted
Average
Yield
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
December 31, 2011
Held-to-maturity
U.S. government and federal
agency securities 2.42% $ 743,312 $ $19,694 $ — $ 763,006
Residential mortgage-backed
securities 0.68% 51,217 121 (26) 51,312
Total held-to-maturity 794,529 19,815 (26) 814,318
Available-for-sale
U.S. government and federal
agency securities 2.35% 5,480,308 248,096 — 5,728,404
Residential mortgage-backed
securities 2.95% 4,392,581 194,872 (2,229) 4,585,224
Commercial mortgage-backed
securities 2.90% 13,964 817 — 14,781
Bank notes 2.67% 855,608 8,902 (6,233) 858,277
Total available-for-sale 10,742,461 452,687 (8,462) 11,186,686
Total securities $ 11,536,990 $ 472,502 $ (8,488) $ 12,001,004
Navy Federal sold $2.0 billion and $0.8 billion of AFS securities during the years ended December 31,
2012 and 2011, respectively. Gross proceeds from those sales totaled $2.1 billion and $0.9 billion for the
years ended December 31, 2012 and 2011, respectively. Gross realized gains of $42.6 million and gross
realized losses of $2.0 million were included in earnings for the year ended December 31, 2012. Gross
realized gains of $32.4 million and gross realized losses of $10.0 million were included in earnings for
the year ended December 31, 2011.
The maturities of Navy Federal’s securities as of December 31, 2012 and 2011 were as follows:
(dollars in thousands) December 31, 2012
Securities: Amortized Cost Fair Value
Due in one year or less $ 489,599 $ 495,428
Due after one year through five years 4,170,393 4,397,135
Due after five years through ten years 3,363,763 3,506,540
Due after ten years 4,603,191 4,765,910
$ 12,626,946 $ 13,165,013
(dollars in thousands) December 31, 2011
Securities: Amortized Cost Fair Value
Due in one year or less $ 402,536 $ 404,607
Due after one year through five years 3,277,547 3,378,149
Due after five years through ten years 3,524,883 3,694,429
Due after ten years 4,332,024 4,523,819
$ 11,536,990 $ 12,001,004