5. INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are summarized below. The majority of securities held are publicly traded, and the estimated fair values were obtained from an independent pricing service based upon market quotes.


	June 30, 2016
	Amortized Cost		Gross Unrealized Holding Gain		Gross Unrealized Holding Loss		Fair Value		Total Percent
			(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	4,750	$	13	$	-	$	4,763		0.21%
Residential mortgage-backed securities		1,663,091		54,359		-		1,717,450		76.40%
CMO/REMIC - residential		388,881		9,015		-		397,896		17.70%
Municipal bonds		119,756		2,893		(1)		122,648		5.46%
Other securities		5,000		275		-		5,275		0.23%

Total available-for-sale securities	$	2,181,478	$	66,555	$	(1)	$	2,248,032		100.00%

Investment securities held-to-maturity (1):
Government agency/GSE	$	209,301	$	6,336	$	-	$	215,637		28.90%
Residential mortgage-backed securities		215,762		6,274		-		222,036		29.79%
CMO		974		501		-		1,475		0.13%
Municipal bonds		298,320		6,983		(970)		304,333		41.18%

Total held-to-maturity securities	$	724,357	$	20,094	$	(970)	$	743,481		100.00%


	December 31, 2015
	Amortized Cost		Gross Unrealized Holding Gain		Gross Unrealized Holding Loss		Fair Value		Total Percent
			(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	5,752	$	-	$	(7)	$	5,745		0.24%
Residential mortgage-backed securities		1,788,857		26,001		(1,761)		1,813,097		76.55%
CMO/REMIC - residential		380,166		4,689		(1,074)		383,781		16.20%
Municipal bonds		157,940		3,036		(3)		160,973		6.80%
Other securities		5,000		50		-		5,050		0.21%

Total available-for-sale securities	$	2,337,715	$	33,776	$	(2,845)	$	2,368,646		100.00%

Investment securities held-to-maturity (1):
Government agency/GSE	$	293,338	$	1,176	$	(734)	$	293,780		34.47%
Residential mortgage-backed securities		232,053		-		(1,293)		230,760		27.27%
CMO		1,284		569		-		1,853		0.15%
Municipal bonds		324,314		3,051		(719)		326,646		38.11%

Total held-to-maturity securities	$	850,989	$	4,796	$	(2,746)	$	853,039		100.00%

(1) Securities held-to-maturity are presented in the condensed consolidated balance sheets at amortized cost.

During the quarter ended September 30, 2015, investment securities were transferred from the available-for-sale security portfolio to the held-to-maturity security portfolio. Transfers of securities into the held-to-maturity category from the available-for-sale category are transferred at fair value at the date of transfer. The fair value of these securities at the date of transfer was $898.6 million. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income (“AOCI”) and in the carrying value of the held-to-maturity securities. The net unrealized holding gain at the date of transfer was $3.9 million after-tax and will continue to be reported in AOCI and amortized over the remaining life of the securities as a yield adjustment. At June 30, 2016, investment securities HTM totaled $724.4 million. The after-tax unrealized gain reported in AOCI on investment securities HTM was $2.5 million at June 30, 2016.

The following table provides information about the amount of interest income earned on investment securities which is fully taxable and which is exempt from regular federal income tax.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
	(Dollars in thousands)
Investment securities available-for-sale:
Taxable	$	10,827	$	12,784	$	22,207	$	25,707
Tax-advantaged		1,191		4,719		2,610		9,730
Investment securities held-to-maturity:
Taxable		2,215		36		4,835		74
Tax-advantaged		2,528		-		5,256		-

Total interest income from investment securities	$	16,761	$	17,539	$	34,908	$	35,511

Approximately 86% of the total investment securities portfolio at June 30, 2016 represents securities issued by the U.S government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. All non-agency available-for-sale Collateralized Mortgage Obligations (“CMO”)/Real Estate Mortgage Investment Conduit (“REMIC”) issues held are rated investment grade or better by either Standard & Poor’s or Moody’s, as of June 30, 2016 and December 31, 2015. At June 30, 2016, the Bank had $1.1 million in total CMO backed by whole loans issued by private-label companies (nongovernment sponsored).

The tables below show the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2016 and December 31, 2015. Management has reviewed individual securities to determine whether a decline in fair value below the amortized cost basis is other-than-temporary.


	June 30, 2016
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Holding Losses		Fair Value		Gross Unrealized Holding Losses		Fair Value		Gross Unrealized Holding Losses
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		-		-		-		-		-		-
CMO/REMIC - residential		-		-		-		-		-		-
Municipal bonds		-		-		5,971		(1)		5,971		(1)
Other securities		-		-		-		-		-		-

Total available-for-sale securities	$	-	$	-	$	5,971	$	(1)	$	5,971	$	(1)

Investment securities held-to-maturity:
Government agency/GSE	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		-		-		-		-		-		-
CMO		-		-		-		-		-		-
Municipal bonds		67,573		(970)		-		-		67,573		(970)
Other securities		-		-		-		-		-		-

Total held-to-maturity securities	$	67,573	$	(970)	$	-	$	-	$	67,573	$	(970)


	December 31, 2015
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Holding Losses		Fair Value		Gross Unrealized Holding Losses		Fair Value		Gross Unrealized Holding Losses
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	5,745	$	(7)	$	-	$	-	$	5,745	$	(7)
Residential mortgage-backed securities		437,699		(1,761)		-		-		437,699		(1,761)
CMO/REMIC - residential		171,923		(1,074)		-		-		171,923		(1,074)
Municipal bonds		398		(2)		5,961		(1)		6,359		(3)
Other securities		-		-		-		-		-		-

Total available-for-sale securities	$	615,765	$	(2,844)	$	5,961	$	(1)	$	621,726	$	(2,845)

Investment securities held-to-maturity:
Government agency/GSE	$	84,495	$	(734)	$	-	$	-	$	84,495	$	(734)
Residential mortgage-backed securities		230,760		(1,293)		-		-		230,760		(1,293)
CMO		-		-		-		-		-		-
Municipal bonds		110,119		(719)		-		-		110,119		(719)
Other securities		-		-		-		-		-		-

Total held-to-maturity securities	$	425,374	$	(2,746)	$	-	$	-	$	425,374	$	(2,746)

At June 30, 2016 and December 31, 2015, investment securities having a carrying value of approximately $2.59 billion and $2.81 billion, respectively, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at June 30, 2016, by contractual maturity, are shown in the table below. Although mortgage-backed securities and CMO/REMIC have contractual maturities through 2043, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed securities and CMO/REMIC are included in maturity categories based upon estimated prepayment speeds.


	June 30, 2016
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	12,202	$	12,343	$	-	$	-
Due after one year through five years		1,795,806		1,851,485		167,856		171,966
Due after five years through ten years		131,286		134,700		240,842		245,295
Due after ten years		242,184		249,504		315,659		326,220

Total investment securities	$	2,181,478	$	2,248,032	$	724,357	$	743,481

The investment in FHLB stock is periodically evaluated for impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through June 30, 2016.