NOTE 6 – Available-for-Sale and Held-to-Maturity Securities

The following tables provide a summary of the amortized cost and fair values of the available-for-sale securities and held-to-maturity securities at June 30, 2016 and December 31, 2015 (in thousands):

	June 30, 2016
	Amortized Cost		Gross Unrealized Gains ¹		Gross Unrealized Losses ¹			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	2,679	$	10	$	(1	)	$	2,688
State and municipal securities		75,672		188		(1,148	)		74,712
Mortgage-backed securities:
Agency		395,871		1,218		(1,818	)		395,271
Commercial		2,707		80		—			2,787
Non-agency		2,352		1		(165	)		2,188
Corporate fixed income securities		641,437		10,664		(8	)		652,093
Asset-backed securities		1,340,316		3,762		(7,111	)		1,336,967
	$	2,461,034	$	15,923	$	(10,251	)	$	2,466,706
Held-to-maturity securities ²
Mortgage-backed securities:
Agency	$	1,522,210	$	50,749	$	(8	)	$	1,572,951
Commercial		59,551		4,314		—			63,865
Non-agency		773		—		(15	)		758
Asset-backed securities		497,242		5,382		(2,246	)		500,378
Corporate fixed income securities		40,112		154		—			40,266
	$	2,119,888	$	60,599	$	(2,269	)	$	2,178,218

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains ¹		Gross Unrealized Losses ¹			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	1,700	$	1	$	(3	)	$	1,698
State and municipal securities		75,953		28		(1,814	)		74,167
Mortgage-backed securities:
Agency		306,309		125		(1,541	)		304,893
Commercial		11,177		134		(1	)		11,310
Non-agency		2,679		2		(163	)		2,518
Corporate fixed income securities		321,017		743		(2,352	)		319,408
Asset-backed securities		922,563		774		(7,424	)		915,913
	$	1,641,398	$	1,807	$	(13,298	)	$	1,629,907
Held-to-maturity securities ²
Mortgage-backed securities:
Agency	$	1,257,808	$	23,346	$	(3,105	)	$	1,278,049
Commercial		59,521		1,832		—			61,353
Non-agency		929		—		(15	)		914
Asset-backed securities		496,996		2,076		(4,139	)		494,933
Corporate fixed income securities		40,145		—		(396	)		39,749
	$	1,855,399	$	27,254	$	(7,655	)	$	1,874,998

¹	Unrealized gains/(losses) related to available-for-sale securities are reported in accumulated other comprehensive loss.

²	Held-to-maturity securities are carried in the consolidated statements of financial condition at amortized cost, and the changes in the value of these securities, other than impairment charges, are not reported on the consolidated financial statements.

During the three and six months ended June 30, 2016, there were no sales of available-for-sale securities. For the three and six months ended June 30, 2015, we received proceeds of $552.6 million, respectively, from the sale of available-for-sale securities, which resulted in net realized gains of $3.1 million, respectively.

During the three months ended June 30, 2016, unrealized gains, net of deferred taxes, of $11.4 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition. During the three months ended June 30, 2015, unrealized losses, net of deferred taxes, of $3.3 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition.

During the six months ended June 30, 2016, unrealized gains, net of deferred taxes, of $10.4 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition. During the six months ended June 30, 2015, unrealized gains, net of deferred taxes, of $3.6 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition.

The table below summarizes the amortized cost and fair values of debt securities by contractual maturity. Expected maturities may differ significantly from contractual maturities, as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016
	Available-for-sale securities				Held-to-maturity securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Debt securities
Within one year	$	1,081	$	1,081	$	—	$	—
After one year through three years		271,590		274,003		40,111		40,265
After three years through five years		327,468		334,561		—		—
After five years through ten years		361,739		359,105		—		—
After ten years		1,098,226		1,097,710		497,243		500,379
Mortgage-backed securities
After one year through three years		38		38		—		—
After five years through ten years		523		553		251,937		258,896
After ten years		400,369		399,655		1,330,597		1,378,678
	$	2,461,034	$	2,466,706	$	2,119,888	$	2,178,218

The maturities of our available-for-sale (fair value) and held-to-maturity (amortized cost) securities at June 30, 2016, are as follows (in thousands):

	Within 1 Year		1-5 Years		5-10 Years		After 10 Years		Total
Available-for-sale: ¹
U.S. government agency securities	$	1,081	$	1,607	$	—	$	—	$	2,688
State and municipal securities		—		—		17,362		57,350		74,712
Mortgage-backed securities:
Agency		—		—		553		394,718		395,271
Commercial		—		—		—		2,787		2,787
Non-agency		38		—		—		2,150		2,188
Corporate fixed income securities		—		606,956		45,137		—		652,093
Asset-backed securities		—		—		296,607		1,040,360		1,336,967
	$	1,119	$	608,563	$	359,659	$	1,497,365	$	2,466,706
Held-to-maturity:
Mortgage-backed securities:
Agency	$	—	$	—	$	192,386	$	1,329,824	$	1,522,210
Commercial		—		—		59,551		—		59,551
Non-agency		—		—		—		773		773
Asset-backed securities		—		—		—		497,242		497,242
Corporate fixed income securities		—		40,112		—		—		40,112
	$	—	$	40,112	$	251,937	$	1,827,839	$	2,119,888

¹	Due to the immaterial amount of income recognized on tax-exempt securities, yields were not calculated on a tax-equivalent basis.

At June 30, 2016 and December 31, 2015, securities and loans of $2.6 billion and $1.4 billion, respectively, were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. At June 30, 2016 and December 31, 2015, securities of $1.5 billion and $1.1 billion, respectively, were pledged with the Federal Reserve discount window.

The following table shows the gross unrealized losses and fair value of the Company’s investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at June 30, 2016 (in thousands):

	Less than 12 months					12 months or more					Total
	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale securities
U.S. government securities	$	(1	)	$	226	$	—		$	—	$	(1	)	$	226
State and municipal securities		—			—		(1,148	)		62,491		(1,148	)		62,491
Mortgage-backed securities:
Agency		(1,734	)		212,562		(84	)		8,185		(1,818	)		220,747
Commercial		—			—		—			—		—			—
Non-agency		—			—		(165	)		2,081		(165	)		2,081
Corporate fixed income securities		(8	)		1,493		—			—		(8	)		1,493
Asset-backed securities		(4,896	)		452,928		(2,215	)		64,717		(7,111	)		517,645
	$	(6,639	)	$	667,209	$	(3,612	)	$	137,474	$	(10,251	)	$	804,683
Held-to-maturity securities
Mortgage-backed securities:
Agency	$	—		$	—	$	(8	)	$	1,789	$	(8	)	$	1,789
Non-agency		—			—		(15	)		758		(15	)		758
Asset-backed securities		(1,074	)		111,822		(1,172	)		65,903		(2,246	)		177,725
Corporate fixed income securities		—			—		—			—		—			—
	$	(1,074	)	$	111,822	$	(1,195	)	$	68,450	$	(2,269	)	$	180,272

At June 30, 2016, the amortized cost of 64 securities classified as available for sale exceeded their fair value by $10.3 million, of which $3.6 million related to investment securities that had been in a loss position for 12 months or longer. The total fair value of these investments at June 30, 2016, was $804.7 million, which was 32.6% of our available-for-sale portfolio.

At June 30, 2016, the carrying value of 19 securities held to maturity exceeded their fair value by $2.3 million, of which $1.2 million related to securities held to maturity that have been in a loss position for 12 months or longer. As discussed in more detail below, we conduct periodic reviews of all securities with unrealized losses to assess whether the impairment is other-than-temporary.

Other-Than-Temporary Impairment

We evaluate all securities in an unrealized loss position quarterly to assess whether the impairment is other-than-temporary. Our other-than-temporary impairment (“OTTI”) assessment is a subjective process requiring the use of judgments and assumptions. There was no credit-related OTTI recognized during the three and six months ended June 30, 2016 and 2015.

We believe the gross unrealized losses of $12.5 million related to our investment portfolio, as of June 30, 2016, are attributable to issuer-specific credit spreads and changes in market interest rates and asset spreads. We, therefore, do not expect to incur any credit losses related to these securities. In addition, we have no intent to sell these securities with unrealized losses, and it is not more likely than not that we will be required to sell these securities prior to recovery of the amortized cost. Accordingly, we have concluded that the impairment on these securities is not other-than-temporary.