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 March 31, 2017 and December 31, 2016 (in thousands):

	March 31, 2017
	Amortized Cost		Gross Unrealized Gains ⁽¹⁾		Gross Unrealized Losses ⁽¹⁾			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	4,437	$	1	$	(19	)	$	4,419
State and municipal securities		75,827		—		(3,410	)		72,417
Mortgage-backed securities:
Agency		342,751		261		(1,958	)		341,054
Commercial		77,077		47		(4,366	)		72,758
Non-agency		1,853		—		(122	)		1,731
Corporate fixed income securities		828,951		2,067		(6,826	)		824,192
Asset-backed securities		2,049,733		12,333		(656	)		2,061,410
	$	3,380,629	$	14,709	$	(17,357	)	$	3,377,981
Held-to-maturity securities ⁽²⁾
Mortgage-backed securities:
Agency	$	1,509,970	$	15,734	$	(16,902	)	$	1,508,802
Commercial		59,573		1,579		—			61,152
Asset-backed securities		1,580,163		11,238		(2,378	)		1,589,023
Corporate fixed income securities		40,061		75		—			40,136
	$	3,189,767	$	28,626	$	(19,280	)	$	3,199,113

	December 31, 2016
	Amortized Cost		Gross Unrealized Gains ⁽¹⁾		Gross Unrealized Losses ⁽¹⁾			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	4,213	$	2	$	(18	)	$	4,197
State and municipal securities		76,066		—		(3,576	)		72,490
Mortgage-backed securities:
Agency		340,738		298		(2,304	)		338,732
Commercial		77,417		59		(4,703	)		72,773
Non-agency		2,032		—		(140	)		1,892
Corporate fixed income securities		830,695		1,418		(8,602	)		823,511
Asset-backed securities		1,858,929		9,857		(1,068	)		1,867,718
	$	3,190,090	$	11,634	$	(20,411	)	$	3,181,313
Held-to-maturity securities ⁽²⁾
Mortgage-backed securities:
Agency	$	1,567,758	$	14,537	$	(17,037	)	$	1,565,258
Commercial		59,581		1,786		—			61,367
Non-agency		688		—		(13	)		675
Asset-backed securities		1,370,300		6,242		(3,396	)		1,373,146
Corporate fixed income securities		40,078		30		—			40,108
	$	3,038,405	$	22,595	$	(20,446	)	$	3,040,554

⁽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.

There were no sales of available-for-sale securities during the three months ended March 31, 2017 and 2016.

During the three months ended March 31, 2017, unrealized gains, net of deferred taxes, of $3.8 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition. During the three months ended March 31, 2016, unrealized losses, net of tax benefit, of $1.0 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.

	March 31, 2017
	Available-for-sale securities				Held-to-maturity securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Debt securities
Within one year	$	23,853	$	23,852	$	40,061	$	40,136
After one year through three years		332,237		333,154		—		—
After three years through five years		353,111		350,670	—		—
After five years through ten years		716,617		718,194		270,998		271,638
After ten years		1,533,130		1,536,568		1,309,165		1,317,385
Mortgage-backed securities
After three years through five years	—		—			59,573		61,152
After five years through ten years		58,788		55,351		160,329		158,931
After ten years		362,893		360,192		1,349,641		1,349,871
	$	3,380,629	$	3,377,981	$	3,189,767	$	3,199,113

The maturities of our available-for-sale (fair value) and held-to-maturity (amortized cost) securities at March 31, 2017, 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	$	1,175	$	3,244	$	—	$	—	$	4,419
State and municipal securities		201		375		16,815		55,026		72,417
Mortgage-backed securities:
Agency		—		—		444		340,610		341,054
Commercial		—		—		54,907		17,851		72,758
Non-agency		—		—		—		1,731		1,731
Corporate fixed income securities		22,476		680,205		121,511		—		824,192
Asset-backed securities		—		—		579,868		1,481,542		2,061,410
	$	23,852	$	683,824	$	773,545	$	1,896,760	$	3,377,981
Held-to-maturity:
Mortgage-backed securities:
Agency	$	—	$	—	$	160,329	$	1,349,641	$	1,509,970
Commercial		—		59,573		—		—		59,573
Asset-backed securities		—		—		270,998		1,309,165		1,580,163
Corporate fixed income securities		40,061		—		—		—		40,061
	$	40,061	$	59,573	$	431,327	$	2,658,806	$	3,189,767

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

At March 31, 2017 and December 31, 2016, securities of $1.9 billion and $2.0 billion, respectively, were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. At March 31, 2017 and December 31, 2016, securities of $1.9 billion and $1.7 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 March 31, 2017 (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	$	(19	)	$	3,819	—			—		$	(19	)	$	3,819
State and municipal securities		(338	)		12,233		(3,072	)		60,206		(3,410	)		72,439
Mortgage-backed securities:
Agency		(607	)		129,632		(1,351	)		139,111		(1,958	)		268,743
Commercial		(4,366	)		71,102	—			—			(4,366	)		71,102
Non-agency	—			—			(122	)		1,691		(122	)		1,691
Corporate fixed income securities		(6,826	)		425,140	—			—			(6,826	)		425,140
Asset-backed securities		(656	)		248,043	—			—			(656	)		248,043
	$	(12,812	)	$	889,969	$	(4,545	)	$	201,008	$	(17,357	)	$	1,090,977
Held-to-maturity securities
Mortgage-backed securities:
Agency	$	(16,886	)	$	961,972	$	(16	)	$	1,263	$	(16,902	)	$	963,235
Non-agency	—			—		—			—			—			—
Asset-backed securities		(205	)		63,745		(2,173	)		43,311		(2,378	)		107,056
Corporate fixed income securities	—			—		—			—			—			—
	$	(17,091	)	$	1,025,717	$	(2,189	)	$	44,574	$	(19,280	)	$	1,070,291

At March 31, 2017, the amortized cost of 130 securities classified as available for sale exceeded their fair value by $17.4 million, of which $4.5 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 March 31, 2017, was $1.1 billion, which was 32.3% of our available-for-sale portfolio.

At March 31, 2017, the carrying value of 43 securities held to maturity exceeded their fair value by $19.3 million, of which $2.2 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 months ended March 31, 2017 and 2016.

We believe the gross unrealized losses of $36.6 million related to our investment portfolio, as of March 31, 2017, 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.