2. SECURITIES

The following table summarizes the amortized cost and estimated fair value of the available for sale and held to maturity investment securities portfolio and the corresponding amounts of gross unrealized gains and losses therein:


	December 31,
	2018								2017
			Gross		Gross		Estimated				Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
Available for sale:
U.S. GSE securities	$	29,997	$	—	$	(947)	$	29,050	$	57,994	$	—	$	(1,180)	$	56,814
State and municipal obligations		40,980		105		(354)		40,731		87,582		259		(819)		87,022
U.S. GSE residential mortgage-backed securities		96,536		38		(3,036)		93,538		189,705		29		(2,833)		186,901
U.S. GSE residential collateralized mortgage obligations		362,905		826		(5,954)		357,777		314,390		16		(7,016)		307,390
U.S. GSE commercial mortgage-backed securities		3,536		—		(28)		3,508		6,017		2		(40)		5,979
U.S. GSE commercial collateralized mortgage obligations		93,177		—		(2,539)		90,638		49,965		—		(1,249)		48,716
Other asset-backed securities		24,250		—		(1,031)		23,219		24,250		—		(849)		23,401
Corporate bonds		46,000		—		(3,575)		42,425		46,000		—		(2,307)		43,693
Total available for sale		697,381		969		(17,464)		680,886		775,903		306		(16,293)		759,916

Held to maturity:
State and municipal obligations		53,540		290		(276)		53,554		60,762		972		(64)		61,670
U.S. GSE residential mortgage-backed securities		9,688		—		(336)		9,352		11,424		—		(261)		11,163
U.S. GSE residential collateralized mortgage obligations		48,244		163		(1,130)		47,277		54,250		244		(666)		53,828
U.S. GSE commercial mortgage-backed securities		19,098		4		(620)		18,482		22,953		77		(438)		22,592
U.S. GSE commercial collateralized mortgage obligations		29,593		—		(1,466)		28,127		31,477		—		(845)		30,632
Total held to maturity		160,163		457		(3,828)		156,792		180,866		1,293		(2,274)		179,885
Total securities	$	857,544	$	1,426	$	(21,292)	$	837,678	$	956,769	$	1,599	$	(18,567)	$	939,801

The following table summarizes securities with gross unrealized losses at December 31, 2018 and 2017, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:


	December 31,
	2018								2017
	Less than 12 months				Greater than 12 months				Less than 12 months				Greater than 12 months
	Estimated		Gross		Estimated		Gross		Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses		Value		Losses
Available for sale:
U.S. GSE securities	$	—	$	—	$	29,050	$	(947)	$	—	$	—	$	56,815	$	(1,180)
State and municipal obligations		6,655		(15)		21,273		(339)		35,350		(301)		28,165		(518)
U.S. GSE residential mortgage-backed securities		—		—		88,762		(3,036)		107,408		(1,153)		69,571		(1,680)
U.S. GSE residential collateralized mortgage obligations		46,452		(141)		172,468		(5,813)		77,705		(759)		224,932		(6,257)
U.S. GSE commercial mortgage-backed securities		—		—		3,508		(28)		2,345		(40)		—		—
U.S. GSE commercial collateralized mortgage obligations		46,705		(623)		43,933		(1,916)		452		(1)		48,264		(1,248)
Other asset-backed securities		—		—		23,219		(1,031)		—		—		23,401		(849)
Corporate bonds		—		—		42,425		(3,575)		13,588		(412)		30,105		(1,895)
Total available for sale	$	99,812	$	(779)	$	424,638	$	(16,685)	$	236,848	$	(2,666)	$	481,253	$	(13,627)

Held to maturity:
State and municipal obligations	$	8,286	$	(26)	$	22,142	$	(250)	$	7,709	$	(57)	$	1,009	$	(7)
U.S. GSE residential mortgage-backed securities		—		—		9,352		(336)		1,359		(16)		9,804		(245)
U.S. GSE residential collateralized mortgage obligations		—		—		40,665		(1,130)		21,329		(94)		21,112		(572)
U.S. GSE commercial mortgage-backed securities		—		—		16,205		(620)		8,789		(121)		8,303		(317)
U.S. GSE commercial collateralized mortgage obligations		—		—		28,127		(1,466)		10,341		(116)		20,290		(729)
Total held to maturity	$	8,286	$	(26)	$	116,491	$	(3,802)	$	49,527	$	(404)	$	60,518	$	(1,870)

Other-Than-Temporary Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) quarterly and more frequently when economic or market conditions warrant. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held to maturity are generally evaluated for OTTI under FASB ASC 320, “Accounting for Certain Investments in Debt and Equity Securities”. In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet these criteria, the amount of impairment is split into two components: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

At December 31, 2018, substantially all of the securities in an unrealized loss position had a fixed interest rate and the cause of the temporary impairment was directly related to changes in interest rates. The Company generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with its experience. Other asset backed securities are comprised of student loan backed bonds, which are guaranteed by the U.S. Department of Education for 97% to 100% of principal. Additionally, the bonds have credit support of 3% to 5% and have maintained their Aa3 Moody’s rating during the time the Bank has owned them. The corporate bonds within the portfolio have all maintained an investment grade rating by either Moody’s or Standard and Poor’s. None of the unrealized losses were related to credit losses. The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2018.

The following table sets forth the estimated fair value, amortized cost and contractual maturities of the securities portfolio at December 31, 2018. 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.


	December 31, 2018
	Within				After One but				After Five but				After
	One Year				Within Five Years				Within Ten Years				Ten Years				Total
	Estimated				Estimated				Estimated				Estimated				Estimated
	Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized
(In thousands)	Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost
Available for sale:
U.S. GSE securities	$	—	$	—	$	14,546	$	14,997	$	14,504	$	15,000	$	—	$	—	$	29,050	$	29,997
State and municipal obligations		5,028		5,049		11,744		11,786		20,011		20,186		3,948		3,959		40,731		40,980
U.S. GSE residential mortgage-backed securities		—		—		—		—		—		—		93,538		96,536		93,538		96,536
U.S. GSE residential collateralized mortgage obligations		—		—		—		—		5,153		5,085		352,624		357,820		357,777		362,905
U.S. GSE commercial mortgage-backed securities		—		—		3,508		3,536		—		—		—		—		3,508		3,536
U.S. GSE commercial collateralized mortgage obligations		—		—		—		—		—		—		90,638		93,177		90,638		93,177
Other asset backed securities		—		—		—		—		—		—		23,219		24,250		23,219		24,250
Corporate bonds		—		—		—		—		42,425		46,000		—		—		42,425		46,000
Total available for sale		5,028		5,049		29,798		30,319		82,093		86,271		563,967		575,742		680,886		697,381

Held to maturity:
State and municipal obligations		2,394		2,404		25,988		25,954		24,876		24,882		296		300		53,554		53,540
U.S. GSE residential mortgage-backed securities		—		—		—		—		7,105		7,333		2,247		2,355		9,352		9,688
U.S. GSE residential collateralized mortgage obligations		—		—		—		—		5,123		5,211		42,154		43,033		47,277		48,244
U.S. GSE commercial mortgage-backed securities		—		—		5,997		6,048		4,743		4,915		7,742		8,135		18,482		19,098
U.S. GSE commercial collateralized mortgage obligations		—		—		2,558		2,687		—		—		25,569		26,906		28,127		29,593
Total held to maturity		2,394		2,404		34,543		34,689		41,847		42,341		78,008		80,729		156,792		160,163
Total securities	$	7,422	$	7,453	$	64,341	$	65,008	$	123,940	$	128,612	$	641,975	$	656,471	$	837,678	$	857,544

Sales and Calls of Securities

There were $230.4 million of proceeds on sales of available for sale securities with gross losses of approximately $7.9 million realized in 2018. There were $52.4 million of proceeds on sales of available for sale securities with gross gains of approximately $0.3 million and gross losses of approximately $0.3 million realized in 2017. There were $264.4 million of proceeds on sales of available for sale securities with gross gains of approximately $1.6 million and gross losses of approximately $1.2 million realized in 2016. There were $3.3 million of proceeds from calls of securities in 2018.

Pledged Securities

Securities having a fair value of $354.3 million and $513.5 million at December 31, 2018 and 2017, respectively, were pledged to secure public deposits and FHLB and FRB overnight borrowings.

Trading Securities

The Company did not hold any trading securities during the years ended December 31, 2018 and 2017.

Restricted Securities

The Bank is a member of the FHLB of New York. Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the FRB system and required to own FRB stock. FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Bank owned $24.0 million and $35.3 million in FHLB, ACBB and FRB stock at December 31, 2018 and 2017, respectively. These amounts were reported as restricted securities in the consolidated balance sheets.

As of December 31, 2018 and 2017, there was no issuer, other than the U.S. Government and its sponsored entities, where the Bank had invested holdings that exceeded 10% of consolidated stockholders’ equity.