4. SECURITIES

The following table summarizes the amortized cost and fair value of the available for sale and held to maturity investment securities portfolio at September 30, 2014 and December 31, 2013 and the corresponding amounts of unrealized gains and losses therein:

September 30, 2014

Gross

Estimated

Amortized

Unrealized

Fair

(In thousands)

Cost

Gains

Losses

Value

Available for sale:

U.S. GSE securities

104,296

(3,522

)

100,781

State and municipal obligations

64,823

404

(268

)

64,959

U.S. GSE residential mortgage-backed securities

99,054

(349

)

98,708

U.S. GSE residential collateralized mortgage obligations

278,002

(4,752

)

273,327

U.S. GSE commercial mortgage-backed securities

3,032

—

(120

)

2,912

U.S. GSE commercial collateralized mortgage obligations

25,206

(151

)

25,118

Other Asset backed securities

29,189

—

29,193

Corporate Bonds

17,950

(106

)

17,903

Total available for sale

621,552

617

(9,268

)

612,901

Held to maturity:

U.S. GSE securities

11,276

(69

)

11,280

State and municipal obligations

55,267

1,648

(86

)

56,829

U.S. GSE residential mortgage-backed securities

7,090

—

(173

)

6,917

U.S. GSE residential collateralized mortgage obligations

61,757

575

(1,663

)

60,669

U.S. GSE commercial mortgage-backed securities

13,298

(88

)

13,303

U.S. GSE commercial collateralized mortgage obligations

38,157

239

(666

)

37,730

Corporate Bonds

22,932

142

(13

)

23,061

Total held to maturity

209,777

2,770

(2,758

)

209,789

Total securities

831,329

3,387

(12,026

)

822,690

	December 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	164,278	$	15	$	(11,536	)	$	152,757
State and municipal obligations	62,141		602		(1,087		)	61,656
U.S. GSE residential mortgage-backed securities	14,609		36		(210		)	14,435
U.S. GSE residential collateralized mortgage obligations	285,595		559		(6,963		)	279,191
U.S. GSE commercial mortgage-backed securities	3,076		—		(242		)	2,834
U.S. GSE commercial collateralized mortgage obligations	26,740		194		(24		)	26,910
Non Agency commercial mortgage-backed securities	3,658		—		(80		)	3,578
Other Asset backed securities	34,970		42		(1,194		)	33,818
Total available for sale	595,067		1,448		(21,336		)	575,179

Held to maturity:
U.S. GSE securities	11,254		—		(375		)	10,879
State and municipal obligations	67,232		863		(179		)	67,916
U.S. GSE residential mortgage-backed securities	8,001		—		(312		)	7,689
U.S. GSE residential collateralized mortgage obligations	68,197		537		(3,655		)	65,079
U.S. GSE commercial mortgage-backed securities	10,132		—		(356		)	9,776
U.S. GSE commercial collateralized mortgage obligations	13,627		—		(706		)	12,921
Corporate Bonds	22,885		203		(9		)	23,079
Total held to maturity	201,328		1,603		(5,592		)	197,339
Total securities	$	796,395	$	3,051	$	(26,928	)	$	772,518

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at September 30, 2014. 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.

	September 30, 2014
	Amortized		Fair
(In thousands)	Cost		Value
Maturity
Available for sale:
Within one year	$	15,983	$	16,081
One to five years	31,614		31,773
Five to ten years	132,528		129,309
Beyond ten years	441,427		435,738
Total	$	621,552	$	612,901

Held to maturity:
Within one year	$	12,407	$	12,442
One to five years	34,983		35,157
Five to ten years	45,316		46,272
Beyond ten years	117,071		115,918
Total	$	209,777	$	209,789

Securities with unrealized losses at September 30, 2014 and December 31, 2013, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

Less than 12 months

Greater than 12 months

September 30, 2014

Unrealized

(In thousands)

Fair Value

losses

Fair Value

losses

Available for sale:

U.S. GSE securities

—

100,509

3,522

State and municipal obligations

12,118

12,752

208

U.S. GSE residential mortgage-backed securities

86,937

285

1,539

U.S. GSE residential collateralized mortgage obligations

122,023

879

113,484

3,873

U.S. GSE commercial mortgage-backed securities

—

2,912

120

U.S. GSE commercial collateralized mortgage obligations

18,549

151

—

Other Asset backed securities

—

Corporate Bonds

9,894

106

—

Total available for sale

249,521

1,481

231,196

7,787

Held to maturity:

U.S. GSE securities

—

78,384

State and municipal obligations

7,761

—

U.S. GSE residential mortgage-backed securities

—

6,917

173

U.S. GSE residential collateralized mortgage obligations

8,914

31,892

1,577

U.S. GSE commercial mortgage-backed securities

—

4,152

U.S. GSE commercial collateralized mortgage obligations

14,290

160

8,461

506

Corporate Bonds

5,987

—

Total held to maturity

36,952

345

129,806

2,413

	Less than 12 months				Greater than 12 months
December 31, 2013			Unrealized				Unrealized
(In thousands)	Fair Value		losses		Fair Value		losses
Available for sale:
U.S. GSE securities	$	128,468	$	8,915	$	23,966	$	2,621
State and municipal obligations	23,765		1,046		966		41
U.S. GSE residential mortgage-backed securities	10,410		210		—		—
U.S. GSE residential collateralized mortgage obligations	218,415		6,476		12,757		487
U.S. GSE commercial mortgage-backed securities	2,834		242		—		—
U.S. GSE commercial collateralized mortgage obligations	4,912		24		—		—
Non Agency commercial mortgage-backed securities	3,578		80		—		—
Other Asset backed securities	21,144		1,103		2,906		91
Total available for sale	413,526		18,096		40,595		3,240

Held to maturity:
U.S. GSE securities	10,879		375		—		—
State and municipal obligations	24,079		178		385		1
U.S. GSE residential mortgage-backed securities	7,689		312		—		—
U.S. GSE residential collateralized mortgage obligations	29,570		2,169		17,752		1,486
U.S. GSE commercial mortgage-backed securities	9,776		356		—		—
U.S. GSE commercial collateralized mortgage obligations	12,921		706		—		—
Corporate Bonds	1,993		7		999		2
Total held to maturity	$	96,907	$	4,103	$	19,136	$	1,489

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, 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 the aforementioned criteria, the amount of impairment is split into two components as follows: (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 September 30, 2014, the majority of unrealized losses on both the available for sale and held to maturity securities are related to the Company’s U.S. GSE securities and U.S. GSE residential collateralized mortgage obligations. The decrease in fair value of the U.S. GSE securities and U.S. GSE residential collateralized mortgage obligations is attributable to changes in interest rates and not credit quality. 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 September 30, 2014.

Proceeds from sales of securities available for sale were $115.3 million and $54.3 million for the three months ended September 30, 2014 and 2013, respectively. Proceeds from sales of securities available for sale were $350.0 million and $129.4 million for the nine months ended September 30, 2014 and 2013, respectively. Net gains of $9,000 and $11,000 were realized on these sales during the three months ended September 30, 2014 and 2013, respectively. Net losses of $1.1 million and net gains of $0.7 million were realized on these sales during the nine months ended September 30, 2014 and 2013, respectively. Proceeds from calls of securities were $0.3 million and $1.1 million for the three months ended September 30, 2014 and 2013, respectively. Proceeds from calls of securities were $2.8 million and $47.8 million for the nine months ended September 30, 2014 and 2013, respectively.

Securities having a fair value of approximately $378.7 million and $397.5 million at September 30, 2014 and December 31, 2013, respectively, were pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings. The Bank did not hold any trading securities during the nine months ended September 30, 2014 or the year ended December 31, 2013.

The Bank is a member of the Federal Home Loan Bank (“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 Federal Reserve Bank (“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 approximately $10.6 million and $7.0 million in FHLB, ACBB and FRB stock at September 30, 2014 and December 31, 2013. These amounts were reported as restricted securities in the consolidated balance sheets.