SECURITIES

6 Months Ended

Jun. 30, 2018

SECURITIES

SECURITIES

4.  SECURITIES

The following tables summarize the amortized cost and estimated fair value of the available for sale and held to maturity investment securities portfolio at June 30, 2018 and December 31, 2017 and the corresponding amounts of unrealized gains and losses therein:

	June 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	29,996	$	-	$	(1,258	)	$	28,738
State and municipal obligations		38,423		50		(525	)		37,948
U.S. GSE residential mortgage-backed securities		101,884		-		(3,688	)		98,196
U.S. GSE residential collateralized mortgage obligations		340,978		6		(8,937	)		332,047
U.S. GSE commercial mortgage-backed securities		3,584		-		(67	)		3,517
U.S. GSE commercial collateralized mortgage obligations		94,845		-		(2,438	)		92,407
Other asset backed securities		24,250		-		(727	)		23,523
Corporate bonds		46,000		-		(3,300	)		42,700
Total available for sale		679,960		56		(20,940	)		659,076
Held to maturity:
State and municipal obligations		57,350		497		(481	)		57,366
U.S. GSE residential mortgage-backed securities		10,441		-		(451	)		9,990
U.S. GSE residential collateralized mortgage obligations		51,026		81		(1,318	)		49,789
U.S. GSE commercial mortgage-backed securities		20,626		-		(897	)		19,729
U.S. GSE commercial collateralized mortgage obligations		30,274		-		(1,542	)		28,732
Total held to maturity		169,717		578		(4,689	)		165,606
Total securities	$	849,677	$	634	$	(25,629	)	$	824,682

	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	57,994	$	-	$	(1,180	)	$	56,814
State and municipal obligations		87,582		259		(819	)		87,022
U.S. GSE residential mortgage-backed securities		189,705		29		(2,833	)		186,901
U.S. GSE residential collateralized mortgage obligations		314,390		16		(7,016	)		307,390
U.S. GSE commercial mortgage-backed securities		6,017		2		(40	)		5,979
U.S. GSE commercial collateralized mortgage obligations		49,965		-		(1,249	)		48,716
Other asset backed securities		24,250		-		(849	)		23,401
Corporate bonds		46,000		-		(2,307	)		43,693
Total available for sale		775,903		306		(16,293	)		759,916
Held to maturity:
State and municipal obligations		60,762		972		(64	)		61,670
U.S. GSE residential mortgage-backed securities		11,424		-		(261	)		11,163
U.S. GSE residential collateralized mortgage obligations		54,250		244		(666	)		53,828
U.S. GSE commercial mortgage-backed securities		22,953		77		(438	)		22,592
U.S. GSE commercial collateralized mortgage obligations		31,477		-		(845	)		30,632
Total held to maturity		180,866		1,293		(2,274	)		179,885
Total securities	$	956,769	$	1,599	$	(18,567	)	$	939,801

The following table summarizes the amortized cost and estimated fair value by contractual maturity of the available for sale and held to maturity investment securities portfolio at June 30, 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.

	June 30, 2018
			Estimated
(In thousands)	Amortized Cost		Fair Value
Maturity
Available for sale:
Within one year	$	8,029	$	8,016
One to five years		24,616		24,104
Five to ten years		90,038		85,462
Beyond ten years		557,277		541,494
Total	$	679,960	$	659,076
Held to maturity:
Within one year	$	3,377	$	3,376
One to five years		30,563		30,374
Five to ten years		51,321		50,491
Beyond ten years		84,456		81,365
Total	$	169,717	$	165,606

The following tables summarize securities with gross unrealized losses at June 30, 2018 and December 31, 2017, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:

	June 30, 2018
	Less than 12 months					Greater than 12 months
	Estimated		Gross			Estimated		Gross
	Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses
Available for sale:
U.S. GSE securities	$	-	$	-		$	28,739	$	(1,258	)
State and municipal obligations		22,612		(318	)		10,404		(207	)
U.S. GSE residential mortgage-backed securities		39,156		(1,267	)		59,040		(2,421	)
U.S. GSE residential collateralized mortgage obligations		189,200		(2,329	)		132,871		(6,608	)
U.S. GSE commercial mortgage-backed securities		3,518		(67	)		-		-
U.S. GSE commercial collateralized mortgage obligations		47,103		(326	)		45,304		(2,112	)
Other asset backed securities		-		-			23,523		(727	)
Corporate bonds		12,930		(1,069	)		29,769		(2,231	)
Total available for sale		314,519		(5,376	)		329,650		(15,564	)
Held to maturity:
State and municipal obligations		28,822		(437	)		2,396		(44	)
U.S. GSE residential mortgage-backed securities		1,205		(35	)		8,784		(416	)
U.S. GSE residential collateralized mortgage obligations		23,685		(492	)		19,392		(826	)
U.S. GSE commercial mortgage-backed securities		11,857		(388	)		7,871		(509	)
U.S. GSE commercial collateralized mortgage obligations		9,489		(400	)		19,244		(1,142	)
Total held to maturity	$	75,058	$	(1,752	)	$	57,687	$	(2,937	)

	December 31, 2017
	Less than 12 months					Greater than 12 months
	Estimated		Gross			Estimated		Gross
	Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses
Available for sale:
U.S. GSE securities	$	-	$	-		$	56,815	$	(1,180	)
State and municipal obligations		35,350		(301	)		28,165		(518	)
U.S. GSE residential mortgage-backed securities		107,408		(1,153	)		69,571		(1,680	)
U.S. GSE residential collateralized mortgage obligations		77,705		(759	)		224,932		(6,257	)
U.S. GSE commercial mortgage-backed securities		2,345		(40	)		-		-
U.S. GSE commercial collateralized mortgage obligations		452		(1	)		48,264		(1,248	)
Other asset backed securities		-		-			23,401		(849	)
Corporate bonds		13,588		(412	)		30,105		(1,895	)
Total available for sale		236,848		(2,666	)		481,253		(13,627	)
Held to maturity:
State and municipal obligations		7,709		(57	)		1,009		(7	)
U.S. GSE residential mortgage-backed securities		1,359		(16	)		9,804		(245	)
U.S. GSE residential collateralized mortgage obligations		21,329		(94	)		21,112		(572	)
U.S. GSE commercial mortgage-backed securities		8,789		(121	)		8,303		(317	)
U.S. GSE commercial collateralized mortgage obligations		10,341		(116	)		20,290		(729	)
Total held to maturity	$	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 June 30, 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 is 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 June 30, 2018.

Sales and Calls of Securities

There were $230.4 million of proceeds from sales of securities with gross losses of $7.9 million realized for the three and six months ended June 30, 2018. There were no proceeds from sales of securities for the three and six months ended June 30, 2017. There were $0.9 million and $1.9 million of proceeds from calls of securities for the three and six months ended June 30, 2018, respectively. There were no proceeds from calls of securities for the three and six months ended June 30, 2017.

Pledged Securities

Securities having a fair value of $366.4 million and $513.5 million at June 30, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) overnight borrowings.

Trading Securities

The Company did not hold any trading securities during the six months ended June 30, 2018 or the year ended December 31, 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 $26.7 million and $35.3 million in FHLB, ACBB and FRB stock at June 30, 2018 and December 31, 2017, respectively. These amounts were reported as restricted securities in the consolidated balance sheets.