SECURITIES

3 Months Ended

Mar. 31, 2017

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 March 31, 2017 and December 31, 2016 and the corresponding amounts of unrealized gains and losses therein:

	March 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	64,993	$	-	$	(1,160	)	$	63,833
State and municipal obligations		116,222		469		(960	)		115,731
U.S. GSE residential mortgage-backed securities		182,139		41		(2,358	)		179,822
U.S. GSE residential collateralized mortgage obligations		356,471		217		(5,200	)		351,488
U.S. GSE commercial mortgage-backed securities		6,296		25		(37	)		6,284
U.S. GSE commercial collateralized mortgage obligations		54,370		3		(1,028	)		53,345
Other asset backed securities		24,250		-		(1,455	)		22,795
Corporate bonds		32,000		-		(1,783	)		30,217
Total available for sale		836,741		755		(13,981	)		823,515
Held to maturity:
State and municipal obligations		65,064		1,274		(87	)		66,251
U.S. GSE residential mortgage-backed securities		12,973		-		(285	)		12,688
U.S. GSE residential collateralized mortgage obligations		59,590		338		(586	)		59,342
U.S. GSE commercial mortgage-backed securities		28,595		98		(495	)		28,198
U.S. GSE commercial collateralized mortgage obligations		37,739		30		(659	)		37,110
Corporate bonds		11,000		33		-			11,033
Total held to maturity		214,961		1,773		(2,112	)		214,622
Total securities	$	1,051,702	$	2,528	$	(16,093	)	$	1,038,137

	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	64,993	$	-	$	(1,344	)	$	63,649
State and municipal obligations		117,292		212		(1,339	)		116,165
U.S. GSE residential mortgage-backed securities		160,446		16		(2,414	)		158,048
U.S. GSE residential collateralized mortgage obligations		373,098		149		(5,736	)		367,511
U.S. GSE commercial mortgage-backed securities		6,337		6		(36	)		6,307
U.S. GSE commercial collateralized mortgage obligations		56,148		-		(956	)		55,192
Other asset backed securities		24,250		-		(1,697	)		22,553
Corporate bonds		32,000		-		(1,703	)		30,297
Total available for sale		834,564		383		(15,225	)		819,722
Held to maturity:
State and municipal obligations		66,666		1,085		(130	)		67,621
U.S. GSE residential mortgage-backed securities		13,443		-		(287	)		13,156
U.S. GSE residential collateralized mortgage obligations		61,639		352		(552	)		61,439
U.S. GSE commercial mortgage-backed securities		28,772		136		(509	)		28,399
U.S. GSE commercial collateralized mortgage obligations		41,717		93		(573	)		41,237
Corporate bonds		11,000		26		-			11,026
Total held to maturity		223,237		1,692		(2,051	)		222,878
Total securities	$	1,057,801	$	2,075	$	(17,276	)	$	1,042,600

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 March 31, 2017. 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.

	March 31, 2017
			Estimated
(In thousands)	Amortized Cost		Fair Value
Maturity
Available for sale:
Within one year	$	10,591	$	10,591
One to five years		86,316		85,639
Five to ten years		147,617		144,678
Beyond ten years		592,217		582,607
Total	$	836,741	$	823,515
Held to maturity:
Within one year	$	19,276	$	19,307
One to five years		36,138		36,210
Five to ten years		56,800		57,517
Beyond ten years		102,747		101,588
Total	$	214,961	$	214,622

The following tables summarize securities with gross unrealized losses at March 31, 2017 and December 31, 2016, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position:

	March 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	$	63,833	$	(1,160	)	$	-	$	-
State and municipal obligations		67,719		(945	)		751		(15	)
U.S. GSE residential mortgage-backed securities		153,469		(2,352	)		238		(6	)
U.S. GSE residential collateralized mortgage obligations		284,303		(4,556	)		23,390		(644	)
U.S. GSE commercial mortgage-backed securities		2,556		(37	)		-		-
U.S. GSE commercial collateralized mortgage obligations		41,896		(790	)		9,341		(238	)
Other asset backed securities		-		-			22,795		(1,455	)
Corporate bonds		8,432		(568	)		21,785		(1,215	)
Total available for sale		622,208		(10,408	)		78,300		(3,573	)
Held to maturity:
State and municipal obligations		20,480		(87	)		-		-
U.S. GSE residential mortgage-backed securities		12,688		(285	)		-		-
U.S. GSE residential collateralized mortgage obligations		39,134		(500	)		3,733		(86	)
U.S. GSE commercial mortgage-backed securities		12,847		(255	)		5,782		(240	)
U.S. GSE commercial collateralized mortgage obligations		17,447		(307	)		8,579		(352	)
Corporate bonds		-		-			-		-
Total held to maturity	$	102,596	$	(1,434	)	$	18,094	$	(678	)

	December 31, 2016
	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	$	63,649	$	(1,344	)	$	-	$	-
State and municipal obligations		78,883		(1,338	)		240		(1	)
U.S. GSE residential mortgage-backed securities		140,514		(2,409	)		241		(5	)
U.S. GSE residential collateralized mortgage obligations		319,197		(5,221	)		15,627		(515	)
U.S. GSE commercial mortgage-backed securities		2,573		(36	)		-		-
U.S. GSE commercial collateralized mortgage obligations		48,901		(886	)		6,292		(70	)
Other asset backed securities		-		-			22,552		(1,697	)
Corporate bonds		17,834		(1,166	)		12,463		(537	)
Total available for sale		671,551		(12,400	)		57,415		(2,825	)
Held to maturity:
State and municipal obligations		21,867		(130	)		-		-
U.S. GSE residential mortgage-backed securities		13,156		(287	)		-		-
U.S. GSE residential collateralized mortgage obligations		31,297		(455	)		3,873		(97	)
U.S. GSE commercial mortgage-backed securities		12,860		(286	)		5,877		(223	)
U.S. GSE commercial collateralized mortgage obligations		22,666		(372	)		3,790		(201	)
Corporate bonds		-		-			-		-
Total held to maturity	$	101,846	$	(1,530	)	$	13,540	$	(521	)

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 March 31, 2017, 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 Aaa Moody’s rating during the time the Bank has owned them. None of the unrealized losses are 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 March 31, 2017.

There were no proceeds from sales of securities for the three months ended the March 31, 2017. There were $28.7 million of proceeds from sales of securities with gross gains of approximately $0.3 million and gross losses of approximately $0.2 million realized for the three months ended March 31, 2016. Proceeds from calls of securities were $0.2 million and $30.6 million for the three months ended March 31, 2017 and 2016, respectively.

Securities having a fair value of $628.0 million and $570.1 million at March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) overnight borrowings. The Company did not hold any trading securities during the three months ended March 31, 2017 or the year ended December 31, 2016.

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 $35.2 million and $34.7 million in FHLB, ACBB and FRB stock at March 31, 2017 and December 31, 2016, respectively. These amounts were reported as restricted securities in the consolidated balance sheets.