Note 4. Securities

The following tables summarize the Company’s portfolio of debt securities available for sale and equity investments with readily determinable fair values at September 30, 2018 and December 31, 2017:


	September 30, 2018
(in thousands)	Amortized Cost			Gross Unrealized Gain			Gross Unrealized Loss			Fair Value
Debt securities available-for-sale
Mortgage-Related Debt Securities:
GSE certificates		$	1,892,104		$	5,113		$	33,361		$	1,863,856
GSE CMOs			919,382			3,791			6,133			917,040

Total mortgage-related debt securities		$	2,811,486		$	8,904		$	39,494		$	2,780,896

Other Debt Securities:
GSE debentures		$	1,043,927		$	632		$	22,868		$	1,021,691
Asset-backed securities ⁽¹⁾			387,782			1,075			534			388,323
Municipal bonds			69,276			100			1,877			67,499
Corporate bonds			445,902			10,384			655			455,631
Capital trust notes			48,265			6,639			4,661			50,243

Total other debt securities		$	1,995,152		$	18,830		$	30,595		$	1,983,387

Total other securities available for sale ⁽²⁾		$	4,806,638		$	27,734		$	70,089		$	4,764,283

Equity securities:
Preferred stock		$	15,292		$	--		$	138		$	15,154
Mutual funds and common stock ⁽³⁾			16,874			376			680			16,570

Total equity securities		$	32,166		$	376		$	818		$	31,724

Total securities		$	4,838,804		$	28,110		$	70,907		$	4,796,007

(1)	The underlying assets of the asset-backed securities are substantially guaranteed by the U.S. Government.

(2)	The amortized cost includes the non-credit portion of OTTI recorded in AOCL. At September 30, 2018, the non-credit portion of OTTI recorded in AOCL was $8.6 million before taxes.

(3)	Primarily consists of mutual funds that are CRA-qualified investments.


	December 31, 2017
(in thousands)	Amortized Cost			Gross Unrealized Gain			Gross Unrealized Loss			Fair Value
Mortgage-Related Securities:
GSE certificates		$	2,023,677		$	46,364		$	1,199		$	2,068,842
GSE CMOs			536,284			14,446			826			549,904

Total mortgage-related securities		$	2,559,961		$	60,810		$	2,025		$	2,618,746

Other Securities:
U. S. Treasury obligations		$	199,960		$	--		$	62		$	199,898
GSE debentures			473,879			2,044			2,665			473,258
Municipal bonds			70,381			540			801			70,120
Corporate bonds			79,702			11,073			--			90,775
Capital trust notes			48,230			6,498			8,632			46,096
Preferred stock			15,292			142			--			15,434
Mutual funds and common stock ⁽¹⁾			16,874			487			261			17,100

Total other securities		$	904,318		$	20,784		$	12,421		$	912,681

Total securities available for sale ⁽²⁾		$	3,464,279		$	81,594		$	14,446		$	3,531,427

(1)	Primarily consists of mutual funds that are CRA-qualified investments.

(2)	The amortized cost includes the non-credit portion of OTTI recorded in AOCL. At December 31, 2017, the non-credit portion of OTTI recorded in AOCL was $8.6 million before taxes.

At September 30, 2018 and December 31, 2017, respectively, the Company had $654.9 million and $603.8 million of FHLB-NY stock, at cost. The Company maintains an investment in FHLB-NY stock partly in conjunction with its membership in the FHLB and partly related to its access to the FHLB funding it utilizes.

The following table summarizes the gross proceeds and gross realized gains from the sale of available-for-sale securities during the nine months ended September 30, 2018 and 2017:


	For the Nine Months Ended September 30,
(in thousands)	2018		2017
Gross proceeds		$--		$246,209
Gross realized gains		--		1,986

In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2018. For credit-impaired debt securities, OTTI recognized in earnings after that date is presented as an addition in two components, based upon whether the current period is the first time a debt security was credit-impaired (initial credit impairment) or is not the first time a debt security was credit-impaired (subsequent credit impairment).


(in thousands)	For the Nine Months Ended September 30, 2018
Beginning credit loss amount as of December 31, 2017		$196,333
Add: Initial other-than-temporary credit losses		--
Subsequent other-than-temporary credit losses		--
Amount previously recognized in AOCL		--
Less: Realized losses for securities sold		--
Securities intended or required to be sold		--
Increase in cash flows on debt securities		49
Ending credit loss amount as of September 30, 2018		$196,284

The following table summarizes, by contractual maturity, the amortized cost of securities at September 30, 2018:


	Mortgage- Related Securities			Average Yield		U.S. Government and GSE Obligations			Average Yield		State, County, and Municipal			Average Yield ⁽¹⁾		Other Debt Securities ⁽²⁾			Average Yield		Fair Value
(dollars in thousands)
Available-for-Sale Debt Securities: ⁽³⁾
Due within one year		$	--		--%		$	--		--%		$	149		6.51%		$	--		--%		$	151
Due from one to five years			1,378,471		3.31			6,950		3.84			294		6.63			78,787		3.64			1,463,371
Due from five to ten years			326,275		3.44			927,006		3.33			--		--			367,115		4.02			1,605,017
Due after ten years			1,106,740		3.19			109,971		3.68			68,833		2.88			436,047		3.23			1,695,744

Total debt securities available for sale		$	2,811,486		3.28%		$	1,043,927		3.37%		$	69,276		2.90%		$	881,949		3.60%		$	4,764,283

(1)	Not presented on a tax-equivalent basis.

(2)	Includes corporate bonds, capital trust notes, and asset-backed securities.

(3)	As equity securities have no contractual maturity, they have been excluded from this table.

The following table presents securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of September 30, 2018:


	Less than Twelve Months						Twelve Months or Longer						Total
(in thousands)	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Temporarily Impaired Securities:
U. S. Government agency and GSE obligations		$	992,186		$	22,868		$	--		$	--		$	992,186		$	22,868
GSE certificates			1,209,277			31,983			18,248			1,378			1,227,525			33,361
GSE CMOs			488,185			6,133			--			--			488,185			6,133
Asset-backed securities			77,000			534			--			--			77,000			534
Municipal bonds			5,884			14			50,082			1,863			55,966			1,877
Corporate bonds			160,268			655			--			--			160,268			655
Capital trust notes			--			--			39,109			4,661			39,109			4,661
Equity securities			19,105			196			11,184			622			30,289			818

Total temporarily impaired securities		$	2,951,905		$	62,383		$	118,623		$	8,524		$	3,070,528		$	70,907

The following table presents securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2017:


	Less than Twelve Months						Twelve Months or Longer						Total
(in thousands)	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Temporarily Impaired Available-for-Sale Securities:
GSE certificates		$	232,546		$	535		$	20,440		$	664		$	252,986		$	1,199
GSE debentures			333,045			2,665			--			--			333,045			2,665
GSE CMOs			118,694			826			--			--			118,694			826
U. S. Treasury obligations			199,898			62			--			--			199,898			62
Municipal bonds			11,169			259			41,054			542			52,223			801
Capital trust notes			--			--			35,105			8,632			35,105			8,632
Equity securities			--			--			11,545			261			11,545			261

Total temporarily impaired available-for-sale securities		$	895,352		$	4,347		$	108,144		$	10,099		$	1,003,496		$	14,446

An OTTI loss on impaired debt securities must be fully recognized in earnings if an investor has the intent to sell the debt security, or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss occurs, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts of impairment relating to factors other than credit losses are recorded in AOCL.

At September 30, 2018, the Company had unrealized losses on certain GSE obligations, municipal bonds, corporate bonds, asset-backed securities, capital trust notes, and equity securities. The unrealized losses on the Company’s GSE obligations, municipal bonds, corporate bonds, asset-backed securities and capital trust notes at September 30, 2018 were primarily caused by movements in market interest rates and spread volatility, rather than credit risk. These securities are not expected to be settled at a price that is less than the amortized cost of the Company’s investment.

The Company reviews quarterly financial information related to its investments in capital trust notes, as well as other information that is released by each of the issuers of such notes, to determine their continued creditworthiness. The Company continues to monitor these investments and currently estimates that the present value of expected cash flows is not less than the amortized cost of the securities. It is possible that these securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from these securities and potential OTTI losses in the future. Future events that could trigger material unrecoverable declines in the fair values of the Company’s investments, and thus result in potential OTTI losses, include, but are not limited to, government intervention; deteriorating asset quality and credit metrics; significantly higher levels of default and loan loss provisions; losses in value on the underlying collateral; net operating losses; and illiquidity in the financial markets.

The Company considers a decline in the fair value of equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. The unrealized losses on the Company’s equity securities at September 30, 2018 were caused by market volatility. The Company evaluated the near-term prospects of recovering the fair value of these securities, together with the severity and duration of impairment to date, and determined that they were not other-than-temporarily impaired. Nonetheless, it is possible that these equity securities will perform worse than is currently expected, which could lead to adverse changes in their fair value, or to the failure of the securities to fully recover in value as currently anticipated by management. Either event could cause the Company to record an OTTI loss in a future period. Events that could trigger a material decline in the fair value of these securities include, but are not limited to, deterioration in the equity markets; a decline in the quality of the loan portfolio of the issuer in which the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuer.

The investment securities designated as having a continuous loss position for twelve months or more at both September 30, 2018 and December 31, 2017 consisted of six agency mortgage-related securities, five capital trust notes, three municipal bonds, and one mutual fund. At September 30, 2018, the fair value of securities having a continuous loss position for twelve months or more was 6.7% below the collective amortized cost of $127.1 million. At December 31, 2017, the fair value of such securities was 8.5% below the collective amortized cost of $118.2 million. At September 30, 2018 and December 31, 2017, the combined market value of the respective securities represented unrealized losses of $8.5 million and $10.1 million, respectively.