5.	INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are summarized below. The majority of securities held are traded in markets where similar assets are actively traded. Estimated fair values were obtained from an independent pricing service based upon market quotes.


	September 30, 2016
	Amortized Cost		Gross Unrealized Holding Gain		Gross Unrealized Holding Loss			Fair Value		Total Percent
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	3,750	$	7	$	-		$	3,757		0.17	%
Residential mortgage-backed securities		1,684,735		52,941		-			1,737,676		78.01	%
CMO/REMIC - residential		376,529		6,679		(112	)		383,096		17.20	%
Municipal bonds		95,537		1,998		(1	)		97,534		4.38	%
Other securities		5,000		488		-			5,488		0.24	%

Total available-for-sale securities	$	2,165,551	$	62,113	$	(113	)	$	2,227,551		100.00	%

Investment securities held-to-maturity (1):
Government agency/GSE	$	181,840	$	5,038	$	(25	)	$	186,853		20.69	%
Residential mortgage-backed securities		204,791		5,811		-			210,602		23.30	%
CMO		192,680		195		(325	)		192,550		21.92	%
Municipal bonds		299,642		5,357		(1,298	)		303,701		34.09	%

Total held-to-maturity securities	$	878,953	$	16,401	$	(1,648	)	$	893,706		100.00	%


	December 31, 2015
	Amortized Cost		Gross Unrealized Holding Gain		Gross Unrealized Holding Loss			Fair Value		Total Percent
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	5,752	$	-	$	(7	)	$	5,745		0.24	%
Residential mortgage-backed securities		1,788,857		26,001		(1,761	)		1,813,097		76.55	%
CMO/REMIC - residential		380,166		4,689		(1,074	)		383,781		16.20	%
Municipal bonds		157,940		3,036		(3	)		160,973		6.80	%
Other securities		5,000		50		-			5,050		0.21	%

Total available-for-sale securities	$	2,337,715	$	33,776	$	(2,845	)	$	2,368,646		100.00	%

Investment securities held-to-maturity (1):
Government agency/GSE	$	293,338	$	1,176	$	(734	)	$	293,780		34.47	%
Residential mortgage-backed securities		232,053		-		(1,293	)		230,760		27.27	%
CMO		1,284		569		-			1,853		0.15	%
Municipal bonds		324,314		3,051		(719	)		326,646		38.11	%

Total held-to-maturity securities	$	850,989	$	4,796	$	(2,746	)	$	853,039		100.00	%

(1) Securities held-to-maturity are presented in the condensed consolidated balance sheets at amortized cost.

During the quarter ended September 30, 2015, investment securities were transferred from the available-for-sale security portfolio to the held-to-maturity security portfolio. Transfers of securities into the held-to-maturity category from the available-for-sale category are transferred at fair value at the date of transfer. The fair value of these securities at the date of transfer was $898.6 million. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income (“AOCI”) and in the carrying value of the held-to-maturity securities. The net unrealized holding gain at the date of transfer was $3.9 million after-tax and will continue to be reported in AOCI and amortized over the remaining life of the securities as a yield adjustment. At September 30, 2016, investment securities HTM totaled $879.0 million. The after-tax unrealized gain reported in AOCI on investment securities HTM was $2.6 million at September 30, 2016.

The following table provides information about the amount of interest income earned on investment securities which is fully taxable and which is exempt from regular federal income tax.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2015		2016		2015
	(Dollars in thousands)
Investment securities available-for-sale:
Taxable	$	10,546	$	11,840	$	32,754	$	37,548
Tax-advantaged		879		2,894		3,488		12,623
Investment securities held-to-maturity:
Taxable		2,349		1,688		7,184		1,762
Tax-advantaged		2,438		1,748		7,694		1,748

Total interest income from investment securities	$	16,212	$	18,170	$	51,120	$	53,681

Approximately 87% of the total investment securities portfolio at September 30, 2016 represents securities issued by the U.S government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. All non-agency available-for-sale Collateralized Mortgage Obligations (“CMO”)/Real Estate Mortgage Investment Conduit (“REMIC”) issues held are rated investment grade or better by either Standard & Poor’s or Moody’s, as of September 30, 2016 and December 31, 2015. At September 30, 2016, the Bank had $101,000 in total CMO backed by whole loans issued by private-label companies (nongovernment sponsored).

The tables below show the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2016 and December 31, 2015. Management has reviewed individual securities to determine whether a decline in fair value below the amortized cost basis is other-than-temporary. The unrealized losses on these securities were primarily attributed to changes in interest rates. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market rates have fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or maturity. As such, management does not deem these securities to be Other-Than-Temporarily-Impaired (“OTTI”).

As of December 31, 2015, the Company had one OTTI HTM security with a net carrying value of $1.3 million. This security sold for a net gain of $546,000 in the third quarter of 2016. The Company did not record any charges for OTTI losses for the nine months ended September 30, 2016 and 2015.


	September 30, 2016
	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Gross Unrealized Holding Losses			Fair Value		Gross Unrealized Holding Losses			Fair Value		Gross Unrealized Holding Losses
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	-	$	-		$	-	$	-		$	-	$	-
Residential mortgage-backed securities		-		-			-		-			-		-
CMO/REMIC - residential		39,453		(112	)		-		-			39,453		(112	)
Municipal bonds		-		-			5,975		(1	)		5,975		(1	)
Other securities		-		-			-		-			-		-

Total available-for-sale securities	$	39,453	$	(112	)	$	5,975	$	(1	)	$	45,428	$	(113	)


Investment securities held-to-maturity:
Government agency/GSE	$	6,065	$	(25	)	$	-	$	-		$	6,065	$	(25	)
Residential mortgage-backed securities		-		-			-		-			-		-
CMO/REMIC - residential		54,425		(325	)		-		-			54,425		(325	)
Municipal bonds		39,894		(351	)		38,027		(947	)		77,921		(1,298	)
Other securities		-		-			-		-			-		-

Total held-to-maturity securities	$	100,384	$	(701	)	$	38,027	$	(947	)	$	138,411	$	(1,648	)


	December 31, 2015
	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Gross Unrealized Holding Losses			Fair Value		Gross Unrealized Holding Losses			Fair Value		Gross Unrealized Holding Losses
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	5,745	$	(7	)	$	-	$	-		$	5,745	$	(7	)
Residential mortgage-backed securities		437,699		(1,761	)		-		-			437,699		(1,761	)
CMO/REMIC - residential		171,923		(1,074	)		-		-			171,923		(1,074	)
Municipal bonds		398		(2	)		5,961		(1	)		6,359		(3	)
Other securities		-		-			-		-			-		-

Total available-for-sale securities	$	615,765	$	(2,844	)	$	5,961	$	(1	)	$	621,726	$	(2,845	)


Investment securities held-to-maturity:
Government agency/GSE	$	84,495	$	(734	)	$	-	$	-		$	84,495	$	(734	)
Residential mortgage-backed securities		230,760		(1,293	)		-		-			230,760		(1,293	)
CMO		-		-			-		-			-		-
Municipal bonds		110,119		(719	)		-		-			110,119		(719	)
Other securities		-		-			-		-			-		-

Total held-to-maturity securities	$	425,374	$	(2,746	)	$	-	$	-		$	425,374	$	(2,746	)

At September 30, 2016 and December 31, 2015, investment securities having a carrying value of approximately $2.25 billion and $2.81 billion, respectively, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at September 30, 2016, by contractual maturity, are shown in the table below. Although mortgage-backed securities and CMO/REMIC have contractual maturities through 2057, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed securities and CMO/REMIC are included in maturity categories based upon estimated prepayment speeds.


	September 30, 2016
	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in thousands)
Due in one year or less	$	12,709	$	12,877	$	-	$	-
Due after one year through five years		1,845,451		1,898,916		295,758		298,986
Due after five years through ten years		98,086		100,634		236,734		240,043
Due after ten years		209,305		215,124		346,461		354,677

Total investment securities	$	2,165,551	$	2,227,551	$	878,953	$	893,706

The investment in FHLB stock is periodically evaluated for impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through September 30, 2016.