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.


	June 30, 2017
	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	$	1,750	$	-	$	-	$	1,750		0.08%
Residential mortgage-backed securities		1,866,602		20,302		(4,601)		1,882,303		82.94%
CMO/REMIC - residential		312,024		3,045		(951)		314,118		13.84%
Municipal bonds		70,209		795		(355)		70,649		3.11%
Other securities		690		-		-		690		0.03%

Total available-for-sale securities	$	2,251,275	$	24,142	$	(5,907)	$	2,269,510		100.00%

Investment securities held-to-maturity:
Government agency/GSE	$	169,942	$	1,108	$	(1,361)	$	169,689		19.54%
Residential mortgage-backed securities		185,401		676		(393)		185,684		21.32%
CMO		234,003		-		(6,611)		227,392		26.90%
Municipal bonds		280,423		2,634		(3,337)		279,720		32.24%

Total held-to-maturity securities	$	869,769	$	4,418	$	(11,702)	$	862,485		100.00%


	December 31, 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	$	2,750	$	2	$	-	$	2,752		0.12%
Residential mortgage-backed securities		1,822,168		18,812		(6,232)		1,834,748		80.81%
CMO/REMIC - residential		345,313		3,361		(1,485)		347,189		15.29%
Municipal bonds		80,137		889		(955)		80,071		3.53%
Other securities		5,506		200		-		5,706		0.25%

Total available-for-sale securities	$	2,255,874	$	23,264	$	(8,672)	$	2,270,466		100.00%

Investment securities held-to-maturity:
Government agency/GSE	$	182,648	$	362	$	(1,972)	$	181,038		20.03%
Residential mortgage-backed securities		193,699		-		(1,892)		191,807		21.25%
CMO		244,419		-		(6,808)		237,611		26.81%
Municipal bonds		290,910		776		(4,768)		286,918		31.91%

Total held-to-maturity securities	$	911,676	$	1,138	$	(15,440)	$	897,374		100.00%

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 June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
	(Dollars in thousands)
Investment securities available-for-sale:
Taxable	$	12,420	$	10,827	$	24,346	$	22,207
Tax-advantaged		587		1,191		1,301		2,610

Total interest income from available-for-sale securities		13,007		12,018		25,647		24,817

Investment securities held-to-maturity:
Taxable		3,203		2,215		6,480		4,835
Tax-advantaged		2,120		2,528		4,350		5,256

Total interest income from held-to-maturity securities		5,323		4,743		10,830		10,091

Total interest income from investment securities	$	18,330	$	16,761	$	36,477	$	34,908

Approximately 89% of the total investment securities portfolio at June 30, 2017 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 June 30, 2017 and December 31, 2016. At June 30, 2017, the Bank had $4,000 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 June 30, 2017 and December 31, 2016. 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”).


	June 30, 2017
	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		339,074		(4,601)		-		-		339,074		(4,601)
CMO/REMIC - residential		79,172		(951)		-		-		79,172		(951)
Municipal bonds		16,243		(354)		5,991		(1)		22,234		(355)

Total available-for-sale securities	$	434,489	$	(5,906)	$	5,991	$	(1)	$	440,480	$	(5,907)

Investment securities held-to-maturity:
Government agency/GSE	$	46,040	$	(1,361)	$	-	$	-	$	46,040	$	(1,361)
Residential mortgage-backed securities		111,873		(393)		-		-		111,873		(393)
CMO		227,392		(6,611)		-		-		227,392		(6,611)
Municipal bonds		77,824		(2,430)		23,484		(907)		101,308		(3,337)

Total held-to-maturity securities	$	463,129	$	(10,795)	$	23,484	$	(907)	$	486,613	$	(11,702)


	December 31, 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		583,143		(6,232)		-		-		583,143		(6,232)
CMO/REMIC - residential		128,595		(1,485)		-		-		128,595		(1,485)
Municipal bonds		23,255		(954)		5,981		(1)		29,236		(955)

Total available-for-sale securities	$	734,993	$	(8,671)	$	5,981	$	(1)	$	740,974	$	(8,672)

Investment securities held-to-maturity:
Government agency/GSE	$	76,854	$	(1,972)	$	-	$	-	$	76,854	$	(1,972)
Residential mortgage-backed securities		191,807		(1,892)		-		-		191,807		(1,892)
CMO		237,611		(6,808)		-		-		237,611		(6,808)
Municipal bonds		145,804		(3,711)		36,971		(1,057)		182,775		(4,768)

Total held-to-maturity securities	$	652,076	$	(14,383)	$	36,971	$	(1,057)	$	689,047	$	(15,440)

At June 30, 2017 and December 31, 2016, investment securities having a carrying value of approximately $2.03 billion and $2.19 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 June 30, 2017, by contractual maturity, are shown in the table below. Although certain mortgage-backed and CMO/REMIC securities 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 and CMO/REMIC securities are included in maturity categories based upon estimated average lives which incorporate estimated prepayment speeds.


	June 30, 2017
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	17,369	$	17,485	$	425	$	424
Due after one year through five years		1,955,896		1,975,849		124,293		122,167
Due after five years through ten years		232,464		230,357		417,336		413,416
Due after ten years		45,546		45,819		327,715		326,478

Total investment securities	$	2,251,275	$	2,269,510	$	869,769	$	862,485

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 June 30, 2017.