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Investment Securities
 12 Months Ended
Dec. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
5.
INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities are summarized below. The majority of securities held are available-for-sale securities with fair value based on quoted prices for similar assets in active markets or quoted prices for identical assets in markets that are not active. Estimated fair values were obtained from an independent pricing service based upon market quotes.
 
 
 
December 31, 2018
 
 
 
Amortized 

Cost
 
 
Gross 

Unrealized 

Holding
Gain
 
 
Gross 

Unrealized 

Holding
Loss
 
 
Fair Value
 
 
Total 

Percent
 
 
 
(Dollars in thousands)
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities
 
$
1,494,106
 
 
$
1,348
 
 
$
(20,946
)
 
$
1,474,508
 
 
 
85.03
% 
CMO/REMIC - residential
 
 
217,223
 
 
 
353
 
 
 
(3,525
)
 
 
214,051
 
 
 
12.34
%
Municipal bonds
 
 
45,621
 
 
 
332
 
 
 
(1,143
)
 
 
44,810
 
 
 
2.59
%
Other securities
 
 
716
 
 
 
-
 
 
 
-
 
 
 
716
 
 
 
0.04
%
Total available-for-sale securities
 
$
1,757,666
 
 
$
2,033
 
 
$
(25,614
)
 
$
1,734,085
 
 
 
100.00
%
Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency/GSE
 
$
138,274
 
 
$
572
 
 
$
(2,622
)
 
$
136,224
 
 
 
18.57
%
Residential mortgage-backed securities
 
 
153,874
 
 
 
-
 
 
 
(3,140
)
 
 
150,734
 
 
 
20.67
%
CMO
 
 
215,336
 
 
 
-
 
 
 
(12,081
)
 
 
203,255
 
 
 
28.93
%
Municipal bonds
 
 
236,956
 
 
 
556
 
 
 
(6,188
)
 
 
231,324
 
 
 
31.83
%
Total held-to-maturity securities
 
$
744,440
 
 
$
1,128
 
 
$
(24,031
)
 
$
721,537
 
 
 
100.00
%
 
 
 
 
December 31, 2017
 
 
 
Amortized Cost
 
 
Gross 

Unrealized 

Holding
Gain
 
 
Gross 

Unrealized 

Holding
Loss
 
 
Fair 

Value
 
 
Total 

Percent
 
 
 
(Dollars in thousands)
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities
 
$
1,747,780
 
 
$
11,231
 
 
$
(8,102
)
 
$
1,750,909
 
 
 
84.14
%
CMO/REMIC - residential
 
 
274,634
 
 
 
1,277
 
 
 
(2,082
)
 
 
273,829
 
 
 
13.16
%
Municipal bonds
 
 
54,966
 
 
 
774
 
 
 
(244
)
 
 
55,496
 
 
 
2.66
%
Other securities
 
 
751
 
 
 
-
 
 
 
-
 
 
 
751
 
 
 
0.04
%
Total available-for-sale securities
 
$
2,078,131
 
 
$
13,282
 
 
$
(10,428
)
 
$
2,080,985
 
 
 
100.00
%
Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency/GSE
 
$
159,716
 
 
$
854
 
 
$
(2,134
)
 
$
158,436
 
 
 
19.25
%
Residential mortgage-backed securities
 
 
176,427
 
 
 
667
 
 
 
(382
)
 
 
176,712
 
 
 
21.26
%
CMO
 
 
225,072
 
 
 
-
 
 
 
(8,641
)
 
 
216,431
 
 
 
27.12
%
Municipal bonds
 
 
268,675
 
 
 
2,751
 
 
 
(3,790
)
 
 
267,636
 
 
 
32.37
%
Total held-to-maturity securities
 
$
829,890
 
 
$
4,272
 
 
$
(14,947
)
 
$
819,215
 
 
 
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 Year Ended December 31,
 
 
 
2018
 
 
2017
 
 
2016
 
 
 
(Dollars in thousands)
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
Taxable
 
$
44,423
 
 
$
47,596
 
 
$
43,538
 
Tax-advantaged
 
 
1,565
 
 
 
2,182
 
 
 
4,164
 
Total interest income from available-for-sale securities
 
 
45,988
 
 
 
49,778
 
 
 
47,702
 
Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
 
Taxable
 
 
11,848
 
 
 
12,558
 
 
 
10,183
 
Tax-advantaged
 
 
7,053
 
 
 
8,457
 
 
 
10,044
 
Total interest income from held-to-maturity securities
 
 
18,901
 
 
 
21,015
 
 
 
20,227
 
Total interest income from investment securities
 
$
64,889
 
 
$
70,793
 
 
$
67,929
 
 
Approximately 89% of the total investment securities portfolio at December 31, 2018 represents securities issued by the U.S government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest.
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 December 31, 2018 and 2017. 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 OTTI.
 
 
 
December 31, 2018
 
 
 
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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities
 
$
692,311
 
 
$
(4,864
)
 
$
593,367
 
 
$
(16,082
)
 
$
1,285,678
 
 
$
(20,946
)
CMO/REMIC - residential
 
 
36,582
 
 
 
(365
)
 
 
135,062
 
 
 
(3,160
)
 
 
171,644
 
 
 
(3,525
)
Municipal bonds
 
 
9,568
 
 
 
(188
)
 
 
14,181
 
 
 
(955
)
 
 
23,749
 
 
 
(1,143
)
Total available-for-sale securities
 
$
738,461
 
 
$
(5,417
)
 
$
742,610
 
 
$
(20,197
)
 
$
1,481,071
 
 
$
(25,614
)
Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency/GSE
 
$
7,479
 
 
$
(15
)
 
$
54,944
 
 
$
(2,607
)
 
$
62,423
 
 
$
(2,622
)
Residential mortgage-backed securities
 
 
59,871
 
 
 
(484
)
 
 
90,863
 
 
 
(2,656
)
 
 
150,734
 
 
 
(3,140
)
CMO
 
 
-
 
 
 
-
 
 
 
203,254
 
 
 
(12,081
)
 
 
203,254
 
 
 
(12,081
)
Municipal bonds
 
 
70,989
 
 
 
(778
)
 
 
77,723
 
 
 
(5,410
)
 
 
148,712
 
 
 
(6,188
)
Total held-to-maturity securities
 
$
138,339
 
 
$
(1,277
)
 
$
426,784
 
 
$
(22,754
)
 
$
565,123
 
 
$
(24,031
)
 
 
 
December 31, 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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities
 
$
414,091
 
 
$
(1,828
)
 
$
303,746
 
 
$
(6,274
)
 
$
717,837
 
 
$
(8,102
)
CMO/REMIC - residential
 
 
95,137
 
 
 
(487
)
 
 
71,223
 
 
 
(1,595
)
 
 
166,360
 
 
 
(2,082
)
Municipal bonds
 
 
946
 
 
 
(4
)
 
 
13,956
 
 
 
(240
)
 
 
14,902
 
 
 
(244
)
Total available-for-sale securities
 
$
510,174
 
 
$
(2,319
)
 
$
388,925
 
 
$
(8,109
)
 
$
899,099
 
 
$
(10,428
)
Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency/GSE
 
$
18,950
 
 
$
(27
)
 
$
43,495
 
 
$
(2,107
)
 
$
62,445
 
 
$
(2,134
)
Residential mortgage-backed securities
 
 
51,297
 
 
 
(188
)
 
 
55,306
 
 
 
(194
)
 
 
106,603
 
 
 
(382
)
CMO
 
 
-
 
 
 
-
 
 
 
216,431
 
 
 
(8,641
)
 
 
216,431
 
 
 
(8,641
)
Municipal bonds
 
 
32,069
 
 
 
(492
)
 
 
66,217
 
 
 
(3,298
)
 
 
98,286
 
 
 
(3,790
)
Total held-to-maturity securities
 
$
102,316
 
 
$
(707
)
 
$
381,449
 
 
$
(14,240
)
 
$
483,765
 
 
$
(14,947
)
 
 
The following summarizes our analysis of these securities and the unrealized losses. This assessment was based on the following factors: i) the length of the time and the extent to which the fair value has been less than amortized cost; ii) adverse condition specifically related to the security, an industry, or a geographic area and whether or not the Company expects to recover the entire amortized cost, iii) historical and implied volatility of the fair value of the security; iv) the payment structure of the security and the likelihood of the issuer being able to make payments in the future; v) failure of the issuer of the security to make scheduled interest or principal payments, vi) any changes to the rating of the security by a rating agency, and vii) recoveries or additional declines in fair value subsequent to the balance sheet date.
Government Agency & Government-Sponsored Enterprise (“GSE”) — The government agency bonds are backed by the full faith and credit of agencies of the U.S. Government. While the Government-Sponsored Enterprise bonds are not expressly guaranteed by the U.S. Government, they are currently being supported by the U.S. Government under a conservatorship arrangement. As of December 31, 2018, approximately $89.7 million in U.S. government agency bonds were callable. These securities are bullet securities, that is, they have a defined maturity date on which the principal is paid. The contractual term of these investments provides that the Company will receive the face value of the bond at maturity which will equal the amortized cost of the bond. Interest is received throughout the life of the security. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the bonds.
Mortgage-Backed Securities (“MBS”) and CMO/REMIC — Most of the Company’s mortgage-backed and CMO/REMIC securities are issued by Government Agencies or Government-Sponsored Enterprises such as Ginnie Mae, Fannie Mae and Freddie Mac. These securities are collateralized or backed by the underlying residential or commercial mortgages. All mortgage-backed securities are considered to be rated investment grade with a weighted average life of approximately 3.9 years. Of the total MBS/CMO, 100.00% have the implied guarantee of U.S. Government-Sponsored Agencies and Enterprises. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the bonds. There were no credit-related OTTI recognized in earnings for the years ended December 31, 2018 and 2017.
Municipal Bonds — The majority of the Company’s municipal bonds, with maturities of approximately 9.6 
years, represented approximately 11% of the
t
otal investment portfolio and are predominately AA or higher rated securities. The Company diversifies its holdings by owning selections of securities from different issuers and by holding securities from geographically diversified municipal issuers, thus reducing the Company’s exposure to any single adverse event. The decline in fair value is primarily due to the changes in interest rates. Since the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized costs, these investments are not considered OTTI at December 31, 2018.
At December 31, 2018 and 2017, investment securities having a carrying value of approximately $1.66 billion and $1.91 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 December 31, 2018, 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 and CMO/REMIC securities are included in maturity categories based upon estimated average lives which incorporate estimated prepayment speeds.
 
 
 
December 31, 2018
 
 
 
Available-for-sale
 
 
Held-to-maturity
 
 
 
Amortized
Cost
 
 
Fair Value
 
 
Amortized
Cost
 
 
Fair Value
 
 
 
(Dollars in thousands)
 
Due in one year or less
 
$
13,907
 
 
$
14,069
 
 
$
500
 
 
$
508
 
Due after one year through five years
 
 
1,574,638
 
 
 
1,554,686
 
 
 
288,967
 
 
 
276,693
 
Due after five years through ten years
 
 
143,258
 
 
 
140,500
 
 
 
197,061
 
 
 
193,389
 
Due after ten years
 
 
25,863
 
 
 
24,830
 
 
 
257,912
 
 
 
250,947
 
Total investment securities
 
$
1,757,666
 
 
$
1,734,085
 
 
$
744,440
 
 
$
721,537
 
 
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 December 
31
,
2018
.