SECURITIES

During the first quarter of fiscal 2018, the Company early adopted Accounting Standard Update ("ASU") 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." Due to the early adoption of the ASU, the Company transferred $204.7 million of investment securities and $101.3 million of MBS from HTM to AFS during the first quarter of fiscal 2018. In connection with the Crestmark Acquisition, the Company transferred $40.9 million of investment securities from HTM to AFS during the fourth quarter of fiscal 2018, as allowed through ASC 320-10-25-6(c), which allows for the transfer of securities from HTM in the event of a major business combination.

Securities available for sale at September 30, 2018 and 2017 were as follows:



Available For Sale			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED			FAIR
At September 30, 2018	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Small business administration securities	$	45,591	$	1	$	(1,255	)	$	44,337
Obligation of states and political subdivisions	17,154		49		(293		)	16,910
Non-bank qualified obligations of states and political subdivisions	1,140,884		826		(31,825		)	1,109,885
Asset-backed securities	310,700		2,585		(257		)	313,028
Mortgage-backed securities	378,301		—		(14,236		)	364,065
Total debt securities	1,892,630		3,461		(47,866		)	1,848,225
Common equities and mutual funds	3,172		635		(7		)	3,800
Total available for sale securities	$	1,895,802	$	4,096	$	(47,873	)	$	1,852,025



	AMORTIZED		GROSS UNREALIZED		GROSS UNREALIZED			FAIR
At September 30, 2017	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Small business administration securities	$	57,046	$	825	$	—		$	57,871
Non-bank qualified obligations of states and political subdivisions	938,883		14,983		(3,037		)	950,829
Asset-backed securities	94,451		2,381		—			96,832
Mortgage-backed securities	588,918		1,259		(3,723		)	586,454
Total debt securities	1,679,298		19,448		(6,760		)	1,691,986
Common equities and mutual funds	1,009		436		—			1,445
Total available for sale securities	$	1,680,307	$	19,884	$	(6,760	)	$	1,693,431

Securities held to maturity at September 30, 2018 and 2017 were as follows:



Held to Maturity			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED			FAIR
At September 30, 2018	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Non-bank qualified obligations of states and political subdivisions	$	164,304	$	—	$	(10,758	)	$	153,546
Mortgage-backed securities	7,850		—		(422		)	7,428
Total held to maturity securities	$	172,154			$	(11,180	)	$	160,974



	AMORTIZED		GROSS UNREALIZED		GROSS UNREALIZED			FAIR
At September 30, 2017	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions	$	19,247	$	157	$	(36	)	$	19,368
Non-bank qualified obligations of states and political subdivisions	430,593		4,744		(2,976		)	432,361
Mortgage-backed securities	113,689		—		(1,233		)	112,456
Total held to maturity securities	$	563,529	$	4,901	$	(4,245	)	$	564,185

Management has implemented processes to identify securities that could potentially have a credit impairment that is other-than-temporary. This process can include, but is not limited to, evaluating the length of time and extent to which the fair value has been less than the amortized cost basis, reviewing available information regarding the financial position of the issuer, interest or dividend payment status, monitoring the rating of the security, monitoring changes in value, and projecting cash flows. Management also determines whether the Company intends to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost basis which, in some cases, may extend to maturity. To the extent the Company determine that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

For all securities considered temporarily impaired, the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost, which may occur at maturity. The Company believes collection will occur for all principal and interest due on all investments with amortized cost in excess of fair value and considered only temporarily impaired.

GAAP requires that, at acquisition, an enterprise classify debt securities into one of three categories: available for sale, held to maturity or trading. AFS securities are carried at fair value on the Consolidated Statements of Financial Condition, and unrealized holding gains and losses are excluded from earnings and recognized as a separate component of equity in accumulated other comprehensive income. HTM debt securities are measured at amortized cost. Both AFS and HTM are subject to review for other-than-temporary impairment. Meta did not have any trading securities at September 30, 2018.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position at September 30, 2018, and 2017, were as follows:



Available For Sale	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At September 30, 2018	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities
Small business administration securities	$	43,097	$	(1,255	)	$	—	$	—		$	43,097	$	(1,255	)
Obligations of states and political subdivisions	11,036		(279		)	881		(14		)	11,917		(293		)
Non-bank qualified obligations of states and political subdivisions	626,693		(13,539		)	358,095		(18,286		)	984,788		(31,825		)
Asset-backed securities	146,638		(257		)	—		—			146,638		(257		)
Mortgage-backed securities	121,217		(3,292		)	242,849		(10,944		)	364,066		(14,236		)
Total debt securities	948,681		(18,622		)	601,825		(29,244		)	1,550,506		(47,866		)
Common equities and mutual funds	1,818		(7		)	—		—			1,818		(7		)
Total available for sale securities	$	950,499	$	(18,629	)	$	601,825	$	(29,244	)	$	1,552,324	$	(47,873	)



	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At September 30, 2017	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities
Non-bank qualified obligations of states and political subdivisions	$	280,900	$	(2,887	)	$	5,853	$	(150	)	$	286,753	$	(3,037	)
Mortgage-backed securities	237,897		(1,625		)	100,287		(2,098		)	338,184		(3,723		)
Total available for sale securities	$	518,797	$	(4,512	)	$	106,140	$	(2,248	)	$	624,937	$	(6,760	)



Held To Maturity	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At September 30, 2018	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities
Non-bank qualified obligations of states and political subdivisions	$	6,178	$	(287	)	$	147,368	$	(10,471	)	$	153,546	$	(10,758	)
Mortgage-backed securities	—		—			7,428		(422		)	7,428		(422		)
Total held to maturity securities	6,178		(287		)	154,796		(10,893		)	160,974		(11,180		)



	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
At September 30, 2017	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
	(Dollars in Thousands)
Debt securities
Obligations of states and political subdivisions	$	1,364	$	(6	)	$	4,089	$	(30	)	$	5,453	$	(36	)
Non-bank qualified obligations of states and political subdivisions	202,018		(2,783		)	6,206		(193		)	208,224		(2,976		)
Mortgage-backed securities	112,456		(1,233		)	—		—			112,456		(1,233		)
Total held to maturity securities	$	315,838	$	(4,022	)	$	10,295	$	(223	)	$	326,133	$	(4,245	)

As of September 30, 2018 and 2017, the investment portfolio included securities with current unrealized losses which have existed for longer than one year. All of these securities are considered to be acceptable credit risks. Because the declines in fair value were due to changes in market interest rates, not in estimated cash flows, and the Company does not intend to sell these securities (has not made a decision to sell), and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may occur at maturity, no other-than-temporary impairment was recorded at September 30, 2018 or 2017.

The amortized cost and fair value of debt securities by contractual maturity are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in MBS because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, MBS are not included in the maturity categories in the following maturity summary. The expected maturities of certain SBA securities may differ from contractual maturities because the borrowers may have the right to prepay the obligation. However, certain prepayment penalties may apply.



Available For Sale	AMORTIZED COST		FAIR VALUE
At September 30, 2018	(Dollars in Thousands)

Due in one year or less	$	2,532	$	2,529
Due after one year through five years	41,415		41,504
Due after five years through ten years	352,099		350,143
Due after ten years	1,118,283		1,089,984
	1,514,329		1,484,160
Mortgage-backed securities	378,301		364,065
Common equities and mutual funds	3,172		3,800
Total available for sale securities	$	1,895,802	$	1,852,025



	AMORTIZED COST		FAIR VALUE
At September 30, 2017	(Dollars in Thousands)

Due in one year or less	$	—	$	—
Due after one year through five years	36,586		37,674
Due after five years through ten years	347,831		358,198
Due after ten years	705,963		709,660
	1,090,380		1,105,532
Mortgage-backed securities	588,918		586,454
Common equities and mutual funds	1,009		1,445
Total available for sale securities	$	1,680,307	$	1,693,431



Held To Maturity	AMORTIZED COST		FAIR VALUE
At September 30, 2018	(Dollars in Thousands)

Due after ten years	164,304		153,546
	164,304		153,546
Mortgage-backed securities	7,850		7,428
Total held to maturity securities	$	172,154	$	160,974



	AMORTIZED COST		FAIR VALUE
At September 30, 2017	(Dollars in Thousands)

Due in one year or less	$	1,483	$	1,480
Due after one year through five years	17,926		18,160
Due after five years through ten years	144,996		147,832
Due after ten years	285,435		284,257
	449,840		451,729
Mortgage-backed securities	113,689		112,456
Total held to maturity securities	$	563,529	$	564,185

Activities related to the sale of securities are summarized below.



	2018			2017			2016
Year ended	(Dollars in Thousands)
Available For Sale
Proceeds from sales	$	596,758		$	457,306		$	285,508
Gross gains on sales	2,551			4,091			1,459
Gross losses on sales	10,728			4,628			1,785
Net loss on available for sale securities	(8,177		)	(537		)	(326		)

Held To Maturity
Net carrying amount of securities sold	$	—		$	5,826		$	—
Gross realized gain on sales	—			92			—
Gross realized losses on sales	—			48			—
Net gain on held to maturity securities	—			44			—

During the fiscal 2018 fourth quarter, the Company completed a balance sheet restructuring related to the closing of the Crestmark Acquisition, selling approximately $260 million of lower-yielding AFS securities.

Securities with fair values of approximately $8.0 million and $5.7 million at September 30, 2018 and 2017, respectively, were pledged as collateral for public funds on deposit. Securities with fair values of approximately $5.9 million and $3.8 million at September 30, 2018, and 2017, respectively, were pledged as collateral for individual, trust and estate deposits.

Federal Home Loan Bank ("FHLB") Stock

The Company’s borrowings from the FHLB are secured by a blanket collateral agreement with respect to a percentage of unencumbered loans and the pledge of specific investment securities. Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities.

The investments in the FHLB stock are required investments related to the Company’s membership in and current borrowings from the FHLB of Des Moines. The investments in the FHLB of Des Moines could be adversely impacted by the financial operations of the FHLBs and actions of their regulator, the Federal Housing Finance Agency. The Company periodically evaluates investments for other than temporary impairment. There was no impairment of this investment in 2018, 2017 or 2016.

The FHLB stock is carried at cost since it is generally redeemable at par value. The carrying value of the stock held at the FHLB was $23.4 million and $61.1 million at September 30, 2018 and 2017, respectively. At fiscal year-end 2018 and 2017, the Company pledged securities with fair values of approximately $1.06 billion and $1.07 billion, respectively, against specific FHLB advances. In addition, a combination of qualifying residential and other real estate loans of approximately $756.0 million and $628.0 million were pledged as collateral at September 30, 2018 and 2017, respectively.

Included in Interest and Dividend Income from other investments is $1.1 million, $0.5 million and $0.6 million related to dividend income on FHLB stock for the fiscal years ended September 30, 2018, 2017 and 2016, respectively.