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SECURITIES

9 Months Ended

Sep. 30, 2015

4. SECURITIES

The following table summarizes the amortized cost and fair value of the available for sale and held to maturity investment securities portfolio at September 30, 2015 and December 31, 2014 and the corresponding amounts of unrealized gains and losses therein:

		September 30, 2015
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
(In thousands)		Cost				Gains				Losses				Value
Available for sale:
U.S. GSE securities		$	67,868			$	145			$	(71	)		$	67,942
State and municipal obligations			86,351				775				(29	)			87,097
U.S. GSE residential mortgage-backed securities			154,546				1,093				(123	)			155,516
U.S. GSE residential collateralized mortgage obligations			235,025				1,456				(1,485	)			234,996
U.S. GSE commercial mortgage-backed securities			12,551				179				(24	)			12,706
U.S. GSE commercial collateralized mortgage obligations			29,185				124				(72	)			29,237
Other asset backed securities			24,247				—				(1,937	)			22,310
Corporate bonds			27,958				4				(296	)			27,666
Total available for sale			637,731				3,776				(4,037	)			637,470

Held to maturity:
U.S. GSE securities			11,306				202				—				11,508
State and municipal obligations			64,220				2,085				(56	)			66,249
U.S. GSE residential mortgage-backed securities			7,932				5				(45	)			7,892
U.S. GSE residential collateralized mortgage obligations			63,163				1,066				(157	)			64,072
U.S. GSE commercial mortgage-backed securities			23,151				468				(119	)			23,500
U.S. GSE commercial collateralized mortgage obligations			33,466				668				(119	)			34,015
Corporate Bonds			16,995				61				(5	)			17,051
Total held to maturity			220,233				4,555				(501	)			224,287
Total securities		$	857,964			$	8,331			$	(4,538	)		$	861,757

		December 31, 2014
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
(In thousands)		Cost				Gains				Losses				Value
Available for sale:
U.S. GSE securities		$	97,560			$	4			$	(2,139	)		$	95,425
State and municipal obligations			63,583				318				(208	)			63,693
U.S. GSE residential mortgage-backed securities			100,931				534				(40	)			101,425
U.S. GSE residential collateralized mortgage obligations			261,256				310				(2,967	)			258,599
U.S. GSE commercial mortgage-backed securities			3,016				—				(71	)			2,945
U.S. GSE commercial collateralized mortgage obligations			24,179				44				(141	)			24,082
Other asset backed securities			24,190				—				(1,153	)			23,037
Corporate Bonds			17,952				161				(135	)			17,978
Total available for sale			592,667				1,371				(6,854	)			587,184

Held to maturity:
U.S. GSE securities			11,283				135				(41	)			11,377
State and municipal obligations			64,864				1,658				(98	)			66,424
U.S. GSE residential mortgage-backed securities			6,667				—				(97	)			6,570
U.S. GSE residential collateralized mortgage obligations			59,539				507				(862	)			59,184
U.S. GSE commercial mortgage-backed securities			13,213				233				(26	)			13,420
U.S. GSE commercial collateralized mortgage obligations			36,413				267				(431	)			36,249
Corporate bonds			22,948				139				(22	)			23,065
Total held to maturity			214,927				2,939				(1,577	)			216,289
Total securities		$	807,594			$	4,310			$	(8,431	)		$	803,473

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at September 30, 2015. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		September 30, 2015
		Amortized				Fair
(In thousands)		Cost				Value
Maturity
Available for sale:
Within one year		$	8,452			$	8,478
One to five years			83,370				83,682
Five to ten years			109,855				110,129
Beyond ten years			436,054				435,181
Total		$	637,731			$	637,470

Held to maturity:
Within one year		$	10,761			$	10,778
One to five years			33,660				34,043
Five to ten years			62,417				64,486
Beyond ten years			113,395				114,980
Total		$	220,233			$	224,287

Securities with unrealized losses at September 30, 2015 and December 31, 2014, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

		Less than 12 months								Greater than 12 months
September 30, 2015						Unrealized								Unrealized
(In thousands)		Fair Value				losses				Fair Value				losses
Available for sale:
U.S. GSE securities		$	—			$	—			$	25,172			$	71
State and municipal obligations			4,799				13				5,391				16
U.S. GSE residential mortgage-backed securities			32,991				89				1,530				34
U.S. GSE residential collateralized mortgage obligations			40,727				158				71,468				1,327
U.S. GSE commercial mortgage-backed securities			2,741				24				—				—
U.S. GSE commercial collateralized mortgage obligations			1,965				24				10,184				48
Other asset backed securities			22,310				1,937				—				—
Corporate bonds			19,854				146				4,850				150
Total available for sale			125,387				2,391				118,595				1,646

Held to maturity:
U.S. GSE securities			—				—				—				—
State and municipal obligations			7,580				56				—				—
U.S. GSE residential mortgage-backed securities			5,699				45				—				—
U.S. GSE residential collateralized mortgage obligations			2,715				16				16,127				141
U.S. GSE commercial mortgage-backed securities			4,992				119				—				—
U.S. GSE commercial collateralized mortgage obligations			—				—				3,870				119
Corporate bonds			—				—				2,994				5
Total held to maturity		$	20,986			$	236			$	22,991			$	265

		Less than 12 months								Greater than 12 months
December 31, 2014						Unrealized								Unrealized
(In thousands)		Fair Value				losses				Fair Value				losses
Available for sale:
U.S. GSE securities		$	4,991			$	8			$	90,233			$	2,131
State and municipal obligations			12,330				79				14,592				129
U.S. GSE residential mortgage-backed securities			—				—				1,554				40
U.S. GSE residential collateralized mortgage obligations			60,126				349				122,179				2,618
U.S. GSE commercial mortgage-backed securities			—				—				2,944				71
U.S. GSE commercial collateralized mortgage obligations			13,830				108				4,636				33
Other asset backed securities			23,038				1,153				—				—
Corporate bonds			9,865				135				—				—
Total available for sale			124,180				1,832				236,138				5,022

Held to maturity:
U.S. GSE securities			—				—				7,414				41
State and municipal obligations			11,343				97				202				1
U.S. GSE residential mortgage-backed securities			—				—				6,569				97
U.S. GSE residential collateralized mortgage obligations			10,422				46				30,413				816
U.S. GSE commercial mortgage-backed securities			—				—				4,188				26
U.S. GSE commercial collateralized mortgage obligations			14,392				73				8,611				358
Corporate bonds			3,978				22				—				—
Total held to maturity		$	40,135			$	238			$	57,397			$	1,339

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320, Accounting for Certain Investments in Debt and Equity Securities. In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

At September 30, 2015, the majority of unrealized losses on both the available for sale and held to maturity securities are related to the Company’s U.S. GSE residential collateralized mortgage obligations and other asset backed securities. The decrease in fair value of these securities is attributable to changes in interest rates and not credit quality. The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2015.

There were no proceeds from sales of securities with no gross gains or gross losses realized for the three months ended September 30, 2015. There were $73.8 million of proceeds from sales of securities with gross gains of approximately $0.5 million and gross losses of approximately $0.5 million realized for the nine months ended September 30, 2015. There were $115.3 million of proceeds from sales of securities with gross gains of approximately $0.5 million and gross losses of approximately $0.5 million realized for the three months ended September 30, 2014. There were $348.8 million of proceeds from sales of securities with gross gains of approximately $1.6 million and gross losses of approximately $2.4 million realized for the nine months ended September 30, 2014. Proceeds from calls of securities were $0.4 million and $0.3 million for the three months ended September 30, 2015 and 2014, respectively. Proceeds from calls of securities were $10.9 million and $2.8 million for the nine months ended September 30, 2015 and 2014, respectively

Securities having a fair value of approximately $488.2 million and $451.1 million at September 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings. The Bank did not hold any trading securities during the nine months ended September 30, 2015 or the year ended December 31, 2014.

The Bank is a member of the Federal Home Loan Bank of New York (“FHLB”). Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the Federal Reserve Bank (“FRB”) system and required to own FRB stock. FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Bank owned approximately $15.0 million and $10.0 million in FHLB, ACBB and FRB stock at September 30, 2015 and December 31, 2014. These amounts were reported as restricted securities in the consolidated balance sheets.

The entire disclosure for investments in certain debt and equity securities.

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