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SECURITIES
 6 Months Ended
Jun. 30, 2016
SECURITIES  
SECURITIES

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 June 30, 2016 and December 31, 2015 and the corresponding amounts of unrealized gains and losses therein:

 

  June 30, 2016 
     Gross  Gross  Estimated 
  Amortized  Unrealized  Unrealized  Fair 
(In thousands) Cost  Gains  Losses  Value 
Available for sale:                
U.S. GSE securities $58,242  $84  $(1) $58,325 
State and municipal obligations  108,184   2,400   (28)  110,556 
U.S. GSE residential mortgage-backed securities  100,685   1,393   (4)  102,074 
U.S. GSE residential collateralized mortgage obligations  236,771   1,962   (135)  238,598 
U.S. GSE commercial mortgage-backed securities  6,488   213   -   6,701 
U.S. GSE commercial collateralized mortgage obligations  56,412   546   (47)  56,911 
Other asset backed securities  24,250   -   (1,940)  22,310 
Corporate bonds  32,000   285   (677)  31,608 
Total available for sale  623,032   6,883   (2,832)  627,083 
                 
Held to maturity:                
U.S. GSE securities  -   -   -   - 
State and municipal obligations  61,159   3,294   -   64,453 
U.S. GSE residential mortgage-backed securities  11,837   107   -   11,944 
U.S. GSE residential collateralized mortgage obligations  66,219   1,937   (33)  68,123 
U.S. GSE commercial mortgage-backed securities  29,119   912   (53)  29,978 
U.S. GSE commercial collateralized mortgage obligations  42,724   974   (51)  43,647 
Corporate bonds  11,000   29   -   11,029 
Total held to maturity  222,058   7,253   (137)  229,174 
Total securities $845,090  $14,136  $(2,969) $856,257 

 

  December 31, 2015 
     Gross  Gross  Estimated 
  Amortized  Unrealized  Unrealized  Fair 
(In thousands) Cost  Gains  Losses  Value 
Available for sale:                
U.S. GSE securities $63,238  $-  $(564) $62,674 
State and municipal obligations  87,830   427   (322)  87,935 
U.S. GSE residential mortgage-backed securities  201,297   237   (1,270)  200,264 
U.S. GSE residential collateralized mortgage obligations  321,253   513   (3,888)  317,878 
U.S. GSE commercial mortgage-backed securities  12,491   7   (80)  12,418 
U.S. GSE commercial collateralized mortgage obligations  64,809   9   (620)  64,198 
Other asset backed securities  24,250   -   (1,879)  22,371 
Corporate bonds  33,000   -   (535)  32,465 
Total available for sale  808,168   1,193   (9,158)  800,203 
                 
Held to maturity:                
U.S. GSE securities $7,466  $1  $-  $7,467 
State and municipal obligations  64,878   1,715   (113)  66,480 
U.S. GSE residential mortgage-backed securities  7,609   -   (106)  7,503 
U.S. GSE residential collateralized mortgage obligations  60,933   617   (498)  61,052 
U.S. GSE commercial mortgage-backed securities  23,056   210   (313)  22,953 
U.S. GSE commercial collateralized mortgage obligations  33,409   282   (185)  33,506 
Corporate bonds  11,000   42   -   11,042 
Total held to maturity  208,351   2,867   (1,215)  210,003 
Total securities $1,016,519  $4,060  $(10,373) $1,010,206 

 

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at June 30, 2016. 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.

 

  June 30, 2016 
  Amortized  Fair 
(In thousands) Cost  Value 
Maturity        
Available for sale:        
Within one year $14,277  $14,315 
One to five years  74,503   75,060 
Five to ten years  116,129   117,641 
Beyond ten years  418,123   420,067 
Total $623,032  $627,083 
         
Held to maturity:        
Within one year $3,644  $3,665 
One to five years  31,697   32,326 
Five to ten years  67,599   71,025 
Beyond ten years  119,118   122,158 
Total $222,058  $229,174 

 

Securities with unrealized losses at June 30, 2016 and December 31, 2015, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

 

  June 30, 2016 
  Less than 12 months  Greater than 12 months 
     Unrealized     Unrealized 
(In thousands) Fair Value  Losses  Fair Value  Losses 
Available for sale:                
U.S. GSE securities $7,999  $(1) $-  $- 
State and municipal obligations  9,853   (27)  243   (1)
U.S. GSE residential mortgage-backed securities  -   -   1,782   (4)
U.S. GSE residential collateralized mortgage obligations  10,183   (48)  17,812   (87)
U.S. GSE commercial mortgage-backed securities  -   -   -   - 
U.S. GSE commercial collateralized mortgage obligations  8,644   (22)  5,706   (25)
Other asset backed securities  -   -   22,310   (1,940)
Corporate bonds  17,406   (594)  4,918   (83)
Total available for sale $54,085  $(692) $52,771  $(2,140)
                 
Held to maturity:                
U.S. GSE securities  -   -   -   - 
State and municipal obligations  -   -   -   - 
U.S. GSE residential mortgage-backed securities  -   -   -   - 
U.S. GSE residential collateralized mortgage obligations  218   -   4,457   (33)
U.S. GSE commercial mortgage-backed securities  6,201   (53)  -   - 
U.S. GSE commercial collateralized mortgage obligations  4,899   (30)  3,969   (21)
Corporate bonds  -   -   -   - 
Total held to maturity $11,318  $(83) $8,426  $(54)

 

  December 31, 2015 
  Less than 12 months  Greater than 12 months 
     Unrealized     Unrealized 
(In thousands) Fair Value  Losses  Fair Value  Losses 
Available for sale:                
U.S. GSE securities $37,759  $(235) $24,914  $(329)
State and municipal obligations  39,621   (298)  5,118   (24)
U.S. GSE residential mortgage-backed securities  136,025   (1,224)  1,510   (46)
U.S. GSE residential collateralized mortgage obligations  187,543   (1,781)  66,830   (2,107)
U.S. GSE commercial mortgage-backed securities  8,594   (80)  -   - 
U.S. GSE commercial collateralized mortgage obligations  51,178   (503)  10,034   (117)
Other asset backed securities  -   -   22,371   (1,879)
Corporate bonds  27,640   (360)  4,825   (175)
Total available for sale $488,360  $(4,481) $135,602  $(4,677)
                 
Held to maturity:                
U.S. GSE securities $-  $-  $-  $- 
State and municipal obligations  18,375   (113)  -   - 
U.S. GSE residential mortgage-backed securities  7,503   (106)  -   - 
U.S. GSE residential collateralized mortgage obligations  15,918   (149)  15,679   (349)
U.S. GSE commercial mortgage-backed securities  13,982   (313)  -   - 
U.S. GSE commercial collateralized mortgage obligations  7,912   (8)  3,813   (177)
Corporate bonds  -   -   -   - 
Total held to maturity $63,690  $(689) $19,492  $(526)

 

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 June 30, 2016, the majority of unrealized losses on the available for sale securities are related to the Company’s other asset backed securities and corporate bonds. The decrease in fair value of the other asset backed securities and corporate bonds 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 June 30, 2016.

 

There were $235.7 million of proceeds from sales of securities with gross gains of approximately $1.3 million and gross losses of approximately $0.9 million realized for the three months ended June 30, 2016. There were $264.4 million of proceeds from sales of securities with gross gains of approximately $1.6 million and gross losses of approximately $1.2 million realized for the six months ended June 30, 2016. There were no sales of securities during the three months ended June 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 six months ended June 30, 2015. Proceeds from calls of securities were $22.3 million and $53.0 million for the three and six months ended June 30, 2016, respectively. Proceeds from calls of securities were $10.3 million and $10.5 million for the three and six months ended June 30, 2015, respectively.

 

Securities having a fair value of approximately $650.9 million and $611.0 million at June 30, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) overnight borrowings. The Company did not hold any trading securities during the six months ended June 30, 2016 or the year ended December 31, 2015.

 

The Bank is a member of the FHLB of New York. 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 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 $20.9 million and $24.8 million in FHLB, ACBB and FRB stock at June 30, 2016 and December 31, 2015, respectively. These amounts were reported as restricted securities in the consolidated balance sheets.