Securities

Available-for-Sales Securities

The following table summarizes available-for-sale securities held by the Company at September 30, 2018:



	Available-for-Sale Securities
September 30, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
Obligations of U.S. Government sponsored entities	$	498,837	$	0	$	13,104	$	485,733
Obligations of U.S. states and political subdivisions	86,517		33		1,788		84,762
Mortgage-backed securities – residential, issued by
U.S. Government agencies	114,417		143		5,404		109,156
U.S. Government sponsored entities	658,195		205		29,596		628,804
Non-U.S. Government agencies or sponsored entities	42		0		0		42
U.S. corporate debt securities	2,500		0		325		2,175
Total available-for-sale securities	$	1,360,508	$	381	$	50,217	$	1,310,672

The following table summarizes available-for-sale securities held by the Company at December 31, 2017:



	Available-for-Sale Securities
December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
Obligations of U.S. Government sponsored entities	$	507,248	$	278	$	3,333	$	504,193
Obligations of U.S. states and political subdivisions	91,659		281		421		91,519
Mortgage-backed securities – residential, issued by
U.S. Government agencies	139,747		659		2,671		137,735
U.S. Government sponsored entities	667,767		1,045		12,634		656,178
Non-U.S. Government agencies or sponsored entities	75		0		0		75
U.S. corporate debt securities	2,500		0		338		2,162
Total debt securities	1,408,996		2,263		19,397		1,391,862
Equity securities	1,000		0		87		913
Total available-for-sale securities	$	1,409,996	$	2,263	$	19,484	$	1,392,775

Held-to-Maturity Securities

The following table summarizes held-to-maturity securities held by the Company at September 30, 2018:



	Held-to-Maturity Securities
September 30, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
Obligations of U.S. Government sponsored entities	$	131,407	$	0	$	3,040	$	128,367
Obligations of U.S. states and political subdivisions	9,829		36		0		9,865
Total held-to-maturity debt securities	$	141,236	$	36	$	3,040	$	138,232

The following table summarizes held-to-maturity securities held by the Company at December 31, 2017:



	Held-to-Maturity Securities
December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
Obligations of U.S. Government sponsored entities	$	131,707	$	1,103	$	90	$	132,720
Obligations of U.S. states and political subdivisions	7,509		93		7		7,595
Total held-to-maturity debt securities	$	139,216	$	1,196	$	97	$	140,315

The Company may from time to time sell investment securities from its available-for-sale portfolio. Realized gains on available-for-sale securities were $30,000 and $327,000 for the three and nine months ended September 30, 2018 and $3,000 for the same periods during 2017. Realized losses on available-for-sale securities were $0 and $3,000 for the three and nine months ended September 30, 2018 and $426,000 for the same periods during 2017. The sales of available-for-sale investment securities were the result of general investment portfolio and interest rate risk management. The Company also recognized losses of $14,000 and $34,000 for the three and nine months ended September 30, 2018, on equity securities, reflecting the change in fair value.

The following table summarizes available-for-sale securities that had unrealized losses at September 30, 2018:



	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored entities	$	298,473	$	6,017	$	187,260	$	7,087	$	485,733	$	13,104
Obligations of U.S. states and political subdivisions	52,521		687		22,773		1,101		75,294		1,788

Mortgage-backed securities – residential, issued by
U.S. Government agencies	9,338		284		93,660		5,120		102,998		5,404
U.S. Government sponsored entities	142,152		4,221		471,869		25,375		614,021		29,596
U.S. corporate debt securities	0		0		2,175		325		2,175		325
Total available-for-sale securities	$	502,484	$	11,209	$	777,737	$	39,008	$	1,280,221	$	50,217

The following table summarizes available-for-sale securities that had unrealized losses at December 31, 2017:



	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored entities	$	319,545	$	2,301	$	39,791	$	1,032	$	359,336	$	3,333
Obligations of U.S. states and political subdivisions	39,571		219		11,729		202		51,300		421

Mortgage-backed securities – residential, issued by
U.S. Government agencies	33,056		452		86,562		2,219		119,618		2,671
U.S. Government sponsored entities	208,524		1,941		410,767		10,693		619,291		12,634
U.S. corporate debt securities	0		0		2,163		338		2,163		338
Equity securities	0		0		913		87		913		87
Total available-for-sale securities	$	600,696	$	4,913	$	551,925	$	14,571	$	1,152,621	$	19,484

Beginning January 1, 2018, upon adoption of ASU 2016-01, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in the consolidated statement of income. For periods prior to adoption, equity securities were classified as available-for-sale and stated at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive income, net of tax.

The following table summarizes held-to-maturity securities that had unrealized losses at September 30, 2018.



	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored entities	$	123,589	$	2,818	$	4,778	$	222	$	128,367	$	3,040

Total held-to-maturity securities	$	123,589	$	2,818	$	4,778	$	222	$	128,367	$	3,040

The following table summarizes held-to-maturity securities that had unrealized losses at December 31, 2017.



	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored entities	$	20,505	$	90	$	0	$	0	$	20,505	$	90

Obligations of U.S. states and political subdivisions	5,094		7		0		0		5,094		7
Total held-to-maturity securities	$	25,599	$	97	$	0	$	0	$	25,599	$	97

The gross unrealized losses reported for residential mortgage-backed securities relate to investment securities issued by U.S. government sponsored entities such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and U.S. government agencies such as Government National Mortgage Association. The total gross unrealized losses, shown in the tables above, were primarily attributable to changes in interest rates and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.

The Company does not intend to sell other-than-temporarily impaired investment securities that are in an unrealized loss position until recovery of unrealized losses (which may be until maturity), and it is not more-likely-than not that the Company will be required to sell the investment securities, before recovery of their amortized cost basis, which may be at maturity. Accordingly, as of September 30, 2018, and December 31, 2017, management has determined that the unrealized losses detailed in the tables above are not other-than-temporary.

Ongoing Assessment of Other-Than-Temporary Impairment

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis (including any previous OTTI charges) at the reporting date. If impaired, the Company then assesses whether the unrealized loss is other-than-temporary. An unrealized loss on a debt security is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value, discounted at the security’s effective rate, of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss component of an other-than-temporary impairment write-down for debt securities is recorded in earnings while the remaining portion of the impairment loss is recognized, net of tax, in other comprehensive income (loss) provided that the Company does not intend to sell the underlying debt security and it is more-likely-than not that the Company would not have to sell the debt security prior to recovery of the unrealized loss, which may be to maturity. If the Company intended to sell any securities with an unrealized loss or it is more-likely-than not that the Company would be required to sell the investment securities, before recovery of their amortized cost basis, then the entire unrealized loss would be recorded in earnings.

The Company considers the following factors in determining whether a credit loss exists.


•	The length of time and the extent to which the fair value has been less than the amortized cost basis;


•	The level of credit enhancement provided by the structure which includes, but is not limited to, credit subordination positions, excess spreads, overcollateralization, protective triggers;


•	Changes in the near term prospects of the issuer or underlying collateral of a security, such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;


•	The level of excess cash flow generated from the underlying collateral supporting the principal and interest payments of the debt securities; and


•	Any adverse change to the credit conditions of the issuer or the security such as credit downgrades by the rating agencies.

As a result of the other-than-temporarily impairment review process, the Company does not consider any investment security held at September 30, 2018 to be other-than-temporarily impaired.

The amortized cost and estimated fair value of debt securities by contractual maturity are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are shown separately since they are not due at a single maturity date.



September 30, 2018
(in thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	87,756	$	87,434
Due after one year through five years	320,407		313,052
Due after five years through ten years	167,362		160,599
Due after ten years	12,329		11,585
Total	587,854		572,670
Mortgage-backed securities	772,654		738,002
Total available-for-sale debt securities	$	1,360,508	$	1,310,672



December 31, 2017
(in thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	51,909	$	51,932
Due after one year through five years	368,846		367,377
Due after five years through ten years	162,061		160,374
Due after ten years	18,591		18,192
Total	601,407		597,875
Mortgage-backed securities	807,589		793,988
Total available-for-sale debt securities	$	1,408,996	$	1,391,863



September 30, 2018
(in thousands)	Amortized Cost		Fair Value
Held-to-maturity securities:
Due in one year or less	$	9,247	$	9,253
Due after one year through five years	81,686		79,931
Due after five years through ten years	50,303		49,048
Total held-to-maturity debt securities	$	141,236	$	138,232



December 31, 2017
(in thousands)	Amortized Cost		Fair Value
Held-to-maturity securities:
Due in one year or less	$	5,980	$	5,979
Due after one year through five years	51,936		52,227
Due after five years through ten years	81,300		82,109
Total held-to-maturity debt securities	$	139,216	$	140,315

The Company also holds non-marketable Federal Home Loan Bank New York (“FHLBNY”) stock, non-marketable Federal Home Loan Bank Pittsburgh (“FHLBPITT”) stock and non-marketable Atlantic Community Bankers Bank stock ("ACBB"), all of which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHLBNY stock, FHLBPITT stock, and ACBB stock totaled $35.0 million, $13.4 million and $95,000 at September 30, 2018, respectively. These securities are carried at par, which is also cost. The FHLBNY and FHLBPITT continue to pay dividends and repurchase stock. Quarterly, we evaluate our investment in the FHLB for impairment. We evaluate recent and long-term operating performance, liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory changes. Based on our most recent evaluation, as of September 30, 2018, we have determined that no impairment write-downs are currently required.