Note 3 - Investment Securities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 3:  Investment Securities

Effective January 1, 2018, upon adoption of ASU 2016-01, equity securities included in the Company’s available for sale portfolio of $1,800 thousand were reclassified to equity securities. The reclassification of equity securities resulted in recording a cumulative effect adjustment to decrease retained earnings by $142 thousand, net of tax.

The market value of equity securities was $1,797 thousand and $1,747 thousand at June 30, 2019 and December 31, 2018, respectively. During the six months ended June 30, 2019, the Company recognized gross unrealized holding gains of $50 thousand in earnings. During the six months ended June 30, 2018, the Company recognized gross unrealized holding losses of $50 thousand in earnings.

An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair value with net unrealized gains (losses) reported on an after-tax basis as a component of cumulative other comprehensive income, and debt securities held to maturity, which are carried at amortized cost, follows:

	At June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
U.S. Treasury securities	$	44,473	$	100	$	-		$	44,573
Securities of U.S. Government sponsored entities		167,239		69		(170	)		167,138
Agency residential mortgage-backed securities (MBS)		987,024		8,236		(8,314	)		986,946
Non-agency residential MBS		109		3		-			112
Agency commercial MBS		5,635		5		(19	)		5,621
Securities of U.S. Government entities		815		-		(7	)		808
Obligations of states and political subdivisions		172,268		3,486		(100	)		175,654
Corporate securities		1,379,704		17,462		(2,119	)		1,395,047
Total debt securities available for sale		2,757,267		29,361		(10,729	)		2,775,899
Debt securities held to maturity
Agency residential MBS		402,961		824		(3,861	)		399,924
Non-agency residential MBS		2,610		96		-			2,706
Obligations of states and political subdivisions		462,418		7,947		(19	)		470,346
Total debt securities held to maturity		867,989		8,867		(3,880	)		872,976
Total	$	3,625,256	$	38,228	$	(14,609	)	$	3,648,875

	At December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
U.S. Treasury securities	$	139,572	$	5	$	(3	)	$	139,574
Securities of U.S. Government sponsored entities		167,228		65		(3,275	)		164,018
Agency residential MBS		883,715		595		(30,439	)		853,871
Non-agency residential MBS		113		1		-			114
Agency commercial MBS		1,869		-		(27	)		1,842
Securities of U.S. Government entities		1,128		-		(9	)		1,119
Obligations of states and political subdivisions		180,220		1,856		(2,985	)		179,091
Corporate securities		1,337,608		1,075		(23,642	)		1,315,041
Total debt securities available for sale		2,711,453		3,597		(60,380	)		2,654,670
Debt securities held to maturity
Agency residential MBS		447,332		249		(14,129	)		433,452
Non-agency residential MBS		3,387		40		-			3,427
Obligations of states and political subdivisions		533,890		3,403		(2,727	)		534,566
Total debt securities held to maturity		984,609		3,692		(16,856	)		971,445
Total	$	3,696,062	$	7,289	$	(77,236	)	$	3,626,115

The amortized cost and fair value of debt securities by contractual maturity are shown in the following tables at the dates indicated:

	At June 30, 2019
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	202,597	$	202,637	$	81,436	$	81,589
Over 1 to 5 years		1,329,781		1,342,419		177,675		180,218
Over 5 to 10 years		193,678		199,098		202,280		207,471
Over 10 years		38,443		39,066		1,027		1,068
Subtotal		1,764,499		1,783,220		462,418		470,346
MBS		992,768		992,679		405,571		402,630
Total	$	2,757,267	$	2,775,899	$	867,989	$	872,976

	At December 31, 2018
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	262,418	$	261,976	$	86,172	$	86,148
Over 1 to 5 years		1,438,849		1,414,020		214,137		213,829
Over 5 to 10 years		85,817		85,877		232,544		233,515
Over 10 years		38,672		36,970		1,037		1,074
Subtotal		1,825,756		1,798,843		533,890		534,566
MBS		885,697		855,827		450,719		436,879
Total	$	2,711,453	$	2,654,670	$	984,609	$	971,445

Expected maturities of mortgage-related securities can differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities. At June 30, 2019 and December 31, 2018, the Company had no high-risk collateralized mortgage obligations as defined by regulatory guidelines.

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

	Debt Securities Available for Sale
	At June 30, 2019
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Securities of U.S. Government sponsored entities		-	$	-	$	-			7	$	77,714	$	(170	)		7	$	77,714	$	(170	)
Agency residential MBS		-		-		-			54		533,982		(8,314	)		54		533,982		(8,314	)
Agency commercial MBS		-		-		-			1		1,833		(19	)		1		1,833		(19	)
Securities of U.S. Government entities		-		-		-			2		808		(7	)		2		808		(7	)
Obligations of states and political subdivisions		2		1,054		-			25		10,643		(100	)		27		11,697		(100	)
Corporate securities		2		10,692		(67	)		32		275,533		(2,052	)		34		286,225		(2,119	)
Total		4	$	11,746	$	(67	)		121	$	900,513	$	(10,662	)		125	$	912,259	$	(10,729	)

 An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

	Debt Securities Held to Maturity
	At June 30, 2019
	No. of		Less than 12 months				No. of		12 months or longer					No. of		Total
	Investment				Unrecognized		Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses		Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		1	$	55	$	-		63	$	350,418	$	(3,861	)		64	$	350,473	$	(3,861	)
Obligations of states and political subdivisions		-		-		-		13		10,516		(19	)		13		10,516		(19	)
Total		1	$	55	$	-		76	$	360,934	$	(3,880	)		77	$	360,989	$	(3,880	)

The unrealized losses on the Company’s debt securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates. The Company evaluates debt securities on a quarterly basis including changes in security ratings issued by rating agencies, changes in the financial condition of the issuer, and, for mortgage-backed and asset-backed securities, delinquency and loss information with respect to the underlying collateral, changes in the levels of subordination for the Company’s particular position within the repayment structure and remaining credit enhancement as compared to expected credit losses of the security. Substantially all of these securities continue to be investment grade rated by a major rating agency. One corporate bond with an amortized cost of $15.0 million and a fair value of $14.2 million at June 30, 2019, is rated below investment grade.  In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset backed securities.

The Company does not intend to sell any debt securities and has concluded that it is more likely than not that it will not be required to sell the debt securities prior to recovery of the amortized cost basis. Therefore, the Company does not consider these debt securities to be other-than-temporarily impaired as of June 30, 2019.

The fair values of the debt securities could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the issuer’s financial condition deteriorates, or the liquidity for debt securities declines. As a result, other than temporary impairments may occur in the future.

As of June 30, 2019 and December 31, 2018, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $746,876 thousand and $728,161 thousand, respectively.

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

	Debt Securities Available for Sale
	At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
U.S. Treasury securities		2	$	54,805	$	(3	)		-	$	-	$	-			2	$	54,805	$	(3	)
Securities of U.S. Government sponsored entities		1		990		(5	)		9		117,963		(3,270	)		10		118,953		(3,275	)
Agency residential MBS		8		107,497		(507	)		58		640,210		(29,932	)		66		747,707		(30,439	)
Agency commercial MBS		1		1,842		(27	)		-		-		-			1		1,842		(27	)
Securities of U.S. Government entities		-		-		-			2		1,119		(9	)		2		1,119		(9	)
Obligations of states and political subdivisions		32		26,452		(166	)		71		67,121		(2,819	)		103		93,573		(2,985	)
Corporate securities		38		308,157		(3,403	)		79		722,740		(20,239	)		117		1,030,897		(23,642	)
Total		82	$	499,743	$	(4,111	)		219	$	1,549,153	$	(56,269	)		301	$	2,048,896	$	(60,380	)

 An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

	Debt Securities Held to Maturity
	At December 31, 2018
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		16	$	8,495	$	(34	)		78	$	412,574	$	(14,095	)		94	$	421,069	$	(14,129	)
Non-agency residential MBS		1		26		-			-		-		-			1		26		-
Obligations of states and political subdivisions		97		83,633		(271	)		142		151,546		(2,456	)		239		235,179		(2,727	)
Total		114	$	92,154	$	(305	)		220	$	564,120	$	(16,551	)		334	$	656,274	$	(16,856	)

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 Three Months				For the Six Months
	Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Taxable	$	18,773	$	15,598	$	37,406	$	30,547
Tax-exempt from regular federal income tax		4,073		5,027		8,388		9,888
Total interest income from investment securities	$	22,846	$	20,625	$	45,794	$	40,435