NOTE 6 – Available-for-Sale and Held-to-Maturity Securities

The following tables provide a summary of the amortized cost and fair values of the available-for-sale securities and held-to-maturity securities at June 30, 2015 and December 31, 2014 (in thousands):

	June 30, 2015
	Amortized Cost		Gross Unrealized Gains ¹		Gross Unrealized Losses ¹			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	1,706	$	5	$	(1	)	$	1,710
State and municipal securities		76,238		2		(2,507	)		73,733
Mortgage-backed securities:
Agency		28,187		134		(418	)		27,903
Commercial		36,345		313		(4	)		36,654
Non-agency		2,970		3		(39	)		2,934
Corporate fixed income securities		187,699		1,627		(793	)		188,533
Asset-backed securities		455,776		2,812		(2,158	)		456,430
	$	788,921	$	4,896	$	(5,920	)	$	787,897
Held-to-maturity securities ²
Mortgage-backed securities:
Agency	$	832,248	$	21,522	$	(27	)	$	853,743
Commercial		59,491		2,057		—			61,548
Non-agency		973		—		(14	)		959
Asset-backed securities		177,523		2,715		(2,732	)		177,506
Corporate fixed income securities		55,191		2		(641	)		54,552
	$	1,125,426	$	26,296	$	(3,414	)	$	1,148,308

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains ¹		Gross Unrealized Losses ¹			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	1,613	$	1	$	(4	)	$	1,610
State and municipal securities		76,518		20		(2,137	)		74,401
Mortgage-backed securities:
Agency		206,982		3,137		(913	)		209,206
Commercial		107,100		633		(89	)		107,644
Non-agency		3,186		5		(54	)		3,137
Corporate fixed income securities		336,210		2,016		(820	)		337,406
Asset-backed securities		788,908		1,321		(10,155	)		780,074
	$	1,520,517	$	7,133	$	(14,172	)	$	1,513,478
Held-to-maturity securities ²
Mortgage-backed securities:
Agency	$	884,451	$	32,926	$	(42	)	$	917,335
Commercial		59,462		2,257		—			61,719
Non-agency		1,081		—		(17	)		1,064
Asset-backed securities		177,335		3,151		(2,645	)		177,841
Corporate fixed income securities		55,236		4		(1,223	)		54,017
	$	1,177,565	$	38,338	$	(3,927	)	$	1,211,976

¹	Unrealized gains/(losses) related to available-for-sale securities are reported in accumulated other comprehensive income.

²	Held-to-maturity securities are carried in the consolidated statements of financial condition at amortized cost, and the changes in the value of these securities, other than impairment charges, are not reported on the consolidated financial statements.

For the three and six months ended June 30, 2015 and 2014, we received proceeds of $552.6 million and $66.7 million, respectively, from the sale of available-for-sale securities, which resulted in net realized gains of $3.1 million and $2.0 million, respectively.

During the three months ended June 30, 2015, unrealized losses, net of deferred tax benefit, of $1.8 million were recorded in accumulated other comprehensive income in the consolidated statements of financial condition. During the three months ended June 30, 2014, unrealized gains, net of deferred taxes, of $2.7 million were recorded in accumulated other comprehensive income in the consolidated statements of financial condition. During the six months ended June 30, 2015 and 2014, unrealized gains, net of deferred taxes, of $5.9 million and $5.6 million, respectively, were recorded in accumulated other comprehensive income in the consolidated statements of financial condition.

The table below summarizes the amortized cost and fair values of debt securities by contractual maturity (in thousands). Expected maturities may differ significantly from contractual maturities, as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2015
	Available-for-sale securities				Held-to-maturity securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Debt securities
Within one year	$	31,104	$	31,290	$	15,013	$	15,012
After one year through three years		98,828		99,728		40,178		39,540
After three years through five years		28,967		29,304		—		—
After five years through ten years		115,553		115,018		—		—
After ten years		446,966		445,066		177,523		177,506
Mortgage-backed securities
After one year through three years		94		95		—		—
After five years through ten years		757		804		59,491		61,548
After ten years		66,651		66,592		833,221		854,702
	$	788,920	$	787,897	$	1,125,426	$	1,148,308

The maturities of our available-for-sale (fair value) and held-to-maturity (amortized cost) securities at June 30, 2015, are as follows (in thousands):

	Within 1 Year		1-5 Years		5-10 Years		After 10 Years		Total
Available-for-sale:¹
U.S. government agency securities	$	732	$	978	$	—	$	—	$	1,710
State and municipal securities		—		—		1,671		72,062		73,733
Mortgage-backed securities:
Agency		—		—		804		27,099		27,903
Commercial		—		—		—		36,654		36,654
Non-agency		—		95		—		2,839		2,934
Corporate fixed income securities		30,558		128,054		29,921		—		188,533
Asset-backed securities		—		-		83,426		373,004		456,430
	$	31,290	$	129,127	$	115,822	$	511,658	$	787,897
Held-to-maturity:
Mortgage-backed securities:
Agency	$	—	$	—	$	—	$	832,248	$	832,248
Commercial		—		—		59,491		—		59,491
Non-agency		—		—		—		973		973
Asset-backed securities		—		—		—		177,523		177,523
Corporate fixed income securities		15,013		40,178				—		55,191
	$	15,013	$	40,178	$	59,491	$	1,010,744	$	1,125,426

¹	Due to the immaterial amount of income recognized on tax-exempt securities, yields were not calculated on a tax-equivalent basis.

At June 30, 2015 and December 31, 2014, securities of $990.4 million and $1.2 billion, respectively, were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits.

The following table shows the gross unrealized losses and fair value of the Company’s investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at June 30, 2015 (in thousands):

	Less than 12 months					12 months or more					Total
	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale securities
U.S. government securities	$	(1	)	$	483	$	—		$	—	$	(1	)	$	483
State and municipal securities		(814	)		36,500		(1,693	)		35,562		(2,507	)		72,062
Mortgage-backed securities:
Agency		(4	)		2,047		(414	)		8,997		(418	)		11,044
Commercial		(4	)		2,099		—			—		(4	)		2,099
Non-agency		(39	)		2,729		—			—		(39	)		2,729
Corporate fixed income securities		(793	)		34,912		—			—		(793	)		34,912
Asset-backed securities		(385	)		66,076		(1,773	)		86,302		(2,158	)		152,378
	$	(2,040	)	$	144,846	$	(3,880	)	$	130,861	$	(5,920	)	$	275,707
Held-to-maturity securities
Mortgage-backed securities:
Agency	$	—		$	—	$	(27	)	$	2,552	$	(27	)	$	2,552
Non-agency		(2	)		569		(12	)		391		(14	)		960
Asset-backed securities		(48	)		9,140		(2,684	)		68,918		(2,732	)		78,058
Corporate fixed income securities		—			—		(641	)		49,551		(641	)		49,551
	$	(50	)	$	9,709	$	(3,364	)	$	121,412	$	(3,414	)	$	131,121

At June 30, 2015, the amortized cost of 43 securities classified as available for sale exceeded their fair value by $5.9 million, of which $3.9 million related to investment securities that had been in a loss position for 12 months or longer. The total fair value of these investments at June 30, 2015, was $275.7 million, which was 35.0% of our available-for-sale portfolio.

At June 30, 2015, the carrying value of 22 securities held to maturity exceeded their fair value by $3.4 million, of which $3.3 million related to securities held to maturity that have been in a loss position for 12 months or longer. As discussed in more detail below, we conduct periodic reviews of all securities with unrealized losses to assess whether the impairment is other-than-temporary.

Other-Than-Temporary Impairment

We evaluate all securities in an unrealized loss position quarterly to assess whether the impairment is other-than-temporary. Our other-than-temporary impairment (“OTTI”) assessment is a subjective process requiring the use of judgments and assumptions. There was no credit-related OTTI recognized during the three and six months ended June 30, 2015 and 2014.

We believe the gross unrealized losses related to all other securities of $5.9 million as of June 30, 2015, are attributable to issuer-specific credit spreads and changes in market interest rates and asset spreads. We, therefore, do not expect to incur any credit losses related to these securities. In addition, we have no intent to sell these securities with unrealized losses, and it is not more likely than not that we will be required to sell these securities prior to recovery of the amortized cost. No OTTI charge was recorded during the three and six months ended June 30, 2015 related to these securities. Accordingly, we have concluded that the impairment on these securities is not other-than-temporary.