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 March 31, 2016 and December 31, 2015 (in thousands):

	March 31, 2016
	Amortized Cost		Gross Unrealized Gains ¹		Gross Unrealized Losses ¹			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	1,776	$	6	$	(2	)	$	1,780
State and municipal securities		75,813		18		(1,726	)		74,105
Mortgage-backed securities:
Agency		407,480		378		(7,227	)		400,631
Commercial		19,572		83		(90	)		19,565
Non-agency		2,459		1		(177	)		2,283
Corporate fixed income securities		535,358		5,896		(45	)		541,209
Asset-backed securities		1,096,144		1,250		(11,501	)		1,085,893
	$	2,138,602	$	7,632	$	(20,768	)	$	2,125,466
Held-to-maturity securities ²
Mortgage-backed securities:
Agency	$	1,430,586	$	39,549	$	(4,504	)	$	1,465,631
Commercial		59,536		3,189		—			62,725
Non-agency		795		—		(18	)		777
Asset-backed securities		497,134		3,440		(4,805	)		495,769
Corporate fixed income securities		40,128		6		(40	)		40,094
	$	2,028,179	$	46,184	$	(9,367	)	$	2,064,996

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains ¹		Gross Unrealized Losses ¹			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	1,700	$	1	$	(3	)	$	1,698
State and municipal securities		75,953		28		(1,814	)		74,167
Mortgage-backed securities:
Agency		306,309		125		(1,541	)		304,893
Commercial		11,177		134		(1	)		11,310
Non-agency		2,679		2		(163	)		2,518
Corporate fixed income securities		321,017		743		(2,352	)		319,408
Asset-backed securities		922,563		774		(7,424	)		915,913
	$	1,641,398	$	1,807	$	(13,298	)	$	1,629,907
Held-to-maturity securities ²
Mortgage-backed securities:
Agency	$	1,257,808	$	23,346	$	(3,105	)	$	1,278,049
Commercial		59,521		1,832		—			61,353
Non-agency		929		—		(15	)		914
Asset-backed securities		496,996		2,076		(4,139	)		494,933
Corporate fixed income securities		40,145		—		(396	)		39,749
	$	1,855,399	$	27,254	$	(7,655	)	$	1,874,998

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

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.

There were no sales of available-for-sale securities during the three months ended March 31, 2016 and 2015, respectively.

During the three months ended March 31, 2016, unrealized losses, net of tax benefit, of $1.0 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition. During the three months ended March 31, 2015, unrealized gains, net of deferred taxes, of $6.9 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition.

The table below summarizes the amortized cost and fair values of debt securities by contractual maturity. 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.

	March 31, 2016
	Available-for-sale securities				Held-to-maturity securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Debt securities
Within one year	$	955	$	953	$	—	$	—
After one year through three years		198,269		199,697		40,128		40,094
After three years through five years		303,415		307,345		—		—
After five years through ten years		302,503		296,855		—		—
After ten years		903,949		898,137		497,134		495,769
Mortgage-backed securities
After one year through three years		52		52		—		—
After five years through ten years		547		577		261,778		266,426
After ten years		428,912		421,850		1,229,139		1,262,707
	$	2,138,602	$	2,125,466	$	2,028,179	$	2,064,996

The maturities of our available-for-sale (fair value) and held-to-maturity (amortized cost) securities at March 31, 2016, 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	$	953	$	827	$	—	$	—	$	1,780
State and municipal securities		—		—		11,017		63,088		74,105
Mortgage-backed securities:
Agency		—		—		577		400,054		400,631
Commercial		—		—		—		19,565		19,565
Non-agency		—		52		—		2,231		2,283
Corporate fixed income securities		—		506,215		34,994		—		541,209
Asset-backed securities		—		—		250,844		835,049		1,085,893
	$	953	$	507,094	$	297,432	$	1,319,987	$	2,125,466
Held-to-maturity:
Mortgage-backed securities:
Agency	$	—	$	—	$	202,242	$	1,228,344	$	1,430,586
Commercial		—		—		59,536		—		59,536
Non-agency		—		—		—		795		795
Asset-backed securities		—		—		—		497,134		497,134
Corporate fixed income securities		—		40,128		—		—		40,128
	$	—	$	40,128	$	261,778	$	1,726,273	$	2,028,179

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

At March 31, 2016 and December 31, 2015, securities and loans of $2.1 billion and $1.4 billion, respectively, were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. At March 31, 2016 and December 31, 2015, securities of $1.3 billion and $1.1 billion, respectively, were pledged with the Federal Reserve discount window.

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 March 31, 2016 (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	$	(2	)	$	578	$	—		$	—	$	(2	)	$	578
State and municipal securities		(128	)		13,784		(1,598	)		56,128		(1,726	)		69,912
Mortgage-backed securities:
Agency		(7,060	)		374,478		(167	)		8,510		(7,227	)		382,988
Commercial		(89	)		12,341		(1	)		111		(90	)		12,452
Non-agency		—			—		(177	)		2,149		(177	)		2,149
Corporate fixed income securities		(45	)		15,848		—			—		(45	)		15,848
Asset-backed securities		(8,488	)		729,217		(3,013	)		63,917		(11,501	)		793,134
	$	(15,812	)	$	1,146,246	$	(4,956	)	$	130,815	$	(20,768	)	$	1,277,061
Held-to-maturity securities
Mortgage-backed securities:
Agency	$	(4,489	)	$	129,576	$	(15	)	$	2,002	$	(4,504	)	$	131,578
Non-agency		—			—		(18	)		777		(18	)		777
Asset-backed securities		(2,791	)		316,535		(2,014	)		69,521		(4,805	)		386,056
Corporate fixed income securities		—			—		(40	)		35,064		(40	)		35,064
	$	(7,280	)	$	446,111	$	(2,087	)	$	107,364	$	(9,367	)	$	553,475

At March 31, 2016, the amortized cost of 98 securities classified as available for sale exceeded their fair value by $20.8 million, of which $5.0 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 March 31, 2016, was $1.3 billion, which was 60.1% of our available-for-sale portfolio.

At March 31, 2016, the carrying value of 37 securities held to maturity exceeded their fair value by $9.4 million, of which $2.1 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 months ended March 31, 2016 and 2015.

We believe the gross unrealized losses of $30.0 million related to our investment portfolio, as of March 31, 2016, 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. Accordingly, we have concluded that the impairment on these securities is not other-than-temporary.