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, 2018 and December 31, 2017 (in thousands):

	March 31, 2018
	Amortized Cost		Gross Unrealized Gains ⁽¹⁾		Gross Unrealized Losses ⁽¹⁾			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	5,082	$	—	$	(56	)	$	5,026
State and municipal securities		74,127		—		(4,262	)		69,865
Mortgage-backed securities:
Agency		288,644		3		(4,944	)		283,703
Commercial		75,259		16		(4,826	)		70,449
Non-agency		1,431		10		—			1,441
Corporate fixed income securities		1,303,493		908		(23,306	)		1,281,095
Asset-backed securities		1,986,886		15,483		(1,147	)		2,001,222
	$	3,734,922	$	16,420	$	(38,541	)	$	3,712,801
Held-to-maturity securities ⁽²⁾
Mortgage-backed securities:
Agency	$	1,282,781	$	1,559	$	(31,106	)	$	1,253,234
Commercial		58,698		197	—				58,895
Asset-backed securities		2,505,047		11,021		(2,798	)		2,513,270
	$	3,846,526	$	12,777	$	(33,904	)	$	3,825,399

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains ⁽¹⁾		Gross Unrealized Losses ⁽¹⁾			Estimated Fair Value
Available-for-sale securities
U.S. government agency securities	$	5,022	$	—	$	(39	)	$	4,983
State and municipal securities		74,691		—		(4,132	)		70,559
Mortgage-backed securities:
Agency		308,409		102		(2,981	)		305,530
Commercial		75,548		28		(3,088	)		72,488
Non-agency		1,568		—		—			1,568
Corporate fixed income securities		1,213,262		3,832		(5,652	)		1,211,442
Asset-backed securities		2,098,958		12,877		(4,897	)		2,106,938
	$	3,777,458	$	16,839	$	(20,789	)	$	3,773,508
Held-to-maturity securities ⁽²⁾
Mortgage-backed securities:
Agency	$	1,334,833	$	13,621	$	(16,208	)	$	1,332,246
Commercial		58,971		1,313		—			60,284
Asset-backed securities		2,264,283		15,526		(1,862	)		2,277,947
Corporate fixed income securities		40,011		27		(37	)		40,001
	$	3,698,098	$	30,487	$	(18,107	)	$	3,710,478

⁽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, 2018 and 2017.

During the three months ended March 31, 2018, unrealized losses, net of deferred taxes, of $13.1 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition. During the three months ended March 31, 2017, unrealized gains, net of deferred taxes, of $3.8 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, 2018
	Available-for-sale securities				Held-to-maturity securities
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Debt securities
Within one year	$	186,449	$	186,128	$	—	$	—
After one year through three years		318,811		313,695		—		—
After three years through five years		280,569		273,083		—		—
After five years through ten years		903,515		894,658		571,991		574,299
After ten years		1,680,244		1,689,644		1,933,056		1,938,971
Mortgage-backed securities
After three years through five years		—		—		58,698		58,895
After five years through ten years		306		307		134,529		130,499
After ten years		365,028		355,286		1,148,252		1,122,735
	$	3,734,922	$	3,712,801	$	3,846,526	$	3,825,399

The maturities of our available-for-sale (fair value) and held-to-maturity (amortized cost) securities at March 31, 2018, 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	$	1,172	$	3,854	$	—	$	—	$	5,026
State and municipal securities		359		—		18,559		50,947		69,865
Mortgage-backed securities:
Agency		—		—		307		283,396		283,703
Commercial		—		—		—		70,449		70,449
Non-agency		—		—		—		1,441		1,441
Corporate fixed income securities		184,597		582,924		513,574		—		1,281,095
Asset-backed securities		—		—		362,525		1,638,697		2,001,222
	$	186,128	$	586,778	$	894,965	$	2,044,930	$	3,712,801
Held-to-maturity:
Mortgage-backed securities:
Agency	$	—	$	—	$	134,529	$	1,148,252	$	1,282,781
Commercial		—		58,698		—		—		58,698
Asset-backed securities		—		—		571,991		1,933,056		2,505,047
	$	—	$	58,698	$	706,520	$	3,081,308	$	3,846,526

⁽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, 2018 and December 31, 2017, securities of $2.1 billion and $2.2 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, 2018 and December 31, 2017, securities of $2.1 billion and $2.0 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, 2018 (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	$	(56	)	$	5,026	$	—		$	—	$	(56	)	$	5,026
State and municipal securities		(120	)		2,732		(4,142	)		67,133		(4,262	)		69,865
Mortgage-backed securities:
Agency		(2,307	)		102,145		(2,637	)		159,001		(4,944	)		261,146
Commercial		—			—		(4,826	)		69,245		(4,826	)		69,245
Corporate fixed income securities		(16,980	)		885,475		(6,326	)		182,272		(23,306	)		1,067,747
Asset-backed securities		(1,147	)		91,881		—			—		(1,147	)		91,881
	$	(20,610	)	$	1,087,259	$	(17,931	)	$	477,651	$	(38,541	)	$	1,564,910
Held-to-maturity securities
Mortgage-backed securities:
Agency	$	(2,948	)	$	293,200	$	(28,158	)	$	655,692	$	(31,106	)	$	948,892
Asset-backed securities		(451	)		181,393		(2,347	)		42,425		(2,798	)		223,818
	$	(3,399	)	$	474,593	$	(30,505	)	$	698,117	$	(33,904	)	$	1,172,710

At March 31, 2018, the amortized cost of 226 securities classified as available for sale exceeded their fair value by $38.5 million, of which $17.9 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 March 31, 2018, was $1.6 billion, which was 42.1% of our available-for-sale portfolio.

At March 31, 2018, the carrying value of 62 securities held to maturity exceeded their fair value by $33.9 million, of which $30.5 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, 2018 and 2017.

We believe the gross unrealized losses of $72.4 million related to our investment portfolio, as of March 31, 2018, 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.