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Available-For-Sale And Held-To-Maturity Securities
 12 Months Ended
Dec. 31, 2018
Investments Debt And Equity Securities [Abstract]  
Available-For-Sale And Held-To-Maturity Securities

NOTE 7 – 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 December 31, 2018 and 2017 (in thousands):

 

 

 

December 31, 2018

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains (1)

 

 

Gross

Unrealized

Losses (1)

 

 

Estimated

Fair Value

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

5,237

 

 

$

13

 

 

$

(35

)

 

$

5,215

 

State and municipal securities

 

 

72,487

 

 

 

—

 

 

 

(4,261

)

 

 

68,226

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

234,292

 

 

 

88

 

 

 

(3,972

)

 

 

230,408

 

Commercial

 

 

74,411

 

 

 

4

 

 

 

(4,700

)

 

 

69,715

 

Non-agency

 

 

1,245

 

 

 

—

 

 

 

(26

)

 

 

1,219

 

Corporate fixed income securities

 

 

958,406

 

 

 

—

 

 

 

(26,802

)

 

 

931,604

 

Asset-backed securities

 

 

1,779,496

 

 

 

672

 

 

 

(16,108

)

 

 

1,764,060

 

 

 

$

3,125,574

 

 

$

777

 

 

$

(55,904

)

 

$

3,070,447

 

Held-to-maturity securities (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

$

1,198,442

 

 

$

1,307

 

 

$

(31,689

)

 

$

1,168,060

 

Commercial

 

 

51,524

 

 

 

185

 

 

 

—

 

 

 

51,709

 

Asset-backed securities

 

 

2,968,888

 

 

 

4,585

 

 

 

(70,335

)

 

 

2,903,138

 

 

 

$

4,218,854

 

 

$

6,077

 

 

$

(102,024

)

 

$

4,122,907

 

 

 

 

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.

For the year ended December 31, 2018, we received proceeds of $372.4 million from the sale of available for sale securities, which resulted in a realized loss of $3.9 million. For the year ended December 31, 2017, we received proceeds of $87.3 million from the sale of available for sale securities, which resulted in realized gains of $0.4 million. For the year ended December 31, 2016, there were no sales of available-for-sale securities.

During the year ended December 31, 2018, unrealized losses, net of deferred taxes, of $36.3 million were recorded in accumulated other comprehensive loss in the consolidated statements of financial condition. During the years ended December 31, 2017 and 2016, unrealized gains, net of deferred tax expense, of $4.7 million and $5.8 million, respectively, 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 (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.

 

 

 

December 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

 

$

5,872

 

 

$

5,855

 

 

$

—

 

 

$

—

 

After one year through three years

 

 

233,969

 

 

 

227,818

 

 

 

—

 

 

 

—

 

After three years through five years

 

 

406,184

 

 

 

396,046

 

 

 

—

 

 

 

—

 

After five years through ten years

 

 

463,765

 

 

 

452,622

 

 

 

366,667

 

 

 

364,758

 

After ten years

 

 

1,705,836

 

 

 

1,686,764

 

 

 

2,602,221

 

 

 

2,538,380

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After one year through three years

 

 

132

 

 

 

133

 

 

 

51,524

 

 

 

51,709

 

After three years through five years

 

 

1,323

 

 

 

1,326

 

 

 

—

 

 

 

—

 

After five years through ten years

 

 

5,801

 

 

 

5,820

 

 

 

170,050

 

 

 

165,858

 

After ten years

 

 

302,692

 

 

 

294,063

 

 

 

1,028,392

 

 

 

1,002,202

 

 

 

$

3,125,574

 

 

$

3,070,447

 

 

$

4,218,854

 

 

$

4,122,907

 

 

The maturities of our available-for-sale (fair value) and held-to-maturity (amortized cost) securities at December 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

 

$

1,534

 

 

$

3,681

 

 

$

—

 

 

$

—

 

 

$

5,215

 

State and municipal securities

 

 

80

 

 

 

—

 

 

 

18,199

 

 

 

49,947

 

 

 

68,226

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

—

 

 

 

1,460

 

 

 

5,820

 

 

 

223,128

 

 

 

230,408

 

Commercial

 

 

—

 

 

 

—

 

 

 

—

 

 

 

69,715

 

 

 

69,715

 

Non-agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,219

 

 

 

1,219

 

Corporate fixed income securities

 

 

4,241

 

 

 

620,182

 

 

 

307,181

 

 

 

—

 

 

 

931,604

 

Asset-backed securities

 

 

—

 

 

 

—

 

 

 

127,242

 

 

 

1,636,818

 

 

 

1,764,060

 

 

 

$

5,855

 

 

$

625,323

 

 

$

458,442

 

 

$

1,980,827

 

 

$

3,070,447

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

$

—

 

 

$

—

 

 

$

170,050

 

 

$

1,028,392

 

 

$

1,198,442

 

Commercial

 

 

—

 

 

 

51,524

 

 

 

—

 

 

 

—

 

 

 

51,524

 

Asset-backed securities

 

 

—

 

 

 

—

 

 

 

366,667

 

 

 

2,602,221

 

 

 

2,968,888

 

 

 

$

—

 

 

$

51,524

 

 

$

536,717

 

 

$

3,630,613

 

 

$

4,218,854

 

 

(1)

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

At December 31, 2018 and 2017, securities of $1.9 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 December 31, 2018 and 2017, securities of $1.6 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 December 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

 

$

(35

)

 

$

3,752

 

 

 

—

 

 

 

—

 

 

$

(35

)

 

$

3,752

 

State and municipal securities

 

 

—

 

 

 

—

 

 

 

(4,261

)

 

 

68,146

 

 

 

(4,261

)

 

 

68,146

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

 

(186

)

 

 

16,124

 

 

 

(3,786

)

 

 

188,069

 

 

 

(3,972

)

 

 

204,193

 

Commercial

 

 

—

 

 

 

—

 

 

 

(4,700

)

 

 

68,850

 

 

 

(4,700

)

 

 

68,850

 

Non-agency

 

 

(26

)

 

 

1,214

 

 

 

—

 

 

 

—

 

 

 

(26

)

 

 

1,214

 

Corporate fixed income securities

 

 

(5,619

)

 

 

351,344

 

 

 

(21,183

)

 

 

580,260

 

 

 

(26,802

)

 

 

931,604

 

Asset-backed securities

 

 

(16,108

)

 

 

1,348,927

 

 

 

—

 

 

 

—

 

 

 

(16,108

)

 

 

1,348,927

 

 

 

$

(21,974

)

 

$

1,721,361

 

 

$

(33,930

)

 

$

905,325

 

 

$

(55,904

)

 

$

2,626,686

 

Held-to-maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

$

(3,511

)

 

$

311,010

 

 

$

(28,178

)

 

$

714,949

 

 

$

(31,689

)

 

$

1,025,959

 

Asset-backed securities

 

 

(68,308

)

 

 

2,579,117

 

 

 

(2,027

)

 

 

42,712

 

 

 

(70,335

)

 

 

2,621,829

 

 

 

$

(71,819

)

 

$

2,890,127

 

 

$

(30,205

)

 

$

757,661

 

 

$

(102,024

)

 

$

3,647,788

 

 

At December 31, 2018, the amortized cost of 258 securities classified as available for sale exceeded their fair value by $55.9 million, of which $33.9 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 December 31, 2018, was $2.6 billion, which was 85.5% of our available-for-sale portfolio.

At December 31, 2018, the carrying value of 196 securities held to maturity exceeded their fair value by $102.0 million, of which $30.2 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 OTTI assessment is a subjective process requiring the use of judgments and assumptions. There was no credit-related OTTI recognized during the years ended December 31, 2018, 2017, and 2016.

We believe the gross unrealized losses of $157.9 million related to our investment portfolio, as of December 31, 2018, are attributable to changes in market interest rates. 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.