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Investment Securities
 12 Months Ended
Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Investment Securities Investment Securities
A Summary of the amortized cost and fair value of investment securities is presented below:
 
At December 31,
 
2017
 
2016
(In thousands)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
 
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Treasury Bills
$
1,247

$
—

$
—

$
1,247

 
$
734

$
—

$
—

$
734

Agency CMO
308,989

1,158

(3,814
)
306,333

 
419,865

3,344

(3,503
)
419,706

Agency MBS
1,124,960

2,151

(19,270
)
1,107,841

 
969,460

4,398

(19,509
)
954,349

Agency CMBS
608,276

—

(20,250
)
588,026

 
587,776

63

(14,567
)
573,272

CMBS
358,984

2,157

(74
)
361,067

 
473,974

4,093

(702
)
477,365

CLO
209,075

910

(134
)
209,851

 
425,083

2,826

(519
)
427,390

Single issuer-trust preferred
7,096

—

(46
)
7,050

 
30,381

—

(1,748
)
28,633

Corporate debt
56,504

797

(679
)
56,622

 
108,490

1,502

(350
)
109,642

Total available-for-sale
$
2,675,131

$
7,173

$
(44,267
)
$
2,638,037

 
$
3,015,763

$
16,226

$
(40,898
)
$
2,991,091

Held-to-maturity:
 
 
 
 
 
 
 
 
 
Agency CMO
$
260,114

$
664

$
(4,824
)
$
255,954

 
$
339,455

$
1,977

$
(3,824
)
$
337,608

Agency MBS
2,569,735

16,989

(37,442
)
2,549,282

 
2,317,449

26,388

(41,768
)
2,302,069

Agency CMBS
696,566

—

(10,011
)
686,555

 
547,726

694

(1,348
)
547,072

Municipal bonds and notes
711,381

8,584

(6,558
)
713,407

 
655,813

4,389

(25,749
)
634,453

CMBS
249,273

2,175

(620
)
250,828

 
298,538

4,107

(411
)
302,234

Private Label MBS
323

1

—

324

 
1,677

12

—

1,689

Total held-to-maturity
$
4,487,392

$
28,413

$
(59,455
)
$
4,456,350

 
$
4,160,658

$
37,567

$
(73,100
)
$
4,125,125


Other-Than-Temporary Impairment
The balance of OTTI, included in the amortized cost columns above, is related to certain CLO positions that were previously considered Covered Funds as defined by Section 619 of the Dodd-Frank Act commonly known as the Volcker Rule. The Company has taken measures to bring its CLO positions into conformance with the Volcker Rule.
To the extent that changes occur in interest rates, credit movements, and other factors that impact fair value and expected recovery of amortized cost of its investment securities, the Company may be required to recognize OTTI in earnings, in future periods.
The following table presents the changes in OTTI:
 
Years ended December 31,
(In thousands)
2017
 
2016
 
2015
Beginning balance
$
3,243

 
$
3,288

 
$
3,696

Reduction for securities sold or called
(2,005
)
 
(194
)
 
(518
)
Additions for OTTI not previously recognized
126

 
149

 
110

Ending balance
$
1,364

 
$
3,243

 
$
3,288


Fair Value and Unrealized Losses
The following tables provide information on fair value and unrealized losses for the individual securities with an unrealized loss, aggregated by investment security type and length of time that the individual securities have been in a continuous unrealized loss position:
 
At December 31, 2017
 
Less Than Twelve Months
 
Twelve Months or Longer
 
Total
(Dollars in thousands)
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
# of
Holdings
Fair
Value
Unrealized
Losses
Available-for-sale:
 
 
 
 
 
 
 
 
 
Agency CMO
$
81,001

$
(449
)
 
$
119,104

$
(3,365
)
 
27
$
200,105

$
(3,814
)
Agency MBS
416,995

(2,920
)
 
606,021

(16,350
)
 
135
1,023,016

(19,270
)
Agency CMBS
54,182

(851
)
 
533,844

(19,399
)
 
36
588,026

(20,250
)
CMBS
23,869

(74
)
 
—

—

 
6
23,869

(74
)
CLO
56,335

(134
)
 
—

—

 
3
56,335

(134
)
Single issuer-trust preferred
7,050

(46
)
 
—

—

 
1
7,050

(46
)
Corporate debt
11,082

(395
)
 
6,265

(284
)
 
4
17,347

(679
)
Total available-for-sale in an unrealized loss position
$
650,514

$
(4,869
)
 
$
1,265,234

$
(39,398
)
 
212
$
1,915,748

$
(44,267
)
Held-to-maturity:
 
 
 
 
 
 
 
 
 
Agency CMO
$
98,090

$
(1,082
)
 
$
106,775

$
(3,742
)
 
22
$
204,865

$
(4,824
)
Agency MBS
762,107

(4,555
)
 
1,197,839

(32,887
)
 
205
1,959,946

(37,442
)
Agency CMBS
576,770

(7,599
)
 
109,785

(2,412
)
 
56
686,555

(10,011
)
Municipal bonds and notes
6,432

(38
)
 
226,861

(6,520
)
 
92
233,293

(6,558
)
CMBS
92,670

(413
)
 
14,115

(207
)
 
13
106,785

(620
)
Total held-to-maturity in an unrealized loss position
$
1,536,069

$
(13,687
)
 
$
1,655,375

$
(45,768
)
 
388
$
3,191,444

$
(59,455
)

 
At December 31, 2016
 
Less Than Twelve Months
 
Twelve Months or Longer
 
Total
(Dollars in thousands)
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
# of
Holdings
Fair
Value
Unrealized
Losses
Available-for-sale:
 
 
 
 
 
 
 
 
 
Agency CMO
$
107,853

$
(2,168
)
 
$
67,351

$
(1,335
)
 
15
$
175,204

$
(3,503
)
Agency MBS
512,075

(10,503
)
 
252,779

(9,006
)
 
97
764,854

(19,509
)
Agency CMBS
554,246

(14,567
)
 
—

—

 
32
554,246

(14,567
)
CMBS
12,427

(24
)
 
63,930

(678
)
 
12
76,357

(702
)
CLO
49,946

(54
)
 
50,237

(465
)
 
5
100,183

(519
)
Single issuer-trust preferred
—

—

 
28,633

(1,748
)
 
5
28,633

(1,748
)
Corporate debt
—

—

 
7,384

(350
)
 
2
7,384

(350
)
Total available-for-sale in an unrealized loss position
$
1,236,547

$
(27,316
)
 
$
470,314

$
(13,582
)
 
168
$
1,706,861

$
(40,898
)
Held-to-maturity:
 
 
 
 
 
 
 
 
 
Agency CMO
$
163,439

$
(3,339
)
 
$
17,254

$
(485
)
 
16
$
180,693

$
(3,824
)
Agency MBS
1,394,623

(32,942
)
 
273,779

(8,826
)
 
150
1,668,402

(41,768
)
Agency CMBS
347,725

(1,348
)
 
—

—

 
25
347,725

(1,348
)
Municipal bonds and notes
384,795

(25,745
)
 
1,192

(4
)
 
196
385,987

(25,749
)
CMBS
60,768

(411
)
 
—

—

 
8
60,768

(411
)
Total held-to-maturity in an unrealized loss position
$
2,351,350

$
(63,785
)
 
$
292,225

$
(9,315
)
 
395
$
2,643,575

$
(73,100
)

Impairment Analysis
The following impairment analysis by investment security type, summarizes the basis for evaluating if investment securities within the Company’s available-for-sale and held-to-maturity portfolios have been impacted by OTTI. Unless otherwise noted for an investment security type, management does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost. As such, based on the following impairment analysis, the Company does not consider these securities, in unrealized loss positions, to be other-than-temporarily impaired at December 31, 2017.
Available-for-Sale Securities
Agency CMO. There were unrealized losses of $3.8 million on the Company’s investment in Agency CMO at December 31, 2017, compared to $3.5 million at December 31, 2016. Unrealized losses increased slightly due to higher market rates while principal balances decreased for this asset class since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency MBS. There were unrealized losses of $19.3 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2017, compared to $19.5 million at December 31, 2016. Unrealized losses decreased slightly due to paydowns and purchase activity, while principal balances increased for this asset class since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency CMBS. There were unrealized losses of $20.3 million on the Company's investment in commercial mortgage-backed securities issued by government agencies at December 31, 2017, compared to $14.6 million at December 31, 2016. Unrealized losses increased due to higher market rates while principal balances increased for this asset class since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
CMBS. There were unrealized losses of $74 thousand on the Company’s investment in CMBS at December 31, 2017, compared to $702 thousand at December 31, 2016. The portfolio of mainly floating rate CMBS experienced reduced market spreads which resulted in higher market prices and smaller unrealized losses at December 31, 2017 compared to December 31, 2016. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. Contractual cash flows for the bonds continue to perform as expected.
CLO. There were unrealized losses of $134 thousand on the Company’s investments in CLO at December 31, 2017 compared to $519 thousand unrealized losses at December 31, 2016. Unrealized losses decreased due to reduced market spreads while principal balances decreased since December 31, 2016. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios. Contractual cash flows for the bonds continue to perform as expected.
Single issuer-trust preferred. There were unrealized losses of $46 thousand on the Company's investment in single issuer-trust preferred at December 31, 2017, compared to $1.7 million at December 31, 2016. Unrealized losses decreased due to lower principal balances for this asset class as a conversion feature for two securities was exercised by the issuer resulting in the reclassification of those securities into corporate debt. Single issuer-trust preferred consists of one investment issued by a large capitalization money center financial institution, which continues to service its debt. The Company performs periodic credit reviews of the issuer to assess the likelihood for ultimate recovery of amortized cost.
Corporate debt. There were $679 thousand unrealized losses on the Company's corporate debt portfolio at December 31, 2017, compared to $350 thousand at December 31, 2016. Unrealized losses increased as reclassified security balances with unrealized losses exceeded maturing corporate debt balances since December 31, 2016. The Company performs periodic credit reviews of the issuer to assess the likelihood for ultimate recovery of amortized cost.
Held-to-Maturity Securities
Agency CMO. There were unrealized losses of $4.8 million on the Company’s investment in Agency CMO at December 31, 2017, compared to $3.8 million at December 31, 2016. Unrealized losses increased due to higher market rates while principal balances decreased since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency MBS. There were unrealized losses of $37.4 million on the Company’s investment in residential mortgage-backed securities issued by government agencies at December 31, 2017, compared to $41.8 million at December 31, 2016. Unrealized losses decreased due to paydowns and purchase activity while principal balances increased for this asset class since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Agency CMBS. There were unrealized losses of $10.0 million on the Company’s investment in commercial mortgage-backed securities issued by government agencies at December 31, 2017, compared to $1.3 million at December 31, 2016. Unrealized losses increased due to higher market rates while principal balances increased since December 31, 2016. These investments are issued by a government or government sponsored agency and therefore, are backed by certain government guarantees, either direct or implicit. There has been no change in the credit quality, and the contractual cash flows are performing as expected.
Municipal bonds and notes. There were unrealized losses of $6.6 million on the Company’s investment in municipal bonds and notes at December 31, 2017, compared to $25.7 million at December 31, 2016. Unrealized losses decreased due to lower market spreads while principal balances increased since December 31, 2016. The Company performs periodic credit reviews of the issuers and the securities are currently performing as expected.
CMBS. There were unrealized losses of $620 thousand on the Company’s investment in CMBS at December 31, 2017, compared to $411 thousand unrealized losses at December 31, 2016. Unrealized losses increased due to higher market rates on mainly seasoned fixed rate conduit transactions while principal balances decreased since December 31, 2016. Internal stress tests are performed on individual bonds to monitor potential losses under stress scenarios.
Sales of Available-for Sale Securities
The following table provides information on sales of available-for-sale securities:
 
Years ended December 31,
(In thousands)
2017
 
2016
 
2015
Proceeds from sales (1)
$
—

 
$
259,273

 
$
95,101

 
 
 
 
 
 
Gross realized gains on sales
$
—

 
$
2,891

 
$
1,029

Less: Gross realized losses on sales
—

 
2,477

 
420

Gain on sale of investment securities, net
$
—

 
$
414

 
$
609


(1)
There were no sales during the year ended December 31, 2017.
Contractual Maturities
The amortized cost and fair value of debt securities by contractual maturity, including called securities, are set forth below:
 
At December 31, 2017
 
 
 
 
 
Available-for-Sale
 
Held-to-Maturity
(In thousands)
Amortized
Cost
Fair
Value
 
Amortized
Cost
Fair
Value
Due in one year or less
$
1,247

$
1,247

 
$
33,654

$
34,145

Due after one year through five years
40,066

40,447

 
3,839

3,857

Due after five through ten years
332,558

333,931

 
37,870

38,450

Due after ten years
2,301,260

2,262,412

 
4,412,029

4,379,898

Total debt securities
$
2,675,131

$
2,638,037

 
$
4,487,392

$
4,456,350


For the maturity schedule above, mortgage-backed securities and CLO, which are not due at a single maturity date, have been categorized based on the maturity date of the underlying collateral. Actual principal cash flows may differ from this maturity date presentation as borrowers have the right to prepay obligations with or without prepayment penalties.
At December 31, 2017, the Company had a carrying value of $1.2 billion in callable securities in its CMBS, CLO, and municipal bond portfolios. The Company considers prepayment risk in the evaluation of its interest rate risk profile. These maturities do not reflect actual duration which are impacted by prepayments.
Investment securities with a carrying value totaling $2.4 billion at December 31, 2017 and $2.5 billion at December 31, 2016 were pledged to secure public funds, trust deposits, repurchase agreements, and for other purposes, as required or permitted by law.