Note 4. Securities

The following tables summarize the Company’s portfolio of securities available for sale at June 30, 2016 and December 31, 2015:


	June 30, 2016
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Municipal bonds	$	729	$	82	$	—	$	811
Capital trust notes		9,451		—		2,658		6,793
Preferred stock		118,205		10,869		31		129,043
Mutual funds and common stock ⁽¹⁾		16,877		746		—		17,623

Total securities available for sale	$	145,262	$	11,697	$	2,689	$	154,270

(1)	Primarily consists of mutual funds that are Community Reinvestment Act-qualified investments.


	December 31, 2015
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates ⁽¹⁾	$	53,820	$	33	$	1	$	53,852

Other Securities:
Municipal bonds	$	725	$	70	$	—	$	795
Capital trust notes		9,444		—		2,480		6,964
Preferred stock		118,205		7,415		248		125,372
Common stock		16,877		470		75		17,272

Total other securities	$	145,251	$	7,955	$	2,803	$	150,403

Total securities available for sale	$	199,071	$	7,988	$	2,804	$	204,255

(1)	Government-sponsored enterprise.

The following tables summarize the Company’s portfolio of securities held to maturity at June 30, 2016 and December 31, 2015:


	June 30, 2016
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,239,688	$	2.239,688	$	169,049	$	—	$	2,408,737
GSE CMOs ⁽¹⁾		1,190,119		1,190,119		86,810		—		1,276,929

Total mortgage-related securities	$	3,429,807	$	3,429,807	$	255,859	$	—	$	3,685,666

Other Securities:
GSE debentures	$	179,366	$	179,366	$	14,326	$	—	$	193,692
Municipal bonds		73,792		73,792		2,984		—		76,776
Corporate bonds		73,983		73,983		10,706		—		84,689
Capital trust notes		74,269		65,613		3,320		16,022		52,911

Total other securities	$	401,410	$	392,754	$	31,336	$	16,022	$	408,068

Total securities held to maturity ⁽²⁾	$	3,831,217	$	3,822,561	$	287,195	$	16,022	$	4,093,734

(1)	Collateralized mortgage obligations.

(2)	Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI recorded in Accumulated Other Comprehensive Loss (“AOCL”). At June 30, 2016, the non-credit portion of OTTI recorded in AOCL was $8.7 million, pre-tax.


	December 31, 2015
(in thousands)	Amortized Cost		Carrying Amount		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,269,828	$	2,269,828	$	76,827	$	4,722	$	2,341,933
GSE CMOs		1,325,033		1,325,033		53,236		57		1,378,212

Total mortgage-related securities	$	3,594,861	$	3,594,861	$	130,063	$	4,779	$	3,720,145

Other Securities:
GSE debentures	$	2,159,856	$	2,159,856	$	23,892	$	7,568	$	2,176,180
Municipal bonds		75,317		75,317		262		1,084		74,495
Corporate bonds		73,756		73,756		10,503		—		84,259
Capital trust notes		74,317		65,600		3,750		15,900		53,450

Total other securities	$	2,383,246	$	2,374,529	$	38,407	$	24,552	$	2,388,384

Total securities held to maturity ⁽¹⁾	$	5,978,107	$	5,969,390	$	168,470	$	29,331	$	6,108,529

(1)	Held-to-maturity securities are reported at a carrying amount equal to amortized cost less the non-credit portion of OTTI recorded in AOCL. At December 31, 2015, the non-credit portion of OTTI recorded in AOCL was $8.7 million, pre-tax.

At June 30, 2016 and December 31, 2015, respectively, the Company had $586.8 million and $664.0 million of Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost. In order to have access to the funding provided by the FHLB-NY, the Company is required to maintain an investment in FHLB-NY stock.

The following table summarizes the gross proceeds and gross realized gains from the sale of available-for-sale securities during the six months ended June 30, 2016 and 2015:


	For the Six Months Ended June 30,
(in thousands)	2016		2015
Gross proceeds	$	112,676	$	166,760
Gross realized gains		176		260

In addition, during the six months ended June 30, 2015, the Company sold held-to-maturity securities with gross proceeds of $19.7 million and gross realized gains of $543,000, all of which were securities on which the Company had collected a substantial portion (at least 85%) of the initial principal balance. No comparable sales occurred in the first six months of 2016.

In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2016. For credit-impaired debt securities, OTTI recognized in earnings after that date is presented as an addition in two components, based upon whether the current period is the first time a debt security was credit-impaired (initial credit impairment) or is not the first time a debt security was credit-impaired (subsequent credit impairment).


(in thousands)	For the Six Months Ended June 30, 2016
Beginning credit loss amount as of January 1, 2016	$	198,766
Add: Initial other-than-temporary credit losses		—
Subsequent other-than-temporary credit losses		—
Amount previously recognized in AOCL		—
Less: Realized losses for securities sold		—
Securities intended or required to be sold		—
Increase in expected cash flows on debt securities		—

Ending credit loss amount as of June 30, 2016	$	198,766

The following table summarizes the carrying amounts and estimated fair values of held-to-maturity mortgage-backed securities and debt securities, and the amortized costs and estimated fair values of available-for-sale securities, at June 30, 2016, by contractual maturity.


	At June 30, 2016
(dollars in thousands)	Mortgage- Related Securities		Average Yield			U.S. Treasury and GSE Obligations		Average Yield			State, County, and Municipal		Average Yield ⁽¹⁾			Other Debt Securities ⁽²⁾		Average Yield			Fair Value
Held-to-Maturity Securities:
Due within one year	$	—		—	%	$	—		—	%	$	219		2.96	%	$	—		—	%	$	219
Due from one to five years		555,797		3.76			66,673		4.14			—		—			—		—			676,824
Due from five to ten years		2,482,830		3.11			112,693		3.45			—		—			64,313		4.75			2,867,505
Due after ten years		391,180		2.98			—		—			73,573		2.89			75,283		5.20			549,186

Total securities held to maturity	$	3,429,807		3.20	%	$	179,366		3.71	%	$	73,792		2.89	%	$	139,596		4.99	%	$	4,093,734

Available-for-Sale Securities: ⁽³⁾
Due within one year	$	—		—	%	$	—		—	%	$	149		6.39	%	$	—		—	%	$	153
Due from one to five years		—		—			—		—			580		6.56			—		—			658
Due from five to ten years		—		—			—		—			—		—			—		—			—
Due after ten years		—		—			—		—			—		—			9,451		4.48			6,793

Total securities available for sale	$	—		—	%	$	—		—	%	$	729		6.52	%	$	9,451		4.48	%	$	7,604

(1)	Not presented on a tax-equivalent basis.

(2)	Includes corporate bonds and capital trust notes

(3)	As equity securities have no contractual maturity, they have been excluded from this table.

The following table presents held-to-maturity and available-for-sale securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of June 30, 2016:


At June 30, 2016	Less than Twelve Months				Twelve Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Held-to-Maturity Securities:
GSE certificates	$	—	$	—	$	—	$	—	$	—	$	—
GSE CMOs		—		—		—		—		—		—
Municipal bonds		—		—		—		—		—		—
Capital trust notes		—		—		45,201		16,022		45,201		16,022

Total temporarily impaired held-to-maturity securities	$	—	$	—	$	45,201	$	16,022	$	45,201	$	16,022

Temporarily Impaired Available-for-Sale Securities:
Capital trust notes	$	—	$	—	$	6,793	$	2,658	$	6,793	$	2,658
Equity securities		15,262		31		—		—		15,262		31

Total temporarily impaired available-for-sale securities	$	15,262	$	31	$	6,793	$	2,658	$	22,055	$	2,689


At December 31, 2015	Less than Twelve Months				Twelve Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Temporarily Impaired Held-to-Maturity Securities:
GSE debentures	$	547,484	$	728	$	1,176,949	$	6,840	$	1,724,433	$	7,568
GSE certificates		299,019		4,608		3,899		114		302,918		4,722
GSE CMOs		9,943		57		—		—		9,943		57
Municipal bonds		42,083		1,084		—		—		42,083		1,084
Capital trust notes		24,601		399		20,710		15,501		45,311		15,900

Total temporarily impaired held-to-maturity securities	$	923,130	$	6,876	$	1,201,558	$	22,455	$	2,124,688	$	29,331

Temporarily Impaired Available-for-Sale Securities:
GSE certificates	$	51,959	$	1	$	—	$	—	$	51,959	$	1
Capital trust notes		1,968		32		4,997		2,448		6,965		2,480
Equity securities		51,775		323		—		—		51,775		323

Total temporarily impaired available-for-sale securities	$	105,702	$	356	$	4,997	$	2,448	$	110,699	$	2,804

An OTTI loss on impaired securities must be fully recognized in earnings if an investor has the intent to sell the debt security, or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event that a credit loss occurs, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts of impairment relating to factors other than credit losses are recorded in AOCL.

At June 30, 2016, the Company had unrealized losses on certain capital trust notes, and equity securities.

The Company reviews quarterly financial information related to its investments in capital trust notes, as well as other information that is released by each of the issuers of such notes, to determine their continued creditworthiness. The Company continues to monitor these investments and currently estimates that the present value of expected cash flows is not less than the amortized cost of the securities. It is possible that these securities will perform worse than is currently expected, which could lead to adverse changes in cash flows from these securities and potential OTTI losses in the future. Future events that could trigger material unrecoverable declines in the fair values of the Company’s investments, and thus result in potential OTTI losses, include, but are not limited to: government intervention; deteriorating asset quality and credit metrics; significantly higher levels of default and loan loss provisions; losses in value on the underlying collateral; deteriorating credit enhancement; net operating losses; and illiquidity in the financial markets.

The Company considers a decline in the fair value of equity securities to be other than temporary if the Company does not expect to recover the entire amortized cost basis of the security. The unrealized losses on the Company’s equity securities at June 30, 2016 were primarily caused by market volatility. The Company evaluated the near-term prospects of recovering the fair value of these securities, together with the severity and duration of impairment to date, and determined that they were not other than temporarily impaired. Nonetheless, it is possible that these equity securities will perform worse than is currently expected, which could lead to adverse changes in their fair value, or the failure of the securities to fully recover in value as currently forecasted by management. Either event could cause the Company to record an OTTI loss in a future period. Events that could trigger a material decline in the fair value of these securities include, but are not limited to, deterioration in the equity markets; a decline in the quality of the loan portfolio of the issuer in which the Company has invested; and the recording of higher loan loss provisions and net operating losses by such issuer.

The investment securities designated as having a continuous loss position for twelve months or more at June 30, 2016 consisted of six capital trust notes. At December 31, 2015, the investment securities designated as having a continuous loss position for twelve months or more consisted of seven agency debt securities, five capital trust notes, and two agency mortgage-backed securities. At June 30, 2016 and December 31, 2015, the combined market value of the respective securities represented unrealized losses of $18.7 million and $24.9 million. At June 30, 2016, the fair value of securities having a continuous loss position for twelve months or more was 26.4% below the collective amortized cost of $70.7 million. At December 31, 2015, the fair value of such securities was 2.0% below the collective amortized cost of $1.2 billion.