Note 4. Securities

The following tables summarize the Company’s portfolio of securities available for sale and equity investments with readily determinable fair values at March 31, 2018 and December 31, 2017:


	March 31, 2018
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	1,966,476	$	20,565	$	15,864	$	1,971,177
GSE CMOs		537,621		7,425		3,459		541,587

Total mortgage-related securities	$	2,504,097	$	27,990	$	19,323	$	2,512,764

Other Securities:
U. S. Treasury obligations	$	199,678	$	—	$	248	$	199,430
GSE debentures		478,588		1,213		6,732		473,069
Corporate bonds		79,828		9,890		—		89,718
Municipal bonds		70,117		201		1,711		68,607
Capital trust notes		48,242		6,485		6,363		48,364

Total other securities	$	876,453	$	17,789	$	15,054	$	879,188

Total securities available for sale ⁽¹⁾	$	3,380,550	$	45,779	$	34,377	$	3,391,952

Equity securities:
Preferred stock	$	15,292	$	—	$	49	$	15,243
Mutual funds and common stock ⁽²⁾		16,874		402		450		16,826

Total equity securities	$	32,166	$	402	$	499	$	32,069

Total securities	$	3,412,716	$	46,181	$	34,876	$	3,424,021

(1)	The amortized cost includes the non-credit portion of OTTI recorded in AOCL. At March 31, 2018, the non-credit portion of OTTI recorded in AOCL was $8.6 million before taxes.

(2)	Primarily consists of mutual funds that are CRA-qualified investments.


	December 31, 2017
(in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Mortgage-Related Securities:
GSE certificates	$	2,023,677	$	46,364	$	1,199	$	2,068,842
GSE CMOs		536,284		14,446		826		549,904

Total mortgage-related securities	$	2,559,961	$	60,810	$	2,025	$	2,618,746

Other Securities:
U. S. Treasury obligations	$	199,960	$	—	$	62	$	199,898
GSE debentures		473,879		2,044		2,665		473,258
Corporate bonds		79,702		11,073		—		90,775
Municipal bonds		70,381		540		801		70,120
Capital trust notes		48,230		6,498		8,632		46,096
Preferred stock		15,292		142		—		15,434
Mutual funds and common stock ⁽¹⁾		16,874		487		261		17,100

Total other securities	$	904,318	$	20,784	$	12,421	$	912,681

Total securities available for sale ⁽²⁾	$	3,464,279	$	81,594	$	14,446	$	3,531,427

(1)	Primarily consists of mutual funds that are CRA-qualified investments.

(2)	The amortized cost includes the non-credit portion of OTTI recorded in AOCL. At December 31, 2017, the non-credit portion of OTTI recorded in AOCL was $8.6 million before taxes.

At March 31, 2018 and December 31, 2017, respectively, the Company had $623.0 million and $603.8 million of FHLB-NY stock, at cost. The Company maintains an investment in FHLB-NY stock partly in conjunction with its membership in the FHLB and partly related to its access to the FHLB funding it utilizes.

The following table summarizes the gross proceeds and gross realized gains from the sale of available-for-sale securities during the three months ended March 31, 2018 and 2017:


	For the Three Months Ended March 31,
(in thousands)	2018		2017
Gross proceeds		—	$	139,002
Gross realized gains		—		1,979

In the following table, the beginning balance represents the credit loss component for debt securities on which OTTI occurred prior to January 1, 2018. 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 Three Months Ended March 31, 2018
Beginning credit loss amount as of December 31, 2017		$	196,333
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 cash flows on debt securities		—

Ending credit loss amount as of March 31, 2018		$	196,333

The following table summarizes, by contractual maturity, the amortized cost of securities at March 31, 2018:


	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
(dollars in thousands)
Available-for-Sale Securities: ⁽³⁾
Due within one year	$	—		—	%	$	199,678		1.70	%	$	149		6.51	%	$	—		—	%	$	199,581
Due from one to five years		950,910		3.37			6,950		3.84			292		6.63			48,548		3.74			1,019,714
Due from five to ten years		864,803		3.35			347,888		3.16			—		—			31,280		8.37			1,257,619
Due after ten years		688,384		3.09			123,750		3.23			69,676		2.88			48,242		4.02			915,038

Total securities available for sale	$	2,504,097		3.29	%	$	678,266		2.75	%	$	70,117		2.90	%	$	128,070		4.98	%	$	3,391,952

(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 securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of March 31, 2018:


	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 Securities:
GSE certificates	$	876,096	$	14,756	$	19,848	$	1,108	$	895,944	$	15,864
GSE debentures		378,983		6,732		—		—		378,983		6,732
GSE CMOs		199,397		3,459		—		—		199,397		3,459
U. S. Treasury obligations		199,430		248		—		—		199,430		248
Municipal bonds		10,901		469		40,156		1,242		51,057		1,711
Capital trust notes		—		—		37,385		6,363		37,385		6,363
Equity securities		16,676		52		11,359		447		28,035		499

Total temporarily impaired securities	$	1,681,483	$	25,716	$	108,748	$	9,160	$	1,790,231	$	34,876

The following table presents securities having a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2017:


	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 Available-for-Sale Securities:
GSE certificates	$	232,546	$	535	$	20,440	$	664	$	252,986	$	1,199
GSE debentures		333,045		2,665		—		—		333,045		2,665
GSE CMOs		118,694		826		—		—		118,694		826
U. S. Treasury obligations		199,898		62		—		—		199,898		62
Municipal bonds		11,169		259		41,054		542		52,223		801
Capital trust notes		—		—		35,105		8,632		35,105		8,632
Equity securities		—		—		11,545		261		11,545		261

Total temporarily impaired available-for-sale securities	$	895,352	$	4,347	$	108,144	$	10,099	$	1,003,496	$	14,446

An OTTI loss on impaired debt 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 March 31, 2018, the Company had unrealized losses on certain GSE obligations, U.S. Treasury obligations, municipal bonds, capital trust notes, and equity securities. The unrealized losses on the Company’s GSE obligations, U.S. Treasury obligations, municipal bonds, and capital trust notes at March 31, 2018 were primarily caused by movements in market interest rates and spread volatility, rather than credit risk. These securities are not expected to be settled at a price that is less than the amortized cost of the Company’s investment.

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; 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 March 31, 2018 were 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 to the failure of the securities to fully recover in value as currently anticipated 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 both March 31, 2018 and December 31, 2017 consisted of six agency mortgage-related securities, five capital trust notes, two municipal bonds, and one mutual fund. At March 31, 2018, the fair value of securities having a continuous loss position for twelve months or more was 7.8% below the collective amortized cost of $117.9 million. At December 31, 2017, the fair value of such securities was 8.5% below the collective amortized cost of $118.2 million. At March 31, 2018 and December 31, 2017, the combined market value of the respective securities represented unrealized losses of $9.2 million and $10.1 million, respectively.