BERKSHIRE HILLS BANCORP INC - Quarter Report: 2014 March (Form 10-Q)

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2014

 

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                     

 

Commission File Number: 001-15781

 

 

BERKSHIRE HILLS BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code: (413) 443-5601

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes o  No x

 

The Registrant had 25,108,296 shares of common stock, par value $0.01 per share, outstanding as of May 6, 2014.

 

 

 

Table of Contents

 

BERKSHIRE HILLS BANCORP, INC.

FORM 10-Q

 

INDEX

 

			Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013		4
	Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013		5
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013		6
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2014 and 2013		7
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013		8
	Notes to Consolidated Financial Statements
	Note 1	Basis of Presentation	10
	Note 2	Acquisition	10
	Note 3	Trading Account Security	12
	Note 4	Securities Available for Sale and Held to Maturity	13
	Note 5	Loans	17
	Note 6	Loan Loss Allowance	27
	Note 7	Deposits	32
	Note 8	Borrowed Funds	32
	Note 9	Stockholders’ Equity	33
	Note 10	Earnings per Share	36
	Note 11	Stock-Based Compensation Plans	36
	Note 12	Operating Segments	37
	Note 13	Derivative Financial Instruments and Hedging Activities	37
	Note 14	Fair Value Measurements	43
	Note 15	Net Interest Income after Provision for Loan Losses	50
	Note 16	Subsequent Events	50
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		51
	Selected Financial Data		55
	Average Balances and Average Yields/Rates		56
	Non-GAAP Financial Measures		58
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		66
Item 4.	Controls and Procedures		66

 

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PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
Signatures		70

 

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PART I

 

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

 

		March 31,			December 31,
(In thousands, except share data)		2014			2013
Assets
Cash and due from banks		$	60,023		$	56,841
Short-term investments		12,650			18,698
Total cash and cash equivalents		72,673			75,539
Trading security		14,923			14,840
Securities available for sale, at fair value		1,033,637			760,048
Securities held to maturity (fair values of $44,191 and $45,764)		43,159			44,921
Federal Home Loan Bank stock and other restricted securities		53,124			50,282
Total securities		1,144,843			870,091
Loans held for sale, at fair value		7,669			15,840
Residential mortgages		1,377,771			1,384,274
Commercial real estate		1,456,976			1,417,120
Commercial and industrial loans		696,895			687,293
Consumer loans		710,985			691,836
Total loans		4,242,627			4,180,523
Less: Allowance for loan losses		(33,602		)	(33,323		)
Net loans		4,209,025			4,147,200
Premises and equipment, net		87,805			84,459
Other real estate owned		2,418			2,758
Goodwill		264,770			256,871
Other intangible assets		15,035			13,791
Cash surrender value of bank-owned life insurance policies		102,343			101,530
Deferred tax assets, net		40,202			50,711
Other assets		63,548			54,009
Total assets		$	6,010,331		$	5,672,799
Liabilities
Demand deposits		$	770,841		$	677,917
NOW deposits		434,833			353,612
Money market deposits		1,459,062			1,383,856
Savings deposits		478,107			431,496
Time deposits		1,075,740			1,001,648
Total deposits		4,218,583			3,848,529
Short-term debt		914,950			872,510
Long-term Federal Home Loan Bank advances		21,797			101,918
Subordinated borrowings		89,696			89,679
Total borrowings		1,026,443			1,064,107
Other liabilities		87,715			82,101
Total liabilities		5,332,741			4,994,737
Stockholders’ equity
Common stock ($.01 par value; 50,000,000 shares authorized and 26,525,466 shares issued and 25,105,207 shares outstanding in 2014; 26,525,466 shares issued and 25,036,169 shares outstanding in 2013)		265			265
Additional paid-in capital		585,342			587,247
Unearned compensation		(7,811		)	(5,563		)
Retained earnings		135,498			141,958
Accumulated other comprehensive loss		(631		)	(9,057		)
Treasury stock, at cost (1,420,259 shares in 2014 and 1,489,297 shares in 2013)		(35,073		)	(36,788		)
Total stockholders’ equity		677,590			678,062
Total liabilities and stockholders’ equity		$	6,010,331		$	5,672,799

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Three Months Ended
		March 31,
(In thousands, except per share data)		2014			2013
Interest and dividend income
Loans		$	42,494		$	47,081
Securities and other		7,301			3,800
Total interest and dividend income		49,795			50,881
Interest expense
Deposits		4,721			5,363
Borrowings		2,308			3,581
Total interest expense		7,029			8,944
Net interest income		42,766			41,937
Non-interest income
Loan related income		1,248			2,717
Mortgage banking income		372			2,217
Deposit related fees		5,439			4,259
Insurance commissions and fees		3,049			2,997
Wealth management fees		2,549			2,264
Total fee income		12,657			14,454
Other		524			344
Gain on sale of securities, net		34			—
Loss on termination of hedges		(8,792		)	—
Total non-interest income		4,423			14,798
Total net revenue		47,189			56,735
Provision for loan losses		3,396			2,400
Non-interest expense
Compensation and benefits		19,859			17,741
Occupancy and equipment		6,814			5,768
Technology and communications		3,778			2,991
Marketing and promotion		521			638
Professional services		1,152			1,490
FDIC premiums and assessments		1,009			828
Other real estate owned and foreclosures		523			23
Amortization of intangible assets		1,306			1,377
Acquisition, restructuring and conversion related expenses		6,301			5,064
Other		4,097			3,563
Total non-interest expense		45,360			39,483
(Loss) income before income taxes		(1,567		)	14,852
Income tax (benefit) expense		(461		)	4,387
Net (loss) income		$	(1,106	)	$	10,465
(Loss) earnings per share:
Basic		$	(0.04	)	$	0.42
Diluted		$	(0.04	)	$	0.42
Weighted average common shares outstanding:
Basic		24,698			24,948
Diluted		24,698			25,143

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

		Three Months Ended
		March 31,
(In thousands)		2014			2013
Net (loss) income		$	(1,106	)	$	10,465
Other comprehensive income, before tax:
Changes in unrealized gains on securities available-for-sale		6,021			733
Changes in unrealized gains on derivative hedges		4,533			1,443
Changes in unrealized gains on terminated swaps		3,237			236
Income taxes related to other comprehensive income:
Changes in unrealized gains on securities available-for-sale		(2,221		)	(321		)
Changes in unrealized gains on derivative hedges		(1,832		)	(575		)
Changes in unrealized gains on terminated swaps		(1,312		)	(208		)
Total other comprehensive income		8,426			1,308
Total comprehensive income		$	7,320		$	11,773

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

																Accumulated
							Additional									other
		Common stock					paid-in			Unearned			Retained			comprehensive			Treasury
(In thousands)		Shares		Amount			capital			compensation			earnings			loss			stock			Total
Balance at December 31, 2012		25,148		$	265		$	585,360		$	(3,035	)	$	122,014		$	(2,979	)	$	(34,360	)	$	667,265
Comprehensive income:
Net income		—		—			—			—			10,465			—			—			10,465
Other comprehensive income		—		—			—			—			—			1,308			—			1,308
Total comprehensive income																						11,773
Cash dividends declared ($0.18 per share)		—		—			—			—			(4,561		)	—			—			(4,561		)
Treasury stock purchased		(98	)	—			—			—			—			—			(2,434		)	(2,434		)
Forfeited shares		(4	)	—			8			90			—			—			(98		)	—
Exercise of stock options		118		—			—			—			(1,488		)	—			3,315			1,827
Restricted stock grants		146		—			(691		)	(3,485		)	—			—			4,176			—
Stock-based compensation		—		—			296			585			—			—			—			881
Net tax benefit related to stock-based compensation		—		—			479			—			—			—			—			479
Other, net		(56	)	—			—			—			—			—			(1,348		)	(1,348		)
Balance at March 31, 2013		25,254		$	265		$	585,452		$	(5,845	)	$	126,430		$	(1,671	)	$	(30,749	)	$	673,882
Balance at December 31, 2013		25,036		$	265		$	587,247		$	(5,563	)	$	141,958		$	(9,057	)	$	(36,788	)	$	678,062
Comprehensive income:
Net loss		—		—			—			—			(1,106		)	—			—			(1,106		)
Other comprehensive income		—		—			—			—			—			8,426			—			8,426
Total comprehensive income																						7,320
Cash dividends declared ($0.18 per share)		—		—			—			—			(4,561		)	—			—			(4,561		)
Treasury stock purchased		(100	)	—			—			—			—			—			(2,467		)	(2,467		)
Forfeited shares		(1	)	—			1			5			—			—			(6		)	—
Exercise of stock options		61		—			—			—			(793		)	—			1,512			719
Restricted stock grants		126		—			37			(3,144		)	—			—			3,107			—
Stock-based compensation		—		—			41			891			—			—			—			932
Net tax benefit related to stock-based compensation		—		—			(1,984		)	—			—			—			—			(1,984		)
Other, net		(17	)	—			—			—			—			—			(431		)	(431		)
Balance at March 31, 2014		25,105		$	265		$	585,342		$	(7,811	)	$	135,498		$	(631	)	$	(35,073	)	$	677,590

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Three Months Ended March 31,
(In thousands)		2014			2013
Cash flows from operating activities:
Net (loss) income		$	(1,106	)	$	10,465
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		3,396			2,400
Net amortization of securities		604			354
Change in unamortized net loan costs and premiums		64			(511		)
Premises and equipment depreciation and amortization expense		1,944			1,725
Stock-based compensation expense		932			881
Accretion of purchase accounting entries, net		(1,999		)	(4,659		)
Amortization of other intangibles		1,306			1,377
Write down of other real estate owned		125			—
Excess tax loss from stock-based payment arrangements		(89		)	(479		)
Income from cash surrender value of bank-owned life insurance policies		(813		)	(695		)
Gain on sales of securities, net		(34		)	(1		)
Net decrease in loans held for sale		8,171			13,020
Loss on disposition of assets		834			1,596
Loss (gain) on sale of real estate		208			(115		)
Loss on termination of hedges		3,237			—
Net change in other		238			(3,072		)
Net cash provided by operating activities		17,018			22,286
Cash flows from investing activities:
Net decrease in trading security		135			128
Proceeds from sales of securities available for sale		3,171			—
Proceeds from maturities, calls and prepayments of securities available for sale		25,440			37,481
Purchases of securities available for sale		(291,662		)	(129,806		)
Proceeds from maturities, calls and prepayments of securities held to maturity		1,762			882
Purchases of securities held to maturity		—			(329		)
Net change in loans		(59,851		)	100,676
Proceeds from sale of Federal Home Loan Bank stock		78			1,915
Purchase of Federal Home Loan Bank stock		(2,920		)	—
Net investment in limited partnership tax credits		(2,500		)	—
Purchase of premises and equipment, net		(3,130		)	(5,094		)
Acquisitions, net of cash paid		423,416			—
Proceeds from sale of other real estate		483			449
Net cash provided by in investing activities		94,422			6,302

 

(continued)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)

 

		Three Months Ended March 31,
(In thousands)		2014			2013
Cash flows from financing activities:
Net (decrease) increase in deposits		(70,422		)	1,049
Proceeds from Federal Home Loan Bank advances and other borrowings		900,018			90,015
Repayments of Federal Home Loan Bank advances and other borrowings		(937,682		)	(138,873		)
Purchase of treasury stock		(2,467		)	(2,434		)
Exercise of stock options		719			1,827
Excess tax (gain) loss from stock-based payment arrangements		89			479
Common stock cash dividends paid		(4,561		)	(4,564		)
Net cash used in financing activities		(114,306		)	(52,501		)
Net change in cash and cash equivalents		(2,866		)	(23,913		)
Cash and cash equivalents at beginning of year		75,539			98,244
Cash and cash equivalents at end of year		$	72,673		$	74,331
Supplemental cash flow information:
Interest paid on deposits		$	4,718		$	5,330
Interest paid on borrowed funds		3,145			3,440
Income taxes paid, net		146			638
Acquisition of non-cash assets and liabilities:
Assets acquired		18,064			—
Liabilities assumed		(441,550		)	(330		)
Other non-cash changes:
Other net comprehensive loss		5,189			—
Real estate owned acquired in settlement of loans		476			918

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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NOTE 1.               BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and contain all adjustments, consisting solely of normal, recurring adjustments, necessary for a fair presentation of results for such periods.

 

In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to U.S. GAAP have been omitted.

 

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures for Berkshire Hills Bancorp, Inc. (the “Company”) previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

Reclassifications

 

Certain items in prior financial statements have been reclassified to conform to the current presentation.

 

Out of Period Adjustments

 

For the quarter ended March 31, 2014, the Company recorded a correction of an error to adjust ($1.4) million in prior period interest income earned on loans acquired in bank acquisitions all of which relates to prior periods.  After evaluating the quantitative and qualitative aspects of these adjustments, the Company concluded that its prior period financial statements were not materially misstated.

 

Recently Adopted Accounting Principles

 

On January 1, 2014 we adopted Accounting Standards Update (“ASU”) ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” to eliminate diversity in practice. This ASU requires that companies net their unrecognized tax benefits against all same-jurisdiction net operating losses or tax credit carryforwards that would be used to settle the position with a tax authority. The adoption of this ASU did not have a material effect on our consolidated financial statements.

 

NOTE 2.               ACQUISITION

 

New York Branch Acquisition

 

On January 17, 2014, Berkshire Bank purchased twenty branch banking offices located in central and eastern New York State, from Bank of America, National Association. Berkshire Bank received $423.1 million in cash, which was net of $17.4 million cash consideration paid and acquisition costs, and assumed certain related deposit liabilities associated with these branches (the “branch acquisition”).  Consideration paid included a 2.25% premium on deposits received. The branch acquisition increased the Bank’s customer base and lending opportunities, and enhanced the Bank’s geographical market presence between Albany and Syracuse, New York.  In addition, the acquired deposits augmented the Bank’s sources of liquidity.

 

On the acquisition date, the acquired branches had assets with a carrying value of approximately $8.9 million, including loans outstanding with a carrying value of approximately $4.5 million, as well as deposits with a carrying value of approximately $440.5 million. The results from the acquired branch operations are included in the Company’s Consolidated Statement of Operations from the date of acquisition.

 

The assets and liabilities obtained and assumed in the branch acquisition were recorded at fair value based on management’s best estimate using information available at the date of acquisition.  Consideration paid, and fair values of the assets acquired and liabilities assumed are summarized in the following table:

 

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					Fair Value			As Recorded at
(in thousands)		As Acquired			Adjustments			Acquisition
Consideration paid:
Cash consideration paid to Bank of Amercia								$	17,105
Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value:
Cash and short-term investments		$	440,521		$	—		$	440,521
Loans		4,541			(533		)(a)	4,008
Premises and equipment		4,381			(710		)(b)	3,671
Core deposit intangibles		—			2,550		(c)	2,550
Other intangibles		—			(79		)(d)	(79		)
Deposits		(440,507		)	(15		)(e)	(440,522		)
Other liabilities		—			(944		)(f)	(944		)
Total identifiable net assets		$	8,936		$	269		$	9,205
Goodwill								$	7,900

 

Explanation of Certain Fair Value Adjustments

 

(a)	The adjustment represents the write down of the book value of loans to their estimated fair value based on current interest rates and expected cash flows, which includes an estimate of expected loan loss inherent in the portfolio. Loans that met the criteria and are being accounted for in accordance with ASC 310-30 had a carrying amount of $201 thousand. Non-impaired loans not accounted for under 310-30 had a carrying value of $4.3 million.
(b)	The amount represents the adjustment of the book value of buildings, and furniture and equipment, to their estimated fair value based on appraisals and other methods. The adjustments will be depreciated over the estimated economic lives of the assets.
(c)	The adjustment represents the value of the core deposit base assumed in the acquisition. The core deposit asset was recorded as an identifiable intangible asset and will be amortized over the estimated useful life of the deposit base.
(d)	Represents an intangible liability related to assumed leases, which was recorded as an identifiable intangible and will be amortized over the remaining life of the leases.
(e)	The adjustment is necessary because the weighted average interest rate of deposits exceeded the cost of similar funding at the time of acquisition.
(f)	Represents an establishment of a reserve on certain acquired lines of credit, which were determined to have specific credit risk at the time of acquisition.

 

Except for collateral dependent loans with deteriorated credit quality, the fair values for loans acquired were estimated using cash flow projections based on the remaining maturity and repricing terms.  Cash flows were adjusted by estimating future credit losses and the rate of prepayments.  Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.  For collateral dependent loans with deteriorated credit quality, to estimate the fair value we analyzed the value of the underlying collateral of the loans, assuming the fair values of the loans were derived from the eventual sale of the collateral.  Those values were discounted using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral.  There was no carryover of the seller’s allowance for credit losses associated with the loans that were acquired in the branch acquisition as the loans were initially recorded at fair value.

 

Information about the acquired loan portfolio subject to ASC 310-30 as of January 17, 2014 is as follows (in thousands):

 

		ASC 310-30 Loans
Contractually required principal and interest at acquisition		$	201
Contractual cash flows not expected to be collected (nonaccretable discount)		(100		)
Expected cash flows at acquisition		101
Interest component of expected cash flows (accretable premium)		20
Fair value of acquired loans		$	121

 

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately nine years utilizing a straight-line method.  Other intangibles consist of leasehold intangible liability, which is amortized over the remaining life of three years using a straight-line method.

 

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The goodwill, which is not amortized for book purposes, was assigned to our banking segment and is not deductible for tax purposes.

 

The fair value of savings and transaction deposit accounts acquired in the branch acquisition was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.  The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities.

 

Direct acquisition and integration costs of the branch acquisition were expensed as incurred, and totaled $3.6 million during the three months ending March 31, 2014, and none during the same period of 2013.

 

The following table presents selected unaudited pro forma financial information reflecting the branch acquisition assuming it was completed as of January 1, 2013.   The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial results of the Company and acquired branches had the transaction actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period.   Pro forma basic and diluted earnings per common share were calculated using Berkshire’s actual weighted-average shares outstanding for the periods presented.  The unaudited pro forma information is based on the actual financial statements of Berkshire for the periods shown, and on the calculated results of the acquired branches for the 2013 period shown and in 2014 until the date of acquisition, at which time their operations became included in Berkshire’s financial statements.

 

The unaudited pro forma information, for the three months ended March 31, 2014 and 2013, set forth below reflects adjustments related to (a) purchase accounting fair value adjustments; (b) amortization of core deposit and other intangibles; and (c) adjustments to interest income and expense due to additional investments and borrowing reductions as a result of the branch acquisition.  Direct acquisition and integration-related costs incurred by the Company during 2014 are reversed; as those expenses are assumed to have occurred prior to 2013.  Furthermore, the unaudited pro forma information does not reflect management’s estimate of any revenue-enhancing opportunities beyond investment of cash received from deposits, or anticipated cost-savings.

 

Information in the following table is shown in thousands, except earnings per share:

 

		Pro Forma (unaudited)
		Three ended March 31,
		2014			2013
Net interest income		$	43,892		$	43,631
Non-interest income		4,632			16,053
Net income		1,487			10,229
Pro forma earnings per share:
Basic		$	0.06		$	0.41
Diluted		$	0.06		$	0.41

 

NOTE 3.               TRADING SECURITY

 

The Company holds a tax advantaged economic development bond that is accounted for at fair value. The security had an amortized cost of $13.0 million and $13.1 million, and a fair value of $14.9 million and $14.8 million, at March 31, 2014 and December 31, 2013, respectively. As discussed further in Note 14 - Derivative Financial Instruments and Hedging Activities, the Company has entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there are no other securities in the trading portfolio at March 31, 2014.

 

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NOTE 4. SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

 

The following is a summary of securities available for sale and held to maturity:

 

(In thousands)		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
March 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations		$	135,382		$	2,949		$	(1,139	)	$	137,192
Government-guaranteed residential mortgage-backed securities		83,299			704			(317		)	83,686
Government-sponsored residential mortgage-backed securities		726,195			2,217			(9,514		)	718,898
Corporate bonds		40,917			116			(912		)	40,121
Trust preferred securities		15,799			1,320			(1,361		)	15,758
Other bonds and obligations		3,244			1			(116		)	3,129
Total debt securities		1,004,836			7,307			(13,359		)	998,784
Marketable equity securities		32,073			3,136			(356		)	34,853
Total securities available for sale		1,036,909			10,443			(13,715		)	1,033,637
Securities held to maturity
Municipal bonds and obligations		3,881			—			—			3,881
Government-sponsored residential mortgage-backed securities		72			3			—			75
Tax advantaged economic development bonds		38,865			1,310			(281		)	39,894
Other bonds and obligations		341			—			—			341
Total securities held to maturity		43,159			1,313			(281		)	44,191
Total		$	1,080,068		$	11,756		$	(13,996	)	$	1,077,828
December 31, 2013
Securities available for sale
Debt securities:
Municipal bonds and obligations		$	77,852		$	1,789		$	(1,970	)	$	77,671
Government-guaranteed residential mortgage-backed securities		78,885			544			(658		)	78,771
Government-sponsored residential mortgage-backed securities		531,441			2,000			(10,783		)	522,658
Corporate bonds		40,945			157			(1,822		)	39,280
Trust preferred securities		16,927			1,249			(1,565		)	16,611
Other bonds and obligations		3,250			—			(166		)	3,084
Total debt securities		749,300			5,739			(16,964		)	738,075
Marketable equity securities		20,042			2,266			(335		)	21,973
Total securities available for sale		769,342			8,005			(17,299		)	760,048
Securities held to maturity
Municipal bonds and obligations		4,244			—			—			4,244
Government-sponsored residential mortgage-backed securities		73			2			—			75
Tax advantaged economic development bonds		40,260			1,255			(414		)	41,101
Other bonds and obligations		344			—			—			344
Total securities held to maturity		44,921			1,257			(414		)	45,764
Total		$	814,263		$	9,262		$	(17,713	)	$	805,812

 

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