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Securities
9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Securities

4.     Securities

The Company did not hold any trading securities at September 30, 2020 and December 31, 2019. Securities available for sale are recorded at fair value. Securities held-to-maturity (“HTM”) are recorded at amortized cost.

Allowance for credit losses

The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical information, current conditions and a reasonable and supportable forecast. The Company’s portfolio is made up of three securities, two of which are structured similar to a commercial owner occupied loan, which is modeled for credit losses similar to commercial business loans secured by real estate. The other security is issued and guaranteed by Fannie Mae, which is a government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S. government and therefore the Company assumes a zero loss expectation. As of September 30, 2020, we have one active forbearance for held-to-maturity securities with an outstanding balance of $20.9 million. During the time this security is in forbearance, it is considered current and as such, continues to accrue interest at its original contractual terms. Accrued interest receivable on held-to-maturity securities totaled $0.1 million at September 30, 2020 and is excluded from estimates of credit losses.

The following table summarizes the Company’s portfolio of securities held-to-maturity at September 30, 2020:

Gross

Gross

Allowance

Amortized

Unrealized

Unrealized

for Credit

    

Cost

    

Fair Value

    

Gains

    

Losses

    

Losses

(In thousands)

Securities held-to-maturity:

 

  

 

  

 

  

 

  

 

  

Municipals

$

50,654

$

53,268

$

2,614

$

$

(402)

Total other securities

 

50,654

 

53,268

 

2,614

 

 

(402)

FNMA

 

7,919

 

9,198

 

1,279

 

 

Total mortgage-backed securities

 

7,919

 

9,198

 

1,279

 

 

Total

$

58,573

$

62,466

$

3,893

$

$

(402)

The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2019:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Fair Value

    

Gains

    

Losses

(In thousands)

Securities held-to-maturity:

 

  

 

  

 

  

 

  

Municipals

$

50,954

$

53,998

$

3,044

$

Total other securities

 

50,954

 

53,998

 

3,044

 

FNMA

 

7,934

 

8,114

 

180

 

Total mortgage-backed securities

 

7,934

 

8,114

 

180

 

Total

$

58,888

$

62,112

$

3,224

$

The following table summarizes the Company’s portfolio of securities available for sale at September 30, 2020:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Fair Value

    

Gains

    

Losses

(In thousands)

Securities available for sale:

Corporate

$

130,000

$

123,516

$

192

$

6,676

Municipals

 

65

 

65

 

 

Mutual funds

 

12,691

 

12,691

 

 

Collateralized loan obligations

 

100,473

 

97,300

 

 

3,173

Other

 

1,149

 

1,149

 

 

Total other securities

 

244,378

 

234,721

 

192

 

9,849

REMIC and CMO

 

206,973

 

213,941

 

7,007

 

39

GNMA

 

505

 

554

 

49

 

FNMA

 

129,140

 

132,001

 

2,883

 

22

FHLMC

 

39,266

 

39,739

 

504

 

31

Total mortgage-backed securities

 

375,884

 

386,235

 

10,443

 

92

Total securities available for sale

$

620,262

$

620,956

$

10,635

$

9,941

The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2019:

Gross

Gross

Amortized

Unrealized

Unrealized

    

Cost

    

Fair Value

    

Gains

    

Losses

(In thousands)

Securities available for sale:

Corporate

$

130,000

$

123,050

$

$

6,950

Municipals

 

12,797

 

12,916

 

119

 

Mutual funds

 

12,216

 

12,216

 

 

Collateralized loan obligations

 

100,349

 

99,137

 

 

1,212

Other

 

1,332

 

1,332

 

 

Total other securities

 

256,694

 

248,651

 

119

 

8,162

REMIC and CMO

 

348,236

 

348,989

 

2,193

 

1,440

GNMA

 

653

 

704

 

51

 

FNMA

 

104,235

 

104,882

 

1,073

 

426

FHLMC

 

68,476

 

69,274

 

871

 

73

Total mortgage-backed securities

 

521,600

 

523,849

 

4,188

 

1,939

Total securities available for sale

$

778,294

$

772,500

$

4,307

$

10,101

We did not hold any private issue CMO’s that are collateralized by commercial real estate mortgages at September 30, 2020 and December 31, 2019.

The corporate securities held by the Company at September 30, 2020 and December 31, 2019 are issued by U.S. banking institutions.

The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-maturity and available for sale at September 30, 2020, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

Amortized

Securities held-to-maturity:

    

Cost

    

Fair Value

 

(In thousands)

Due after ten years

$

50,654

$

53,268

Total other securities

50,654

53,268

Mortgage-backed securities

7,919

9,198

Total

$

58,573

 

$

62,466

Amortized

Securities available for sale:

    

Cost

    

Fair Value

(In thousands)

Due after one year through five years

$

45,000

$

43,654

Due after five years through ten years

 

110,431

 

104,599

Due after ten years

76,256

73,777

Total other securities

 

231,687

 

222,030

Mutual funds

 

12,691

 

12,691

Mortgage-backed securities

 

375,884

 

386,235

Total

$

620,262

$

620,956

The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated:

At September 30, 2020

Total

Less than 12 months

12 months or more

Unrealized

Unrealized

Unrealized

    

Count

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

    

Losses

(Dollars in thousands)

Available for sale securities

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Corporate

 

14

$

113,324

$

6,676

$

$

$

113,324

$

6,676

Collateralized loan obligations

 

13

 

97,299

 

3,173

 

7,293

 

183

 

90,006

 

2,990

Total other securities

 

27

 

210,623

 

9,849

 

7,293

 

183

 

203,330

 

9,666

REMIC and CMO

 

2

 

5,663

 

39

 

5,663

 

39

 

 

GNMA (1)

 

1

 

48

 

 

48

 

 

 

FNMA

 

1

 

8,652

 

22

 

 

 

8,652

 

22

FHLMC

 

1

 

13,449

 

31

 

13,449

 

31

 

 

Total mortgage-backed securities

 

5

 

27,812

 

92

 

19,160

 

70

 

8,652

 

22

Total securities available for sale

 

32

$

238,435

$

9,941

$

26,453

$

253

$

211,982

$

9,688

(1)At September 30, 2020, the unrealized loss was less than $1,000 and in a continuous loss position for less than 12 months.

At December 31, 2019

Total

Less than 12 months

12 months or more

Unrealized

Unrealized

Unrealized

    

Count

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

    

Losses

(Dollars in thousands)

Available for sale securities

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Corporate

 

16

$

123,050

$

6,950

$

$

$

123,050

$

6,950

Collateralized loan obligations

 

13

 

99,137

 

1,212

 

25,451

 

108

 

73,686

 

1,104

Total other securities

 

29

 

222,187

 

8,162

 

25,451

 

108

 

196,736

 

8,054

REMIC and CMO

 

23

 

120,989

 

1,440

 

102,384

 

1,117

 

18,605

 

323

GNMA

 

1

 

49

 

 

49

 

 

 

FNMA

 

8

 

67,618

 

426

 

19,073

 

138

 

48,545

 

288

FHLMC

 

1

 

30,200

 

73

 

 

 

30,200

 

73

Total mortgage-backed securities

 

33

 

218,856

 

1,939

 

121,506

 

1,255

 

97,350

 

684

Total securities available for sale

 

62

$

441,043

$

10,101

$

146,957

$

1,363

$

294,086

$

8,738

The Company reviewed each available for sale debt security that had an unrealized loss at September 30, 2020 and December 31, 2019. At September 30, 2020, the Company evaluated whether the decline in fair value of a debt security resulted from credit losses or other factors under ASC 326. The Company does not have the intent to sell these securities and it is more likely than not the Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion is based upon considering the Company’s cash and working capital requirements and contractual and regulatory obligations, none of which the Company believes would cause the sale of the securities. All of these securities are rated investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s investment.

In determining the risk of loss for available for sale securities, the Company considered that mortgage-backed securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to U.S. government, the issuer of Corporate securities are global systematically important banks, and the tranche of the purchased CLO’s. Each of these securities is performing according to its terms and, in the opinion of management, will continue to perform according to its terms. Based on this review, management believes that the unrealized losses have resulted from other factors not deemed credit-related and no allowance for credit loss was recorded.

Accrued interest receivable on available-for-sale debt securities totaled $1.4 million at September 30, 2020 and is excluded from the estimate of credit losses.

Upon adoption of ASC Topic 326, “Credit Losses” on January 1, 2020, see Note 17 related to the adoption of Topic 326, we recorded a transition adjustment of $0.3 million in the allowance for credit losses for held-to-maturity debt securities.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three months ended September 30, 2020:

Mortgage-backed securities

Other securities

(In thousands)

Beginning balance

$

$

402

Provision

Allowance for credit losses - securities

$

$

402

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the nine months ended September 30, 2020:

Mortgage-backed securities

Other securities

(In thousands)

Beginning balance

$

$

CECL adoption

340

Provision

62

Allowance for credit losses - securities

$

$

402

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company did not sell any securities during three months ended September 30, 2020 and 2019. The Company sold $130.8 million and $26.4 million in mortgage-backed securities during the nine months ended September 30, 2020 and 2019, respectively.

The following table represents the gross gains and gross losses realized from the sale of securities available for sale for the periods indicated:

For the three months ended

For the nine months ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

(In thousands)

Gross gains from the sale of securities

$

$

$

1,476

$

423

Gross losses from the sale of securities

 

 

 

(1,567)

 

(438)

Net losses from the sale of securities

$

$

$

(91)

$

(15)