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Securities

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Securities

4. Securities

The Company did not hold any trading securities at September 30, 2022 and December 31, 2021. Securities available for sale are recorded at fair value. Securities held-to-maturity (“HTM”) are recorded at amortized cost.

The following table summarizes the Company’s portfolio of securities held-to-maturity at September 30, 2022:


								Gross			Gross
		Amortized						Unrecognized			Unrecognized
		Cost			Fair Value			Gains			Losses

		(In thousands)
Securities held-to-maturity:
Municipals		$	67,128		$	52,727		$	—		$	14,401
Total municipals			67,128			52,727			—			14,401

FNMA			7,880			6,986			—			894
Total mortgage-backed securities			7,880			6,986			—			894

Allowance for Credit Losses			(1,096)			—			—			—
Total		$	73,912		$	59,713		$	—		$	15,295

The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2021:


								Gross			Gross
		Amortized						Unrecognized			Unrecognized
		Cost			Fair Value			Gains			Losses

		(In thousands)
Securities held-to-maturity:
Municipals		$	50,836		$	53,362		$	2,526		$	—
Total municipals			50,836			53,362			2,526			—

FNMA			7,894			8,667			773			—
Total mortgage-backed securities			7,894			8,667			773			—

Allowance for Credit Losses			(862)			—			—			—
Total		$	57,868		$	62,029		$	3,299		$	—

The following table summarizes the Company’s portfolio of securities available for sale at September 30, 2022:


								Gross			Gross
		Amortized						Unrealized			Unrealized
		Cost			Fair Value			Gains			Losses

		(In thousands)
U.S. government agencies		$	84,400		$	81,591		$	11		$	2,820
Corporate			146,428			132,499			—			13,929
Mutual funds			11,131			11,131			—			—
Collateralized loan obligations			130,371			124,780			—			5,591
Other			1,494			1,494			—			—
Total other securities			373,824			351,495			11			22,340
REMIC and CMO			181,595			155,954			—			25,641
GNMA			9,385			7,400			4			1,989
FNMA			204,305			174,122			—			30,183
FHLMC			156,524			130,890			—			25,634
Total mortgage-backed securities			551,809			468,366			4			83,447
Total securities available for sale		$	925,633		$	819,861		$	15		$	105,787

The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2021:


								Gross			Gross
		Amortized						Unrealized			Unrealized
		Cost			Fair Value			Gains			Losses

		(In thousands)
U.S. government agencies		$	5,599		$	5,590		$	—		$	9
Corporate			107,423			104,370			136			3,189
Mutual funds			12,485			12,485			—			—
Collateralized loan obligations			81,166			80,912			1			255
Other			1,695			1,695			—			—
Total other securities			208,368			205,052			137			3,453
REMIC and CMO			210,948			208,509			1,217			3,656
GNMA			10,572			10,286			30			316
FNMA			203,777			202,938			1,321			2,160
FHLMC			152,760			150,451			326			2,635
Total mortgage-backed securities			578,057			572,184			2,894			8,767
Total securities available for sale		$	786,425		$	777,236		$	3,031		$	12,220

The corporate securities held by the Company at September 30, 2022 and December 31, 2021 are issued by U.S. banking institutions. The CMOs held by the Company at September 30, 2022 and December 31, 2021 are either fully guaranteed or issued by a government sponsored enterprise.

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, 2022, 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		$	67,128		$	52,727
Total other securities			67,128			52,727
Mortgage-backed securities			7,880			6,986
			75,008			59,713

Allowance for credit losses			(1,096)			-
Total securities held-to-maturity		$	73,912		$	59,713


		Amortized
Securities available for sale:		Cost			Fair Value

		(In thousands)
Due in one year or less		$	10,016		$	9,907
Due after one year through five years			134,500			127,090
Due after five years through ten years			195,895			181,787
Due after ten years			22,282			21,580
Total other securities			362,693			340,364
Mutual funds			11,131			11,131
Mortgage-backed securities			551,809			468,366
Total securities available for sale		$	925,633		$	819,861

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, 2022
				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)
Held-to-maturity securities

Municipals		3		$	52,727		$	14,401		$	52,727		$	14,401		$	—		$	—
Total other securities		3			52,727			14,401			52,727			14,401			—			—

FNMA		1			6,986			894			6,986			894			—			—
Total mortgage-backed securities		1			6,986			894			6,986			894			—			—

Total		4		$	59,713		$	15,295		$	59,713		$	15,295		$	—		$	—

Available for sale securities
U.S. government agencies		7		$	77,678		$	2,820		$	77,678		$	2,820		$	—		$	—
Corporate		19			119,999			13,929			43,114			3,386			76,885			10,543
CLO		19			124,780			5,591			104,671			4,448			20,109			1,143
Total other securities		45			322,457			22,340			225,463			10,654			96,994			11,686

REMIC and CMO		47			155,637			25,641			61,979			5,523			93,658			20,118
GNMA		9			7,237			1,989			337			31			6,900			1,958
FNMA		51			174,122			30,183			58,057			7,479			116,065			22,704
FHLMC		26			130,891			25,634			40,649			4,754			90,242			20,880
Total mortgage-backed securities		133			467,887			83,447			161,022			17,787			306,865			65,660
Total		178		$	790,344		$	105,787		$	386,485		$	28,441		$	403,859		$	77,346


		At December 31, 2021
				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
U.S. government agencies		2		$	5,577		$	9		$	1,130		$	5		$	4,447		$	4
Corporate		13			94,234			3,189			65,453			1,970			28,781			1,219
CLO		4			31,012			255			10,000			1			21,012			254
Total other securities		19			130,823			3,453			76,583			1,976			54,240			1,477

REMIC and CMO		15			124,131			3,656			105,959			2,800			18,172			856
GNMA		4			9,924			316			1,138			16			8,786			300
FNMA		25			171,109			2,160			153,657			1,587			17,452			573
FHLMC		18			129,115			2,635			98,297			1,448			30,818			1,187
Total mortgage-backed securities		62			434,279			8,767			359,051			5,851			75,228			2,916
Total		81		$	565,102		$	12,220		$	435,634		$	7,827		$	129,468		$	4,393

The Company reviewed each available for sale security that had an unrealized loss at September 30, 2022 and December 31, 2021. 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. If the Company identifies any decline in the fair value due to credit loss factors and evaluation indicates that a credit loss exists, then the present value of cash flows that is expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. 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 tranche of the purchased collateralized loan obligations (“CLO”) and the issuer of Corporate securities are global systematically important banks. 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.

The Company reviewed each held-to-maturity security at September 30, 2022 as part of its quarterly Current Expected Credit Loss (“CECL”) process, with an allowance for credit losses of $1.1 million and $0.9 million at September 30, 2022 and December 31, 2021, respectively.

It is the Company’s policy to exclude accrued interest receivable from the calculation of the allowance for credit losses on HTM and valuation of AFS securities. Accrued interest receivable on held-to-maturity securities totaled $0.1 million each at September 30, 2022 and December 31, 2021 and accrued interest receivable on available for sale debt securities totaled $3.0 million and $1.5 million at September 30, 2022 and December 31, 2021, respectively.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity.


		Other Securities
		For the three months ended						For the nine months ended
		September 30,						September 30,
		2022			2021			2022			2021

		(In thousands)
Beginning balance		$	1,085		$	844		$	862		$	907
Provision (benefit)			11			(1)			234			(64)
Allowance for credit losses		$	1,096		$	843		$	1,096		$	843

During the three months ended September 30, 2022, the Company modified one investment security totaling $21.0 million as troubled debt restructured (“TDR”) by granting a payment forbearance until January 2023. At September 30, 2022, this security is non-accrual and non-performing.

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company did not sell any securities during the three and nine months ended September 30, 2022. The Company sold $20.0 million and $45.0 million in corporate securities during the three and nine months ended September 30, 2021, respectively.

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


		For the three months ended						For the nine months ended
		September 30,						September 30,
		2022			2021			2022			2021

Gross gains from the sale of securities		$	—		$	—		$	—		$	123
Gross losses from the sale of securities			—			(10)			—			(10)
Net gains from the sale of securities		$	—		$	(10)		$	—		$	113