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Securities

6 Months Ended

Jun. 30, 2024

Securities

Securities

4. Securities

The following table summarizes the Company’s portfolio of securities held-to-maturity on June 30, 2024:


								Gross			Gross
		Amortized						Unrecognized			Unrecognized
		Cost			Fair Value			Gains			Losses

		(In thousands)
Municipals		$	65,255		$	54,153		$	—		$	(11,102)
Total municipals			65,255			54,153			—			(11,102)

FNMA			7,846			6,917			—			(929)
Total mortgage-backed securities			7,846			6,917			—			(929)
Total before allowance for credit losses			73,101		$	61,070		$	—		$	(12,031)

Allowance for credit losses			(1,089)
Total		$	72,012

The following table summarizes the Company’s portfolio of securities held-to-maturity on December 31, 2023:


								Gross			Gross
		Amortized						Unrecognized			Unrecognized
		Cost			Fair Value			Gains			Losses

		(In thousands)
Municipals		$	66,155		$	58,697		$	—		$	(7,458)
Total municipals			66,155			58,697			—			(7,458)

FNMA			7,855			7,058			—			(797)
Total mortgage-backed securities			7,855			7,058			—			(797)
Total before allowance for credit losses			74,010		$	65,755		$	—		$	(8,255)

Allowance for credit losses			(1,087)
Total		$	72,923

The following table summarizes the Company’s portfolio of securities available for sale on June 30, 2024:


								Gross			Gross
		Amortized						Unrealized			Unrealized
		Cost			Fair Value			Gains			Losses

		(In thousands)
U.S. government agencies		$	31,073		$	30,678		$	122		$	(517)
Corporate			177,234			158,759			24			(18,499)
Mutual funds			11,655			11,655			—			—
Collateralized loan obligations			475,134			476,568			1,883			(449)
Other			1,457			1,457			—			—
Total other securities			696,553			679,117			2,029			(19,465)
REMIC and CMO			678,425			649,262			280			(29,443)
GNMA			26,250			24,248			1			(2,003)
FNMA			148,928			125,740			4			(23,192)
FHLMC			86,203			70,244			—			(15,959)
Total mortgage-backed securities			939,806			869,494			285			(70,597)
Total Securities excluding portfolio layer adjustments			1,636,359			1,548,611			2,314			(90,062)
Unallocated portfolio layer basis adjustments ⁽¹⁾			(5,195)			n/a			—			5,195
Total securities available for sale		$	1,631,164		$	1,548,611		$	2,314		$	(84,867)

(1) Represents the amount of portfolio layer method basis adjustments related to available for sale (“AFS”) securities hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual securities, however, the amounts impact the unrealized gains or losses for the individual securities being hedged. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

The following table summarizes the Company’s portfolio of securities available for sale on December 31, 2023:


								Gross			Gross
		Amortized						Unrealized			Unrealized
		Cost			Fair Value			Gains			Losses

		(In thousands)
U.S. government agencies		$	82,548		$	81,734		$	123		$	(937)
Corporate			173,184			155,449			—			(17,735)
Mutual funds			11,660			11,660			—			—
Collateralized loan obligations			269,600			270,129			1,215			(686)
Other			1,437			1,437			—			—
Total other securities			538,429			520,409			1,338			(19,358)
REMIC and CMO			160,165			133,574			—			(26,591)
GNMA			12,402			10,665			3			(1,740)
FNMA			155,995			135,074			14			(20,935)
FHLMC			89,427			75,031			—			(14,396)
Total mortgage-backed securities			417,989			354,344			17			(63,662)
Total Securities excluding portfolio layer adjustments			956,418			874,753			1,355			(83,020)
Unallocated portfolio layer basis adjustments ⁽¹⁾			(2,254)			n/a			—			2,254
Total securities available for sale		$	954,164		$	874,753		$	1,355		$	(80,766)

(1) Represents the amount of portfolio layer method basis adjustments related to AFS securities hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual securities, however, the amounts impact the unrealized gains or losses for the individual securities being hedged. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

The corporate securities held by the Company at June 30, 2024 and December 31, 2023, are issued by U.S. banking institutions. The CMOs held by the Company at June 30, 2024 and December 31, 2023, 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 June 30, 2024, 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		$	65,255		$	54,153
Total other securities			65,255			54,153
Mortgage-backed securities			7,846			6,917
Total before allowance for credit losses			73,101		$	61,070

Allowance for credit losses			(1,089)
Total		$	72,012


		Amortized
Securities available for sale:		Cost			Fair Value

		(In thousands)
Due in one year or less		$	29,927		$	29,291
Due after one year through five years			75,188			70,119
Due after five years through ten years			192,898			180,115
Due after ten years			386,885			387,937
Total other securities			684,898			667,462
Mutual funds			11,655			11,655
Mortgage-backed securities			939,806			869,494
Total securities available for sale ⁽¹⁾		$	1,636,359		$	1,548,611

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $5.2 million related to AFS securities hedged in a closed portfolio at June 30, 2024. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

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 June 30, 2024
				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		$	54,153		$	(11,102)		$	—		$	—		$	54,153		$	(11,102)
Total other securities		3			54,153			(11,102)			—			—			54,153			(11,102)

FNMA		1			6,917			(929)			—			—			6,917			(929)
Total mortgage-backed securities		1			6,917			(929)			—			—			6,917			(929)

Total		4		$	61,070		$	(12,031)		$	—		$	—		$	61,070		$	(12,031)

Available for sale securities ⁽¹⁾
U.S. Government Agencies		5		$	24,221		$	(517)		$	—		$	—		$	24,221		$	(517)
Corporate		26			149,736			(18,499)			6,372			(43)			143,364			(18,456)
Collateralized loan obligations		18			184,599			(449)			174,602			(446)			9,997			(3)
Total other securities		49			358,556			(19,465)			180,974			(489)			177,582			(18,976)

REMIC and CMO		65			400,702			(29,443)			275,314			(1,663)			125,388			(27,780)
GNMA		8			24,069			(2,003)			17,903			(147)			6,166			(1,856)
FNMA		43			124,739			(23,192)			—			—			124,739			(23,192)
FHLMC		18			70,244			(15,959)			—			—			70,244			(15,959)
Total mortgage-backed securities		134			619,754			(70,597)			293,217			(1,810)			326,537			(68,787)
Total		183		$	978,310		$	(90,062)		$	474,191		$	(2,299)		$	504,119		$	(87,763)

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $5.2 million related to AFS securities hedged in a closed portfolio at June 30, 2024. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.


		At December 31, 2023
				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		$	58,697		$	(7,458)		$	—		$	—		$	58,697		$	(7,458)
Total other securities		3			58,697			(7,458)			—			—			58,697			(7,458)

FNMA		1			7,058			(797)			—			—			7,058			(797)
Total mortgage-backed securities		1			7,058			(797)			—			—			7,058			(797)

Total		4		$	65,755		$	(8,255)		$	—		$	—		$	65,755		$	(8,255)

Available for sale securities ⁽¹⁾
U.S. government agencies		8		$	74,517		$	(937)		$	2,517		$	(7)		$	72,000		$	(930)
Corporate		26			155,449			(17,735)			25,428			(1,318)			130,021			(16,417)
Collateralized loan obligations		17			120,609			(686)			—			—			120,609			(686)
Total other securities		51			350,575			(19,358)			27,945			(1,325)			322,630			(18,033)

REMIC and CMO		46			133,312			(26,591)			—			—			133,312			(26,591)
GNMA		7			10,466			(1,740)			3,867			(34)			6,599			(1,706)
FNMA		44			133,394			(20,935)			2,044			(1)			131,350			(20,934)
FHLMC		18			75,031			(14,396)			—			—			75,031			(14,396)
Total mortgage-backed securities		115			352,203			(63,662)			5,911			(35)			346,292			(63,627)
Total		166		$	702,778		$	(83,020)		$	33,856		$	(1,360)		$	668,922		$	(81,660)

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $2.3 million related to AFS securities hedged in a closed portfolio at December 31, 2023. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

The Company reviewed each available for sale security that had an unrealized loss at June 30, 2024 and December 31, 2023. 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. If the Company identifies any decline in the fair value due to credit loss factors and an 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 but one of these securities are rated investment grade or better, and all these securities have a long history of no credit losses. The Bank holds approximately $10 million of corporate debt from a New York based bank holding company that on February 6, 2024 was downgraded two levels to Ba2 (Moody’s non-investment grade). On March 1, 2024 the bond was downgraded four levels to B3 and then on March 15, 2024 the bond was upgraded one level to B2. At this time, we do not consider the decline in fair value to be credit related given the underlying bond has not missed any payments and financial performance has not deteriorated to a level where the institution is not well capitalized. The Bank has placed the security on the watch list and will continue to monitor this risk position closely to determine if any action steps and valuation adjustments are required in the future. It is not anticipated that this security or any other available for sale security held at June 30, 2024 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 the U.S. government, and that issuers of the 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 June 30, 2024 and December 31, 2023 as part of its quarterly Current Expected Credit Loss (“CECL”) process, resulting in an allowance for credit losses of $1.1 million at both June 30, 2024 and December 31, 2023.

It is the Company’s policy to exclude accrued interest receivable from the calculation of the allowance for credit losses on held-to-maturity and the valuation of available for sale securities. Accrued interest receivable on held-to-maturity securities totaled $0.1 million at both June 30, 2024 and December 31, 2023 and accrued interest receivable on available for sale debt securities totaled $11.3 million and $7.1 million at June 30, 2024 and December 31, 2023, respectively.

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


	For the three months ended						For the six months ended
	June 30,						June 30,
	2024			2023			2024			2023

		(In thousands)
Beginning balance	$	1,084		$	1,087		$	1,087		$	1,100
Provision (benefit)		5			(8)			2			(21)
Allowance for credit losses	$	1,089		$	1,079		$	1,089		$	1,079

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 six months ended June 30, 2024 and 2023.