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Securities Held-to-Maturity

6 Months Ended

Jun. 30, 2021

Securities Held-to-Maturity

Securities Held-to-Maturity

Note 7 — Securities Held-to-Maturity

Agency Private Label Certificates (“APL certificates”). In connection with our Private Label securitizations, we retain the most subordinate class of the APL certificates in satisfaction of credit risk retention requirements. As of June 30, 2021, we retained APL certificates with an initial face value of $101.9 million, which were purchased at a discount for $61.7 million. These certificates are collateralized by 10-year fixed rate first mortgage loans on multifamily properties, bear interest at an initial weighted average variable rate of 4.51% and have an estimated weighted average remaining maturity of 8.9 years. The weighted average effective interest rate was 10.09% and 10.15% at June 30, 2021 and December 31, 2020, respectively, and the full $101.9 million is expected to mature after five years through ten years.

Agency B Piece Bonds. Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program. As part of the securitizations under the SBL program, we have the ability to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. As of June 30, 2021, we retained 49%, or $106.2 million initial face value, of seven B Piece bonds, which were purchased at a discount for $74.7 million, and sold the remaining 51% to a third-party at par. These securities are collateralized by a pool of multifamily mortgage loans, bear interest at an initial weighted average variable rate of 3.74% and have an estimated weighted average remaining maturity of 6.0 years. The weighted average effective interest rate was 11.12% and 10.85% at June 30, 2021 and December 31, 2020, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $12.1 million is estimated to mature within one year, $31.9 million is estimated to mature after one year through five years, $8.7 million is estimated to mature after five years through ten years and $16.4 million is estimated to mature after ten years.

A summary of our securities held-to-maturity is as follows (in thousands):


					Net Carrying			Unrealized			Estimated			Allowance for
		Face Value			Value			Gain/(Loss)			Fair Value			Credit Losses
June 30, 2021
APL certificates		$	101,868		$	61,600		$	6,368		$	67,968		$	1,568
B Piece bonds			69,133			53,096			3,939			57,035			547
Total		$	171,001		$	114,696		$	10,307		$	125,003		$	2,115
December 31, 2020
APL certificates		$	63,627		$	37,685		$	(2,105)		$	35,580		$	1,023
B Piece bonds			76,497			57,839			709			58,548			621
Total		$	140,124		$	95,524		$	(1,396)		$	94,128		$	1,644

A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):


		Three Months Ended June 30, 2021
		APL			B Piece
		Certificates			Bonds			Total
Beginning balance		$	991		$	606		$	1,597
Provision for credit loss expense			577			(59)			518
Ending balance		$	1,568		$	547		$	2,115


		Six Months Ended June 30, 2021
Beginning balance		$	1,023		$	621		$	1,644
Provision for credit loss expense			545			(74)			471
Ending balance		$	1,568		$	547		$	2,115

The allowance for credit losses on our held-to-maturity securities was estimated on a collective basis by major security type and was based on a reasonable and supportable forecast period and a historical loss reversion for similar securities. The issuers continue to make timely principal and interest payments and we continue to accrue interest on all our securities. As of June 30, 2021, no other-than-temporary impairment was recorded on our held-to-maturity securities.

We recorded interest income (including the amortization of discount) related to these investments of $3.1 million and $6.0 million during the three and six months ended June 30, 2021, respectively, and $1.7 million and $4.0 million during the three and six months ended June 30, 2020, respectively.