Securities Held-To-Maturity

6 Months Ended

Jun. 30, 2023

Debt Securities, Held-to-Maturity, Amortized Cost, after Allowance for Credit Loss, Maturity [Abstract]

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. At June 30, 2023, we held APL certificates with an initial face value of $192.8 million, which were purchased at a discount for $119.0 million. These certificates are collateralized by 5-year to 10-year fixed rate first mortgage loans on multifamily properties, bear interest at an initial weighted average variable rate of 3.94% and have an estimated weighted average remaining maturity of 7.05 years. The weighted average effective interest rate was 8.85% at both June 30, 2023 and December 31, 2022, including the accretion of a portion of the discount deemed collectible. At June 30, 2023, approximately $8.2 million is estimated to mature after one year through five years and $184.6 million is estimated 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. At June 30, 2023, we held 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. 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 6.1 years. The weighted average effective interest rate was 11.31% and 12.20% at June 30, 2023 and December 31, 2022, respectively, including the accretion of a portion of the discount deemed collectible. At June 30, 2023, approximately $7.6 million is estimated to mature within one year, $14.8 million is estimated to mature after one year through five years and $16.5 million is estimated to mature after ten years.

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


	Face Value		Net Carrying Value		Unrealized Gain (Loss)		Estimated Fair Value		Allowance for Credit Losses
June 30, 2023
APL certificates	$	192,791	$	125,290	$	(29,734)	$	95,556	$	3,375
B Piece bonds	38,917		29,920		2,419		32,339		1,159
Total	$	231,708	$	155,210	$	(27,315)	$	127,895	$	4,534
December 31, 2022
APL certificates	$	192,791	$	123,475	$	(13,348)	$	110,127	$	2,783
B Piece bonds	41,464		33,072		1,372		34,444		370
Total	$	234,255	$	156,547	$	(11,976)	$	144,571	$	3,153

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, 2023
	APL Certificates		B Piece Bonds		Total
Beginning balance	$	3,330	$	1,695	$	5,025
Provision for credit loss expense/(reversal)	45		(536)		(491)
Ending balance	$	3,375	$	1,159	$	4,534

	Six Months Ended June 30, 2023
Beginning balance	$	2,783	$	370	$	3,153
Provision for credit loss expense/(reversal)	592		789		1,381
Ending balance	$	3,375	$	1,159	$	4,534

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.

We recorded interest income (including the amortization of discount) related to these investments of $3.9 million and $7.1 million during the three and six months ended June 30, 2023, respectively, and $5.1 million and $10.3 million during the three and six months ended June 30, 2022, respectively.