Securities Held-To-Maturity

9 Months Ended

Sep. 30, 2024

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 September 30, 2024, 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 6.6 years. The weighted average effective interest rate was 8.84% and 8.85% at September 30, 2024 and December 31, 2023, respectively, including the accretion of a portion of the discount deemed collectible. At September 30, 2024, $192.8 million is maturing within five years through 10 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 September 30, 2024, we held 49%, or $106.2 million initial face value, of seven B Piece bonds, which were previously 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 13.4 years. The weighted average effective interest rate was 11.59% and 11.28% at September 30, 2024 and December 31, 2023, respectively, including the accretion of a portion of the discount deemed collectible. At September 30, 2024, $37.4 million is maturing 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
September 30, 2024
APL certificates	$	192,791	$	133,272	$	(20,537)	$	112,735	$	1,831
B Piece bonds	37,399		22,755		9,510		32,265		8,733
Total	$	230,190	$	156,027	$	(11,027)	$	145,000	$	10,564
December 31, 2023
APL certificates	$	192,791	$	128,865	$	(31,331)	$	97,534	$	2,272
B Piece bonds	37,704		26,414		5,442		31,856		3,984
Total	$	230,495	$	155,279	$	(25,889)	$	129,390	$	6,256

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 September 30, 2024						Three Months Ended September 30, 2023
	APL Certificates		B Piece Bonds		Total		APL Certificates		B Piece Bonds		Total
Beginning balance	$	2,290	$	6,842	$	9,132	$	3,375	$	1,159	$	4,534
Provision for credit loss expense/(reversal)	(459)		1,891		1,432		(1,035)		2,444		1,409
Ending balance	$	1,831	$	8,733	$	10,564	$	2,340	$	3,603	$	5,943

	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
Beginning balance	$	2,272	$	3,984	$	6,256	$	2,783	$	370	$	3,153
Provision for credit loss expense/(reversal)	(441)		4,749		4,308		(443)		3,233		2,790
Ending balance	$	1,831	$	8,733	$	10,564	$	2,340	$	3,603	$	5,943

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 $3.0 million and $11.3 million during the three and nine months ended September 30, 2024, respectively, and $3.6 million and $10.7 million during the three and nine months ended September 30, 2023, respectively.