Securities

9 Months Ended

Sep. 30, 2023

5.	Securities

The amortized cost, estimated fair value and unrealized gains (losses) of available for sale (“AFS”) securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
As of September 30, 2023
U.S. treasury	$	133,160	$	-	$	(11,565	)	$	121,595
Federal agency		248,392		-		(44,636	)		203,756
State & municipal		96,449		-		(13,164	)		83,285
Mortgage-backed:
Government-sponsored enterprises		412,257		-		(61,231	)		351,026
U.S. government agency securities		74,812		6		(10,076	)		64,742
Collateralized mortgage obligations:
Government-sponsored enterprises		463,436		2		(63,389	)		400,049
U.S. government agency securities		164,418		-		(31,056	)		133,362
Corporate		48,432		-		(7,215	)		41,217
Total AFS securities	$	1,641,356	$	8	$	(242,332	)	$	1,399,032
As of December 31, 2022
U.S. treasury	$	132,891	$	-	$	(11,233	)	$	121,658
Federal agency		248,419		-		(42,000	)		206,419
State & municipal		97,036		5		(14,190	)		82,851
Mortgage-backed:
Government-sponsored enterprises		454,177		9		(54,675	)		399,511
U.S. government agency securities		81,844		15		(7,676	)		74,183
Collateralized mortgage obligations:
Government-sponsored enterprises		498,021		9		(59,473	)		438,557
U.S. government agency securities		171,090		-		(21,284	)		149,806
Corporate		60,404		-		(6,164	)		54,240
Total AFS securities	$	1,743,882	$	38	$	(216,695	)	$	1,527,225

There was no allowance for credit losses on AFS securities as of September 30, 2023 and December 31, 2022.

During the three months ended September 30, 2023, there were no gains or losses reclassified out of accumulated other comprehensive income (loss) (“AOCI”) and into earnings. During the nine months ended September 30, 2023, there were $4.5 million of gross realized losses reclassified out of AOCI and into earnings and the Company incurred a $5.0 million loss on the write-off of an AFS corporate debt security from a subordinated debt investment of a financial institution that failed. These losses were reclassified out of AOCI and into earnings in net securities losses in the consolidated statements of income. During the three and nine months ended September 30, 2022 there were no gains or losses reclassified out of AOCI and into earnings.

The amortized cost, estimated fair value and unrealized gains (losses) of held to maturity (“HTM”) securities are as follows:

(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
As of September 30, 2023
Federal agency	$	100,000	$	-	$	(23,003	)	$	76,997
Mortgage-backed:
Government-sponsored enterprises		233,580		-		(45,066	)		188,514
U.S. government agency securities		17,094		-		(1,328	)		15,766
Collateralized mortgage obligations:
Government-sponsored enterprises		192,243		-		(18,562	)		173,681
U.S. government agency securities		64,537		-		(13,259	)		51,278
State & municipal		307,066		-		(29,316	)		277,750
Total HTM securities	$	914,520	$	-	$	(130,534	)	$	783,986
As of December 31, 2022
Federal agency	$	100,000	$	-	$	(20,678	)	$	79,322
Mortgage-backed:
Government-sponsored enterprises		249,511		-		(36,819	)		212,692
U.S. government agency securities		18,396		4		(619	)		17,781
Collateralized mortgage obligations:
Government-sponsored enterprises		207,738		200		(14,876	)		193,062
U.S. government agency securities		66,628		-		(9,842	)		56,786
State & municipal		277,244		5		(24,245	)		253,004
Total HTM securities	$	919,517	$	209	$	(107,079	)	$	812,647

At September 30, 2023 and December 31, 2022, all of the mortgaged-backed HTM securities were comprised of U.S. government agency and government-sponsored enterprises securities. There was no allowance for credit losses on HTM securities as of September 30, 2023 and December 31, 2022 because the expectation of nonrepayment of the amortized cost was zero, except for state & municipal securities, which such expected losses from nonrepayment were immaterial.

The Company recorded no gains from calls on HTM securities for the three months ended September 30, 2023 and 2022. The Company recorded no gains from calls on HTM securities for the nine months ended September 30, 2023. Included in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $4 thousand for the nine months ended September 30, 2022.

AFS and HTM securities with amortized costs totaling $1.99 billion at September 30, 2023 and $1.73 billion at December 31, 2022 were pledged to secure public deposits and for other purposes required or permitted by law. Additionally, at September 30, 2023 and December 31, 2022, AFS and HTM securities with an amortized cost totaling $157.4 million and $149.5 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

The following tables set forth information with regard to gains and (losses) on equity securities:

	Three Months Ended September 30,
(In thousands)	2023			2022
Net (losses) recognized on equity securities	$	(183	)	$	(148	)
Less: Net (losses) recognized on equity securities sold during the period		-			-
Unrealized (losses) recognized on equity securities still held	$	(183	)	$	(148	)

	Nine Months Ended September 30,
(In thousands)	2023			2022
Net (losses) recognized on equity securities	$	(372	)	$	(918	)
Less: Net (losses) recognized on equity securities sold during the period		-			-
Unrealized (losses) recognized on equity securities still held	$	(372	)	$	(918	)

As of September 30, 2023 and December 31, 2022, the carrying value of equity securities without readily determinable fair values was $1.0 million. The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of concern as of September 30, 2023 and 2022. There were no impairments, or downward or upward adjustments recognized for equity securities without readily determinable fair values during the three and nine months ended September 30, 2023 and 2022.

The following table sets forth information with regard to contractual maturities of debt securities at September 30, 2023:

(In thousands)	Amortized Cost		Estimated Fair Value
AFS debt securities:
Within one year	$	16,971	$	16,676
From one to five years		509,520		447,316
From five to ten years		423,813		359,342
After ten years		691,052		575,698
Total AFS debt securities	$	1,641,356	$	1,399,032
HTM debt securities:
Within one year	$	88,319	$	88,240
From one to five years		100,237		95,052
From five to ten years		279,872		234,309
After ten years		446,092		366,385
Total HTM debt securities	$	914,520	$	783,986

Maturities of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives. Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Except for U.S. government securities and government-sponsored enterprises securities, there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of consolidated stockholders’ equity at September 30, 2023 and December 31, 2022.

The following table sets forth information with regard to investment securities with unrealized losses, for which an allowance for credit losses has not been recorded, segregated according to the length of time the securities had been in a continuous unrealized loss position:

	Less Than 12 Months							12 Months or Longer							Total
(In thousands)	Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions		Fair Value		Unrealized Losses			Number of Positions
As of September 30, 2023
AFS securities:
U.S. treasury	$	-	$	-			-	$	121,595	$	(11,565	)		8	$	121,595	$	(11,565	)		8
Federal agency		-		-			-		203,756		(44,636	)		16		203,756		(44,636	)		16
State & municipal		747		(21	)		1		82,538		(13,143	)		66		83,285		(13,164	)		67
Mortgage-backed		463		(7	)		25		414,686		(71,300	)		157		415,149		(71,307	)		182
Collateralized mortgage obligations		3,825		(31	)		6		528,324		(94,414	)		118		532,149		(94,445	)		124
Corporate		1,344		(101	)		1		39,873		(7,114	)		14		41,217		(7,215	)		15
Total securities with unrealized losses	$	6,379	$	(160	)		33	$	1,390,772	$	(242,172	)		379	$	1,397,151	$	(242,332	)		412

HTM securities:
Federal agency	$	-	$	-			-	$	76,997	$	(23,003	)		4	$	76,997	$	(23,003	)		4
Mortgage-backed		11,610		(975	)		1		192,576		(45,419	)		33		204,186		(46,394	)		34
Collateralized mortgage obligation		8,834		(134	)		2		216,125		(31,687	)		53		224,959		(31,821	)		55
State & municipal		24,593		(1,080	)		31		164,058		(28,236	)		193		188,651		(29,316	)		224
Total securities with unrealized losses	$	45,037	$	(2,189	)		34	$	649,756	$	(128,345	)		283	$	694,793	$	(130,534	)		317

As of December 31, 2022
AFS securities:
U.S. treasury	$	55,616	$	(3,864	)		5	$	66,042	$	(7,369	)		3	$	121,658	$	(11,233	)		8
Federal agency		-		-			-		206,419		(42,000	)		16		206,419		(42,000	)		16
State & municipal		3,679		(341	)		2		78,395		(13,849	)		64		82,074		(14,190	)		66
Mortgage-backed		204,447		(15,048	)		149		267,926		(47,303	)		32		472,373		(62,351	)		181
Collateralized mortgage obligations		211,612		(14,458	)		77		374,376		(66,299	)		49		585,988		(80,757	)		126
Corporate		34,434		(2,970	)		12		19,806		(3,194	)		6		54,240		(6,164	)		18
Total securities with unrealized losses	$	509,788	$	(36,681	)		245	$	1,012,964	$	(180,014	)		170	$	1,522,752	$	(216,695	)		415

HTM securities:
Federal agency	$	-	$	-			-	$	79,322	$	(20,678	)		4	$	79,322	$	(20,678	)		4
Mortgage-backed		91,417		(9,096	)		21		138,936		(28,342	)		13		230,353		(37,438	)		34
Collateralized mortgage obligations		191,644		(13,863	)		47		48,289		(10,855	)		8		239,933		(24,718	)		55
State & municipal		110,727		(4,930	)		149		82,949		(19,315	)		76		193,676		(24,245	)		225
Total securities with unrealized losses	$	393,788	$	(27,889	)		217	$	349,496	$	(79,190	)		101	$	743,284	$	(107,079	)		318

The Company does not believe the AFS securities that were in an unrealized loss position as of September 30, 2023 and December 31, 2022, which consisted of 412 and 415 individual securities, respectively, represented a credit loss impairment. AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. As of September 30, 2023 and December 31, 2022, the majority of the AFS securities in an unrealized loss position consisted of debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises that carry the explicit and/or implicit guarantee of the U.S. government, which are widely recognized as “risk- free” and have a long history of zero credit losses. Total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Company does not intend to sell, nor is it more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may be at maturity. The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities. AIR on AFS debt securities totaled $3.9 million at September 30, 2023 and $4.2 million at December 31, 2022 and is excluded from the estimate of credit losses and reported in the other assets financial statement line.

None of the Bank’s HTM debt securities were past due or on nonaccrual status as of September 30, 2023 and December 31, 2022. There was no accrued interest reversed against interest income for the three and nine months ended September 30, 2023 or the year ended December 31, 2022 as all securities remained on accrual status. In addition, there were no collateral-dependent HTM debt securities as of September 30, 2023 and December 31, 2022. As of September 30, 2023 and December 31, 2022, 66% and 70%, respectively, of the Company’s HTM debt securities were issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, which are widely recognized as “risk-free,” and have a long history of zero credit losses. Therefore, the Company did not record an allowance for credit losses for these securities as of September 30, 2023 and December 31, 2022. The remaining HTM debt securities at September 30, 2023 and December 31, 2022 were comprised of state and municipal obligations with bond ratings of A to AAA. Utilizing the Current Expected Credit Losses (“CECL”) approach, the Company determined that the expected credit loss on its HTM municipal bond portfolio was immaterial and therefore no allowance for credit loss was recorded as of September 30, 2023 and December 31, 2022. AIR on HTM debt securities totaled $3.8 million at September 30, 2023 and December 31, 2022 and is excluded from the estimate of credit losses and reported in the other assets financial statement line.