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Investment Securities

6 Months Ended

Jun. 30, 2024

Investment Securities

Investment Securities

Note 3 Investment Securities

The Company’s investment securities portfolio is comprised of available-for-sale and held-to-maturity investment securities. These investment securities totaled $1.3 billion at June 30, 2024 and included $0.7 billion of available-for-sale securities and $0.6 billion of held-to-maturity securities. At December 31, 2023, investment securities totaled $1.2 billion and included $0.6 billion of available-for-sale securities and $0.6 billion of held-to-maturity securities.

Available-for-sale

Available-for-sale securities are summarized as follows as of the dates indicated:


		June 30, 2024
		Amortized			Gross			Gross
		cost			unrealized gains			unrealized losses			Fair value
U.S. Treasury securities		$	74,518		$	3		$	(1,333)		$	73,188
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			230,597			131			(33,668)			197,060
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			486,723			91			(68,685)			418,129
Municipal securities			80			—			—			80
Corporate debt			2,000			—			(112)			1,888
Other securities			731			—			—			731
Total investment securities available-for-sale		$	794,649		$	225		$	(103,798)		$	691,076


		December 31, 2023
		Amortized			Gross			Gross
		cost			unrealized gains			unrealized losses			Fair value
U.S. Treasury securities		$	74,508		$	—		$	(1,464)		$	73,044
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			233,264			57			(31,512)			201,809
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			417,155			—			(65,913)			351,242
Municipal securities			80			—			(1)			79
Corporate debt			2,000			—			(157)			1,843
Other securities			812			—			—			812
Total investment securities available-for-sale		$	727,819		$	57		$	(99,047)		$	628,829

During the six months ended June 30, 2024, purchases of available-for-sale securities totaled $138.4 million. During the six months ended June 30, 2023, there were no purchases of available-for-sale securities. Maturities and paydowns of available-for-sale securities during the six months ended June 30, 2024 and 2023 totaled $72.1 million and $47.6 million, respectively. There were no sales of available-for-sale securities during the six months ended June 30, 2024 or 2023.

At June 30, 2024 and December 31, 2023, the Company’s available-for-sale investment portfolio was primarily comprised of U.S. Treasury securities and mortgage-backed securities (“MBS”). All mortgage-backed securities were backed by government sponsored enterprises (“GSE”) collateral such as Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”) and the government owned agency Government National Mortgage Association (“GNMA”).

The tables below summarize the available-for-sale securities with unrealized losses as of the dates shown, along with the length of the impairment period:


		June 30, 2024
		Less than 12 months						12 months or more						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
		value			losses			value			losses			value			losses
U.S. Treasury securities		$	—		$	—		$	48,351		$	(1,333)		$	48,351		$	(1,333)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			—			—			181,312			(33,668)			181,312			(33,668)
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			65,761			(445)			323,031			(68,240)			388,792			(68,685)
Municipal securities			—			—			80			—			80			—
Corporate debt			—			—			1,888			(112)			1,888			(112)
Total		$	65,761		$	(445)		$	554,662		$	(103,353)		$	620,423		$	(103,798)


		December 31, 2023
		Less than 12 months						12 months or more						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
		value			losses			value			losses			value			losses
U.S. Treasury securities		$	—		$	—		$	73,044		$	(1,464)		$	73,044		$	(1,464)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			9			—			199,000			(31,512)			199,009			(31,512)
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			138			(1)			351,104			(65,912)			351,242			(65,913)
Municipal securities			—			—			79			(1)			79			(1)
Corporate debt			—			—			1,843			(157)			1,843			(157)
Total		$	147		$	(1)		$	625,070		$	(99,046)		$	625,217		$	(99,047)

Management regularly monitors the investment securities portfolio in its entirety and further evaluates all of the available-for-sale securities in an unrealized loss position. The portfolio included 223 securities, which were in an unrealized loss position at June 30, 2024, compared to 230 securities at December 31, 2023. The unrealized losses in the Company's investment portfolio at June 30, 2024 were caused by changes in interest rates. The Company has no intention to sell these securities and believes it will not be required to sell the securities before the recovery of their amortized cost. Management believes that default of the available-for-sale securities is highly unlikely. FHLMC, FNMA and GNMA guaranteed mortgage-backed securities and U.S. Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk.

The tables below summarize the credit quality indicators, by fair value, of available-for-sale securities as of the dates shown:


		June 30, 2024
		AA+			Not rated			Total
U.S. Treasury securities		$	73,188		$	—		$	73,188
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			197,060			—			197,060
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			418,129			—			418,129
Municipal securities			—			80			80
Corporate debt			—			1,888			1,888
Other securities			—			731			731
Total investment securities available-for-sale		$	688,377		$	2,699		$	691,076


		December 31, 2023
		AAA			Not rated			Total
U.S. Treasury securities		$	73,044		$	—		$	73,044
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			201,809			—			201,809
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			351,242			—			351,242
Municipal securities			—			79			79
Corporate debt			—			1,843			1,843
Other securities			—			812			812
Total investment securities available-for-sale		$	626,095		$	2,734		$	628,829

Certain securities are pledged as collateral for public deposits, securities sold under agreements to repurchase and to secure borrowing capacity at the Federal Reserve Bank (“FRB”), if needed. The fair value of available-for-sale investment securities pledged as collateral totaled $284.8 million and $312.4 million at June 30, 2024 and at December 31, 2023, respectively. The Company may also pledge available-for-sale investment securities as collateral for Federal Home Loan Bank (“FHLB”) advances. No securities were pledged for this purpose at June 30, 2024 or December 31, 2023.

A summary of the available-for-sale securities by maturity is shown in the following table as of June 30, 2024. Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments and are therefore not included in the table below. Additionally, the Company holds other available-for-sale securities with an amortized cost and fair value of $0.7 million as of June 30, 2024 that have no stated contractual maturity date.


		June 30, 2024
								Weighted
		Amortized Cost			Fair Value			Average Yield
U.S. Treasury securities
Within one year		$	49,693		$	49,235		3.94%
After one but within five years			24,825			23,953		2.77%
Total U.S. Treasury securities			74,518			73,188		3.55%
Municipal securities
Within one year			80			80		3.16%
Corporate debt
After five but within ten years			2,000			1,888		5.87%
Total		$	76,598		$	75,156

As of June 30, 2024 and December 31, 2023, accrued interest receivable (“AIR”) from available-for-sale investment securities totaled $1.6 million and $1.3 million, respectively, and was included within other assets in the consolidated statements of financial condition.

Held-to-maturity

Held-to-maturity investment securities are summarized as follows as of the dates indicated:


		June 30, 2024
					Gross			Gross
		Amortized			unrealized			unrealized
		cost			gains			losses			Fair value
U.S. Treasury securities		$	49,487		$	—		$	(1,145)		$	48,342
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			279,941			31			(37,427)			242,545
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			225,258			—			(47,256)			178,002
Total investment securities held-to-maturity		$	554,686		$	31		$	(85,828)		$	468,889


		December 31, 2023
					Gross			Gross
		Amortized			unrealized			unrealized
		cost			gains			losses			Fair value
U.S. Treasury securities		$	49,338		$	—		$	(1,004)		$	48,334
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			299,337			226			(34,552)			265,011
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			236,377			2			(45,396)			190,983
Total investment securities held-to-maturity		$	585,052		$	228		$	(80,952)		$	504,328

During the six months ended June 30, 2024, there were no purchases of held-to-maturity securities. During the six months ended June 30, 2023, purchases of held-to-maturity securities totaled $2.5 million. Maturities and paydowns of held-to-maturity securities totaled $30.7 million and $34.9 million during the six months ended June 30, 2024 and 2023, respectively.

The held-to-maturity portfolio included 155 securities which were in an unrealized loss position as of June 30, 2024, compared to 123 securities at December 31, 2023. The tables below summarize the held-to-maturity securities with unrealized losses as of the dates shown, along with the length of the impairment period:


		June 30, 2024
		Less than 12 months						12 months or more						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
		value			losses			value			losses			value			losses
U.S. Treasury securities		$	—		$	—		$	48,342		$	(1,145)		$	48,342		$	(1,145)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			32,855			(579)			205,990			(36,848)			238,845			(37,427)
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			1,636			(36)			176,367			(47,220)			178,003			(47,256)
Total		$	34,491		$	(615)		$	430,699		$	(85,213)		$	465,190		$	(85,828)


		December 31, 2023
		Less than 12 months						12 months or more						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
		value			losses			value			losses			value			losses
U.S. Treasury securities		$	—		$	—		$	48,334		$	(1,004)		$	48,334		$	(1,004)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			14,689			(72)			217,467			(34,480)			232,156			(34,552)
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			2,289			(37)			187,021			(45,359)			189,310			(45,396)
Total		$	16,978		$	(109)		$	452,822		$	(80,843)		$	469,800		$	(80,952)

The Company does not measure expected credit losses on a financial asset, or group of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Management evaluated held-to-maturity securities noting they are backed by loans guaranteed by either U.S. government agencies or U.S. government sponsored entities, and management believes that default is highly unlikely given this governmental backing and long history without credit losses. Additionally, management notes that yields on which the portfolio generally trades are based upon market views of prepayment and liquidity risk and not credit risk. The Company has no intention to sell any held-to-maturity securities and believes it will not be required to sell any held-to-maturity securities before the recovery of their amortized cost.

The tables below summarize the credit quality indicators, by amortized cost, of held-to-maturity securities as of the dates shown:


		June 30, 2024			December 31, 2023
		AA+			AAA
U.S. Treasury securities		$	49,487		$	49,338
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. government agencies or sponsored enterprises			279,941			299,337
Other residential MBS issued or guaranteed by U.S. government agencies or sponsored enterprises			225,258			236,377
Total investment securities held-to-maturity		$	554,686		$	585,052

Certain securities are pledged as collateral for public deposits, securities sold under agreements to repurchase and to secure borrowing capacity at the FRB, if needed. The carrying value of held-to-maturity investment securities pledged as collateral totaled $495.6 million and $559.3 million at June 30, 2024 and December 31, 2023, respectively. The Company may also pledge held-to-maturity investment securities as collateral for FHLB advances. No held-to-maturity investment securities were pledged for this purpose at June 30, 2024 or December 31, 2023.

A summary of the held-to-maturity securities by maturity is shown in the following table as of June 30, 2024. Actual maturities of mortgage-backed securities may differ from scheduled maturities depending on the repayment characteristics and experience of the underlying financial instruments and are therefore not included in the table below.


		June 30, 2024
								Weighted
		Amortized Cost			Fair Value			Average Yield
U.S. Treasury securities
Within one year		$	24,937		$	24,534		3.18%
After one but within five years			24,550			23,808		3.10%
Total		$	49,487		$	48,342

As of June 30, 2024 and December 31, 2023, AIR from held-to-maturity investment securities totaled $0.9 million and $1.0 million, respectively, and was included within other assets in the consolidated statements of financial condition.