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Investment Securities

12 Months Ended

Dec. 31, 2023

Investment Securities

Investment Securities

Note 3: Investment Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities available for sale and held to maturity were as follows:


		December 31, 2023
					Gross			Gross			Approximate
		Amortized			Unrealized			Unrealized			Fair
		Cost (1)			Gains			Losses			Value

		(In thousands)
Securities available for sale:
Treasury notes		$	129,261		$	45		$	338		$	128,968
Federal agencies			250,731			—			2,976			247,755
Mortgage-backed - Government Agency ("Agency") ⁽²⁾			14,465			5			3			14,467
Mortgage-backed - Non-Agency residential - fair value option			485,500			—			—			485,500
Mortgage-backed - Agency - fair value option			236,997			—			—			236,997
Total securities available for sale		$	1,116,954		$	50		$	3,317		$	1,113,687
Securities held to maturity:
Mortgage-backed - Non-Agency multi-family		$	719,662		$	—		$	415		$	719,247
Mortgage-backed - Non-Agency residential			472,539			973			418			473,094
Mortgage-backed - Agency			12,016			—			822			11,194
Total securities held to maturity		$	1,204,217		$	973		$	1,655		$	1,203,535

(1)

For fair value option securities, the amortized cost reflects the carrying value, which is also equal to the fair value.

(2)

Agency includes government sponsored agencies, such as Fannie Mae, Freddie Mac, and Ginne Mae.


		December 31, 2022
					Gross			Gross			Approximate
		Amortized			Unrealized			Unrealized			Fair
		Cost			Gains			Losses			Value

		(In thousands)
Securities available for sale:
Treasury notes		$	37,234		$	1		$	955		$	36,280
Federal agencies			284,986			—			13,096			271,890
Mortgage-backed - Agency			15,167			7			7			15,167
Total securities available for sale		$	337,387		$	8		$	14,058		$	323,337
Securities held to maturity:
Mortgage-backed - Non-Agency multi-family		$	871,772		$	12		$	—		$	871,784
Mortgage-backed - Non-Agency residential			247,306			—			124			247,182
Total securities held to maturity		$	1,119,078		$	12		$	124		$	1,118,966

At December 31, 2023 and 2022, agency mortgage-backed securities included in the tables above are primarily backed by multi-family and single-family loans.

During 2023 the Company acquired both agency and non-agency mortgage-backed available for sale securities that are being carried utilizing the fair value option. Changes in the fair value are recognized in other income as they occur. These fair value option securities are included in the table above at December 31, 2023.

Accrued interest on securities available for sale totaled $6.7 million at December 31, 2023 and $0.5 million at December 31, 2022, respectively, and is excluded from the estimate of credit losses.

Accrued interest on securities held to maturity totaled $5.8 million at December 31, 2023 and $4.3 million at December 31, 2022, respectively, and is excluded from the estimate of credit losses.

The amortized cost and fair value of securities available for sale and held to maturity at December 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.


		December 31, 2023
		Amortized			Fair
		Cost (1)			Value

Securities available for sale:		(In thousands)
Within one year		$	308,474		$	305,406
After one through five years			71,518			71,317
			379,992			376,723
Mortgage-backed - Agency			14,465			14,467
Mortgage-backed - Non-Agency residential - fair value option			485,500			485,500
Mortgage-backed - Agency - fair value option			236,997			236,997
		$	1,116,954		$	1,113,687
Securities held to maturity:
Mortgage-backed - Non-Agency multi-family		$	719,662		$	719,247
Mortgage-backed - Non-Agency residential			472,539			473,094
Mortgage-backed - Agency			12,016			11,194
		$	1,204,217		$	1,203,535

(1)

For fair value option securities, the amortized cost reflects the carrying value, which is also equal to the fair value.

During the year ended December 31, 2023, proceeds from sales of securities available for sale were $1.5 million, and the net gain was inconsequential. During the year ended December 31, 2022, one of the mortgage-backed – non-agency multi-family securities available for sale was sold for $11.4 million resulting in no gain or loss. During the year ended December 31, 2021, proceeds from sales of securities available for sale were $38.6 million, and a net gain of $191,000 was recognized, consisting of $191,000 in gains and $0 of losses.

The carrying value of securities pledged as collateral, to secure borrowings, public deposits and for other purposes, was $1.1 billion and $570.6 million at December 31, 2023 and 2022, respectively.

Certain investments in securities available for sale are reported in the consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at December 31, 2023 and 2022 was $263.4 million (28 positions) and $308.0 million (37 positions), respectively, which is approximately 24%, and 95%, respectively, of the Company’s available for sale investment portfolio.

Certain investments in securities held to maturity are reported in the consolidated financial statements at amortized cost. The amortized cost of these investments that were reported at less than their fair value at December 31, 2023 and 2022 totaled $777.7 million (8 positions) and $247.2 million (2 positions), respectively, which is approximately 65% and 22%, respectively, of the Company’s held to maturity investment portfolio.

The following tables show the Company’s gross unrealized losses and fair value of the Company’s investment securities with unrealized losses for which an ACL has not been recorded, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023 and 2022:


		December 31, 2023
								12 Months or
		Less than 12 Months						Longer						Total
					Gross						Gross						Gross
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
		Value			Losses			Value			Losses			Value			Losses

		(In thousands)
Securities available for sale:
Treasury notes		$	3,052		$	6		$	32,080		$	332		$	35,132		$	338
Federal agencies			60,541			189			167,213			2,787			227,754			2,976
Mortgage-backed - Agency			364			1			186			2			550			3
		$	63,957		$	196		$	199,479		$	3,121		$	263,436		$	3,317


		December 31, 2022
								12 Months or
		Less than 12 Months						Longer						Total
					Gross						Gross						Gross
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
		Value			Losses			Value			Losses			Value			Losses

		(In thousands)
Securities available for sale:
Treasury notes		$	29,560		$	762		$	5,798		$	193		$	35,358		$	955
Federal agencies			19,276			724			252,613			12,372			271,889			13,096
Mortgage-backed - Agency			709			7			—			—			709			7
		$	49,545		$	1,493		$	258,411		$	12,565		$	307,956		$	14,058

Allowance for Credit Losses

For available for sale securities with an unrealized loss position, the Company evaluates the securities to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit related factors. Any impairment that is not credit-related is recognized in accumulated other comprehensive income (loss), net of tax. Credit-related impairment is recognized as an ACL for available for sale securities on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Accrued interest receivable is excluded from the estimate of credit losses. Both

the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company expects, or is required, to sell an impaired available for sale security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL in this situation.

In evaluating available for sale securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors. Unrealized losses on the Company’s investment securities portfolio have not been recognized as an expense because the securities are of high credit quality, and the decline in fair values is attributable to changes in the prevailing interest rate environment since the purchase date. Fair value is expected to recover as securities reach maturity and/or the interest rate environment returns to conditions similar to when these securities were purchased. There were no credit related factors underlying unrealized losses on available for sale debt securities at December 31, 2023 and 2022.

Securities held to maturity are comprised of non-agency mortgage-backed securities secured by multi-family or single-family properties, and agency mortgage-backed securities secured by multi-family properties. The agency securities are Ginnie Mae mortgage-backed securities and backed by the full faith and credit of the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. The non-agency securities were purchased under securitization arrangements where a credit loss component was purchased by third party investors. These securities were evaluated for credit losses over and above the credit loss percentage sold under the arrangements, and the Company does not anticipate any such losses. Additional qualitative factors are evaluated, including the timeliness of principal and interest payments under the contractual terms of the securities. Accordingly, no allowance for credit losses has been recorded for the non-agency securities.