INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

At September 30, 2020 and December 31, 2019, all investment securities were classified as AFS. The following table summarizes amortized cost and fair value of investment securities, and the corresponding amounts of gross unrealized gains and losses recognized in AOCI, at September 30, 2020 and December 31, 2019:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020


States and political subdivisions	$	104,900	$	8,042	$	235	$	112,707
GSE residential MBSs	4,488		90		—		4,578
GSE residential CMOs	60,254		2,682		797		62,139
Non-agency CMOs	17,071		91		—		17,162


Private label commercial CMOs	72,372		23		3,186		69,209
Asset-backed	219,048		148		7,046		212,150
Other	343		—		—		343
Totals	$	478,476	$	11,076	$	11,264	$	478,288
December 31, 2019


States and political subdivisions	$	83,607	$	4,288	$	32	$	87,863

GSE residential CMOs	67,928		1,000		774		68,154
Non-agency CMOs	17,210		—		123		17,087


Private label commercial CMOs	86,704		156		231		86,629
Asset-backed	235,406		138		5,029		230,515
Other	637		—		—		637
Totals	$	491,492	$	5,582	$	6,189	$	490,885

The following table summarizes investment securities with unrealized losses at September 30, 2020 and December 31, 2019, aggregated by major security type and the length of time in a continuous unrealized loss position.


	Less Than 12 Months					12 Months or More					Total
	# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses
September 30, 2020

States and political subdivisions	1	$	9,975	$	235	—	$	—	$	—	1	$	9,975	$	235

GSE residential CMOs	3	25,296		797		—	—		—		3	25,296		797



Private label commercial CMOs	4	24,768		1,285		9	38,469		1,901		13	63,237		3,186
Asset-backed	6	45,289		419		13	158,129		6,627		19	203,418		7,046
Totals	14	$	105,328	$	2,736	22	$	196,598	$	8,528	36	$	301,926	$	11,264
December 31, 2019


States and political subdivisions	1	$	6,173	$	32	—	$	—	$	—	1	$	6,173	$	32

GSE residential CMOs	5	37,158		309		1	11,602		465		6	48,760		774
Non-agency CMOs	1	17,087		123		—	—		—		1	17,087		123


Private label commercial CMOs	6	26,079		67		8	39,726		164		14	65,805		231
Asset-backed	9	92,189		1,145		9	121,399		3,884		18	213,588		5,029
Totals	22	$	178,686	$	1,676	18	$	172,727	$	4,513	40	$	351,413	$	6,189

The Company determines whether unrealized losses are temporary in nature in accordance with FASB ASC 320-10, Investments - Overall, (“FASB ASC 320-10”) and FASB ASC 325-40, Investments – Beneficial Interests in Securitized Financial Assets, when applicable. The evaluation is based upon factors such as the creditworthiness of the underlying

borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer.

FASB ASC 320-10 requires the Company to assess if an OTTI exists by considering whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If either of these situations applies, the guidance requires the Company to record an OTTI charge to earnings on debt securities for the difference between the amortized cost basis of the security and the fair value of the security. If neither of these situations applies, the Company is required to assess whether it is expected to recover the entire amortized cost basis of the security. If the Company is not expected to recover the entire amortized cost basis of the security, the guidance requires the Company to bifurcate the identified OTTI into a credit loss component and a component representing loss related to other factors. A discount rate is applied which equals the effective yield of the security. The difference between the present value of the expected flows and the amortized book value is considered a credit loss, which would be recorded through earnings as an OTTI charge. When a market price is not readily available, the market value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from the open market and other sources as appropriate for the security. The difference between the market value and the present value of cash flows expected to be collected is recognized in accumulated other comprehensive loss on the consolidated statements of financial condition.

As of September 30, 2020, the Company had no cumulative OTTI. There were no OTTI charges recognized in earnings as a result of credit losses on investments in the three and nine months ended September 30, 2020 and 2019. During the nine months ended September 30, 2020, unrealized losses were substantially higher due to market uncertainty brought about by the COVID-19 pandemic. The sudden and desperate need for liquidity from many institutional pools of capital combined with the global economic implications of the COVID-19 pandemic caused significant widening of spreads.

States and Political Subdivisions. The unrealized losses presented in the table above have been caused by a widening of spreads from the time these securities were purchased. Management considers the investment rating, the state of the issuer of the security and other credit support in determining whether the security is OTTI. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2020 or December 31, 2019.

GSE Residential CMOs. The unrealized losses presented in the table above have been caused by a widening of spreads from the time these securities were purchased. The contractual terms of these securities do not permit the issuer to settle the securities at a price less than its par value basis. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2020 or December 31, 2019.

Non-agency CMOs. The unrealized losses presented in the table above have been caused by a widening of spreads from the time the securities were purchased. Management considers the investment rating and other credit support in determining whether a security is other-than-temporarily impaired. As of September 30, 2020, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend to sell nor will it be required to sell the securities before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

Private Label Commercial CMOs and Asset-backed. The unrealized losses presented in the table above have been caused by a widening of spreads from the time the securities were purchased. Management considers the investment rating and other credit support in determining whether a security is other-than-temporarily impaired. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2020 or December 31, 2019.

The following table summarizes the credit ratings and collateral associated with the Company's investment portfolio, excluding equity securities, at September 30, 2020:


Sector	Portfolio Mix		Amortized Book		Fair Value		Credit Enhancement		AAA		AA		A		BBB		NR		Collateral Type
Unsecured ABS	2	%	$	8,239	$	8,291	43	%	5	%	—	%	—	%	—	%	95	%	Unsecured Consumer Debt
Student Loan ABS	2	%	$	11,868	$	11,636	26	%	—	%	—	%	—	%	—	%	100	%	Seasoned Student Loans
Federal Family Education Loan ABS	38	%	$	181,639	$	174,916	6	%	4	%	73	%	23	%	—	%	—	%	Federal Family Education Loan (1)
PACE Loan ABS	1	%	$	5,472	$	5,551	6	%	100	%	—	%	—	%	—	%	—	%	PACE Loans
Non-Agency CMBS	15	%	$	72,372	$	69,209	55	%	87	%	—	%	3	%	10	%	—	%	Commercial Real Estate
Non-Agency RMBS	4	%	$	17,071	$	17,162	33	%	100	%	—	%	—	%	—	%	—	%	Reverse Mortgages (2)
Municipal - General Obligation	11	%	$	53,886	$	58,640			3	%	85	%	12	%	—	%	—	%
Municipal - Revenue	11	%	$	51,014	$	54,067			—	%	61	%	19	%	—	%	20	%
SBA ReRemic	2	%	$	11,830	$	11,756			—	%	100	%	—	%	—	%	—	%	SBA Guarantee (3)
Agency MBS	14	%	$	64,743	$	66,717			—	%	100	%	—	%	—	%	—	%	Residential Mortgages (3)
Bank CDs	—	%	$	249	$	249			—	%	—	%	—	%	—	%	100	%	FDIC Insured CD
	100	%	$	478,383	$	478,194			20	%	60	%	13	%	1	%	6	%

(1) Minimum of 97% guaranteed by U.S. government
(2) Reverse mortgages, expected credit enhancement is provided above
(3) 100% guaranteed by U.S. government agencies

Note : Ratings in table are the lowest of the six rating agencies (Standard & Poors, Moody's, Morningstar, DBRS, KBRA and Fitch). Standard & Poors rates U.S. government obligations at AA+

The following table summarizes amortized cost and fair value of investment securities by contractual maturity at September 30, 2020. Expected maturities may differ from contractual maturities if borrowers 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.


	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due after one year through five years	249		249
Due after five years through ten years	27,068		29,078
Due after ten years	77,926		83,723
CMOs and MBSs	154,185		153,088
Asset-backed	219,048		212,150
	$	478,476	$	478,288

The following table summarizes proceeds from sales of investment securities and gross gains and gross losses for the three and nine months ended September 30, 2020 and 2019:


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Proceeds from sale of investment securities	$	—	$	25,575	$	—	$	199,411
Gross gains	—		2,328		—		4,956
Gross losses	13		—		44		225

During the three and nine months ended September 30, 2020, a loss of $13 thousand and $44 thousand, respectively, was recorded to adjust an equity security to market value, compared to net investment security gains of $2.3 million and $4.7 million, respectively, for the three and nine months ended September 30, 2019 from security sales. There were no sales of investment securities during the three and nine months ended September 30, 2020. Investment securities with a fair value of $426.1 million and $158.7 million at September 30, 2020 and December 31, 2019, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.