INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

At March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2021


States and political subdivisions	$	128,214	$	6,834	$	1,375	$	133,673
GSE residential MBSs	7,811		57		7		7,861
GSE residential CMOs	41,374		681		1,893		40,162
Non-agency CMOs	16,030		472		—		16,502



Asset-backed	209,273		883		1,052		209,104
Other	388		—		—		388
Totals	$	403,090	$	8,927	$	4,327	$	407,690
December 31, 2020


States and political subdivisions	$	104,704	$	9,091	$	1,125	$	112,670
GSE residential MBSs	4,197		96		—		4,293
GSE residential CMOs	56,856		2,226		1,071		58,011
Non-agency CMOs	16,505		413		—		16,918


Private label commercial CMOs	63,941		57		1,762		62,236
Asset-backed	214,425		171		2,630		211,966
Other	371		—		—		371
Totals	$	460,999	$	12,054	$	6,588	$	466,465

The following table summarizes investment securities with unrealized losses at March 31, 2021 and December 31, 2020, 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
March 31, 2021

States and political subdivisions	4	$	23,403	$	238	1	$	9,062	$	1,137	5	$	32,465	$	1,375
GSE residential MBSs	1	686		7		—	—		—		1	686		7
GSE residential CMOs	—	—		—		3	21,976		1,893		3	21,976		1,893




Asset-backed	1	13,736		25		6	78,781		1,027		7	92,517		1,052
Totals	6	$	37,825	$	270	10	$	109,819	$	4,057	16	$	147,644	$	4,327
December 31, 2020


States and political subdivisions	1	$	9,079	$	1,125	—	$	—	$	—	1	$	9,079	$	1,125

GSE residential CMOs	3	23,954		1,071		—	—		—		3	23,954		1,071



Private label commercial CMOs	1	4,314		685		10	42,403		1,077		11	46,717		1,762
Asset-backed	2	16,921		12		15	183,161		2,618		17	200,082		2,630
Totals	7	$	54,268	$	2,893	25	$	225,564	$	3,695	32	$	279,832	$	6,588

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 unaudited condensed consolidated statements of financial condition.

As of March 31, 2021, 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 months ended March 31, 2021 and 2020. During 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. Market conditions improved in the second half of 2020 and into 2021 as the uncertainty dissipated with economies re-opening and the distribution of vaccines.

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 March 31, 2021 or December 31, 2020.

GSE Residential CMOs and GSE Residential MBS. 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 March 31, 2021 or December 31, 2020.

Asset-backed. The unrealized losses presented in the table above were 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 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 March 31, 2021 or December 31, 2020.

The following table summarizes the credit ratings and collateral associated with the Company's investment portfolio, excluding equity securities, at March 31, 2021:


Sector	Portfolio Mix		Amortized Book		Fair Value		Credit Enhancement		AAA		AA		A		BBB		NR		Collateral Type
Unsecured ABS	1	%	$	5,313	$	5,382	50	%	—	%	—	%	—	%	—	%	100	%	Unsecured Consumer Debt
Student Loan ABS	3	%	$	10,610	$	10,516	26	%	—	%	—	%	—	%	—	%	100	%	Seasoned Student Loans
Federal Family Education Loan ABS	44	%	$	178,213	$	178,012	6	%	4	%	73	%	23	%	—	%	—	%	Federal Family Education Loan (1)
PACE Loan ABS	1	%	$	4,839	$	4,917	5	%	100	%	—	%	—	%	—	%	—	%	PACE Loans

Non-Agency RMBS	4	%	$	16,030	$	16,502	37	%	100	%	—	%	—	%	—	%	—	%	Reverse Mortgages (2)
Municipal - General Obligation	19	%	$	77,342	$	81,116			2	%	89	%	8	%	—	%	—	%
Municipal - Revenue	13	%	$	50,872	$	52,557			—	%	61	%	19	%	—	%	20	%
SBA ReRemic	3	%	$	10,298	$	10,277			—	%	100	%	—	%	—	%	—	%	SBA Guarantee (3)
Agency MBS	12	%	$	49,185	$	48,023			—	%	100	%	—	%	—	%	—	%	Residential Mortgages (3)
Bank CDs	—	%	$	249	$	249			—	%	—	%	—	%	—	%	100	%	FDIC Insured CD
	100	%	$	402,951	$	407,551			7	%	72	%	14	%	—	%	7	%

(1) Minimum of 97% guaranteed by U.S. government
(2) Reverse mortgages fund over time, credit enhancement is estimated based on prior experience
(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 March 31, 2021. 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	32,144		34,469
Due after ten years	96,209		99,343
CMOs and MBSs	65,215		64,525
Asset-backed	209,273		209,104
	$	403,090	$	407,690

The following table summarizes proceeds from sales of investment securities and gross gains and gross losses for the three months ended March 31, 2021 and 2020:


	Three months ended March 31,
		2021		2020
Proceeds from sale of investment securities		$	75,736	$	—
Gross gains		1,351		—
Gross losses		1,206		40

During the three months ended March 31, 2021, net investment security gains of $145 thousand were recorded from security sales, compared to a loss of $40 thousand recorded to adjust an equity security to market value for the three months ended March 31, 2020. During the three months ended March 31, 2021, 14 securities with a principal balance of $75.6 million were sold for proceeds of $75.7 million. There were no sales of investment securities during the three months ended March 31, 2020. Investment securities with a fair value of $301.6 million and $398.7 million at March 31, 2021 and December 31, 2020, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.