INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIESAt September 30, 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 September 30, 2021 and December 31, 2020:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2021
U.S. Treasury securities	$	20,087	$	—	$	256	$	19,831


States and political subdivisions	174,239		8,072		790		181,521
GSE residential MBSs	20,552		80		114		20,518
GSE residential CMOs	69,922		921		656		70,187
Non-agency CMOs	25,929		1		273		25,657



Asset-backed	126,726		457		276		126,907
Other	397		—		—		397
Totals	$	437,852	$	9,531	$	2,365	$	445,018
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 September 30, 2021 and December 31, 2020, aggregated by major investment 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, 2021
U.S. Treasury securities	3	$	19,831	$	256	—	$	—	$	—	3	$	19,831	$	256

States and political subdivisions	11	40,666		790		—	—		—		11	40,666		790
GSE residential MBSs	5	17,354		114		—	—		—		5	17,354		114
GSE residential CMOs	7	43,267		656		—	—		—		7	43,267		656
Non-agency CMOs	1	13,257		273		—	—		—		1	13,257		273



Asset-backed	2	19,084		14		3	36,067		262		5	55,151		276
Totals	29	$	153,459	$	2,103	3	$	36,067	$	262	32	$	189,526	$	2,365
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 September 30, 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 and nine months ended September 30, 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.

U.S. Treasury Securities. The unrealized losses presented in the table above have been caused by an increase in rates from the time these securities were purchased. Management considers the full faith and credit of the U.S. government 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 September 30, 2021.

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, 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 September 30, 2021 or December 31, 2020.

Non-Agency CMOs. The unrealized losses presented in the table above were caused by a widening of spreads and/or a rise in interest rates from the time the securities were purchased. 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, 2021.

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 September 30, 2021 or December 31, 2020.

The following table summarizes amortized cost and fair value of investment securities by contractual maturity at September 30, 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	69,999		71,976
Due after ten years	124,475		129,524
CMOs and MBSs	116,403		116,362
Asset-backed	126,726		126,907
Totals	$	437,852	$	445,018

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, 2021 and 2020:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Proceeds from sale of investment securities	$	73,319	$	—	$	149,038	$	—
Gross gains	482		—		1,844		—
Gross losses	3		13		1,209		44

During the three and nine months ended September 30, 2021, net investment security gains of $479 thousand and $635 thousand were recorded, respectively, compared to a net loss of $13 thousand and $44 thousand recorded to adjust an equity security to market value for the three and nine months ended September 30, 2020, respectively. During the nine months ended September 30, 2021, 18 securities with a principal balance of $148.4 million were sold for proceeds of $149.0 million compared to none during the nine months ended September 30, 2020. There were four investment securities with a principal balance of $72.8 million sold for proceeds of $73.3 million during the three months ended September 30, 2021, compared to none during the three months ended September 30, 2020. Investment securities with a fair value of $316.0 million and $398.7 million at September 30, 2021 and December 31, 2020, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.