Investment Securities

9 Months Ended

Sep. 30, 2021

(5.) INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):


	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
September 30, 2021
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	6,253		$	278	$	—	$	6,531
Mortgage-backed securities:
Federal National Mortgage Association		575,861			8,847		4,973		579,735
Federal Home Loan Mortgage Corporation		390,062			1,257		6,195		385,124
Government National Mortgage Association		92,793			468		935		92,326
Collateralized mortgage obligations:
Federal National Mortgage Association		17,689			67		132		17,624
Federal Home Loan Mortgage Corporation		16,318			—		128		16,190
Privately issued		—			420		—		420
Total mortgage-backed securities		1,092,723			11,059		12,363		1,091,419
Total available for sale securities	$	1,098,976		$	11,337	$	12,363	$	1,097,950
Securities held to maturity:
State and political subdivisions	$	116,812		$	2,897	$	196	$	119,513
Mortgage-backed securities:
Federal National Mortgage Association		9,535			539		—		10,074
Federal Home Loan Mortgage Corporation		8,835			203		132		8,906
Government National Mortgage Association		29,172			1,009		—		30,181
Collateralized mortgage obligations:
Federal National Mortgage Association		21,668			644		—		22,312
Federal Home Loan Mortgage Corporation		26,125			894		—		27,019
Government National Mortgage Association		5,993			166		—		6,159
Total mortgage-backed securities		101,328			3,455		132		104,651
Total held to maturity securities		218,140		$	6,352	$	328	$	224,164
Allowance for credit losses - securities		(5	)
Total held to maturity securities, net	$	218,135
December 31, 2020
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	6,239		$	396	$	—	$	6,635
Mortgage-backed securities:
Federal National Mortgage Association		350,627			15,549		44		366,132
Federal Home Loan Mortgage Corporation		225,645			3,155		24		228,776
Government National Mortgage Association		22,107			830		—		22,937
Collateralized mortgage obligations:
Federal National Mortgage Association		3,047			97		—		3,144
Federal Home Loan Mortgage Corporation		—			—		—		—
Privately issued		—			435		—		435
Total mortgage-backed securities		601,426			20,066		68		621,424
Total available for sale securities	$	607,665		$	20,462	$	68	$	628,059

(5.) INVESTMENT SECURITIES (Continued)


	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
December 31, 2020 (continued)
Securities held to maturity:
State and political subdivisions	$	144,506		$	4,478	$	—	$	148,984
Mortgage-backed securities:
Federal National Mortgage Association		10,776			703		—		11,479
Federal Home Loan Mortgage Corporation		5,858			382		—		6,240
Government National Mortgage Association		37,084			1,578		—		38,662
Collateralized mortgage obligations:
Federal National Mortgage Association		29,988			1,075		—		31,063
Federal Home Loan Mortgage Corporation		35,897			1,581		—		37,478
Government National Mortgage Association		7,864			265		—		8,129
Total mortgage-backed securities		127,467			5,584		—		133,051
Total held to maturity securities		271,973		$	10,062	$	—	$	282,035
Allowance for credit losses - securities		(7	)
Total held to maturity securities, net	$	271,966

The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities disclosed throughout this footnote. For available for sale (“AFS”) debt securities, AIR totaled $1.9 million and $1.2 million as of September 30, 2021 and December 31, 2020. For held to maturity (“HTM”) debt securities, AIR totaled $1.0 million and $905 thousand as of September 30, 2021 and December 31, 2020, respectively. AIR is included in other assets on the Company’s consolidated statements of financial condition.

For the three months ended September 30, 2021 and 2020, credit loss expense (credit) for HTM investment securities was $(1) thousand and $0, respectively. For the nine months ended September 30, 2021 and 2020, credit loss expense (credit) for HTM investment securities was $(2) thousand and $(6) thousand, respectively.

Investment securities with a total fair value of $861.2 million and $567.4 million at September 30, 2021 and December 31, 2020, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

Sales of securities available for sale were as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Proceeds from sales	$	—	$	20,576	$	51,891	$	50,207
Gross realized gains		—		554		251		1,170
Gross realized losses		—		—		180		9

The scheduled maturities of securities available for sale and securities held to maturity at September 30, 2021 are shown below (in thousands). Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.


	Amortized		Fair
	Cost		Value
Debt securities available for sale:
Due in one year or less	$	4,863	$	4,891
Due from one to five years		62,802		65,773
Due after five years through ten years		175,663		180,702
Due after ten years		855,648		846,584
Total available for sale securities	$	1,098,976	$	1,097,950
Debt securities held to maturity:
Due in one year or less	$	36,191	$	36,543
Due from one to five years		72,707		75,317
Due after five years through ten years		20,848		21,233
Due after ten years		88,394		91,071
Total held to maturity securities	$	218,140	$	224,164

(5.) INVESTMENT SECURITIES (Continued)

Unrealized losses on investment securities for which an allowance for credit losses has not been recorded and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):


	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2021
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
Federal National Mortgage Association		328,931		4,650		9,173		323		338,104		4,973
Federal Home Loan Mortgage Corporation		335,977		5,977		7,676		218		343,653		6,195
Government National Mortgage Association		79,351		935		—		—		79,351		935
Collateralized mortgage obligations:
Federal National Mortgage Association		7,818		132		—		—		7,818		132
Federal Home Loan Mortgage Corporation		16,190		128		—		—		16,190		128
Privately issued		—		—		—		—		—		—
Total mortgage-backed securities		768,267		11,822		16,849		541		785,116		12,363
Total available for sale securities		768,267		11,822		16,849		541		785,116		12,363
Total temporarily impaired securities	$	768,267	$	11,822	$	16,849	$	541	$	785,116	$	12,363
December 31, 2020
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
Federal National Mortgage Association		18,155		44		—		—		18,155		44
Federal Home Loan Mortgage Corporation		10,932		24		—		—		10,932		24
Government National Mortgage Association		—		—		—		—		—		—
Collateralized mortgage obligations:
Federal National Mortgage Association		—		—		8		—		8		—
Federal Home Loan Mortgage Corporation		—		—		—		—		—		—
Privately issued		—		—		—		—		—		—
Total mortgage-backed securities		29,087		68		8		—		29,095		68
Total available for sale securities		29,087		68		8		—		29,095		68
Total temporarily impaired securities	$	29,087	$	68	$	8	$	—	$	29,095	$	68

(5.) INVESTMENT SECURITIES (Continued)

The total number of securities positions in the investment portfolio in an unrealized loss position at September 30, 2021 was 99 compared to eight at December 31, 2020. At September 30, 2021, the Company had positions in six investment securities with a fair value of $16.8 million and a total unrealized loss of $541 thousand dollars that has been in a continuous unrealized loss position for more than 12 months. At September 30, 2021, there were a total of 93 securities positions in the Company’s investment portfolio with a fair value of $768.3 million and a total unrealized loss of $11.8 million that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2020, the Company had a position in one investment security with a fair value of eight thousand dollars and a total unrealized loss of less than one thousand dollars that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2020, there were a total of seven securities positions in the Company’s investment portfolio with a fair value of $29.1 million and a total unrealized loss of $68 thousand that had been in a continuous unrealized loss position for less than 12 months. The unrealized loss on investment securities was predominantly caused by changes in market interest rates subsequent to purchase. The fair value of most of the investment securities in the Company’s portfolio fluctuates as market interest rates change.

Securities Available for Sale

As of September 30, 2021 and December 31, 2020, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities were impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our available for sale securities and in consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Securities Held to Maturity

The Company’s HTM investment securities include debt securities that are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. In addition, the Company’s HTM investment securities include debt securities that are issued by state and local government agencies, or municipal bonds.

The Company monitors the credit quality of our municipal bonds through the use of a credit rating agency or by ratings that are derived by an internal scoring model. The scoring methodology for the internally derived ratings is based on a series of financial ratios for the municipality being reviewed as compared to typical industry figures. This information is used to determine the financial strengths and weaknesses of the municipality, which is indicated with a numeric rating. This number is then converted into a letter rating to better match the system used by the credit rating agencies. As of September 30, 2021, $111.0 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $5.8 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating. Additionally, no municipal bonds were rated below investment grade. As of December 31, 2020, $135.7 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $8.5 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating. Additionally, one municipal bond was rated below investment grade, with a BB+ Standard & Poor’s equivalent rating. The below investment grade bond represented exposure of $279 thousand, or 0.19% of the municipal bond portfolio and had been closely monitored for repayment.

As of September 30, 2021 and December 31, 2020, the Company had no past due or nonaccrual held to maturity investment securities.