Investment Securities

9 Months Ended

Sep. 30, 2022

(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, 2022
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	24,535		$	—	$	3,428	$	21,107
Mortgage-backed securities:
Federal National Mortgage Association		556,883			—		83,012		473,871
Federal Home Loan Mortgage Corporation		419,428			—		74,634		344,794
Government National Mortgage Association		114,019			1		16,587		97,433
Collateralized mortgage obligations:
Federal National Mortgage Association		12,569			—		2,489		10,080
Federal Home Loan Mortgage Corporation		22,041			—		4,139		17,902
Privately issued		—			344		—		344
Total mortgage-backed securities		1,124,940			345		180,861		944,424
Total available for sale securities	$	1,149,475		$	345	$	184,289	$	965,531
Securities held to maturity:
U.S. Government agency and government sponsored enterprises	$	16,325		$	—	$	850	$	15,475
State and political subdivisions		102,419			16		8,975		93,460
Mortgage-backed securities:
Federal National Mortgage Association		8,576			—		658		7,918
Federal Home Loan Mortgage Corporation		8,009			—		1,485		6,524
Government National Mortgage Association		23,854			—		2,508		21,346
Collateralized mortgage obligations:
Federal National Mortgage Association		15,190			—		1,084		14,106
Federal Home Loan Mortgage Corporation		18,749			—		1,247		17,502
Government National Mortgage Association		4,421			—		314		4,107
Total mortgage-backed securities		78,799			—		7,296		71,503
Total held to maturity securities		197,543		$	16	$	17,121	$	180,438
Allowance for credit losses - securities		(5	)
Total held to maturity securities, net	$	197,538
December 31, 2021
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	15,793		$	195	$	97	$	15,891
Mortgage-backed securities:
Federal National Mortgage Association		576,163			6,565		5,242		577,486
Federal Home Loan Mortgage Corporation		430,010			952		6,435		424,527
Government National Mortgage Association		122,266			298		2,082		120,482
Collateralized mortgage obligations:
Federal National Mortgage Association		15,346			26		433		14,939
Federal Home Loan Mortgage Corporation		25,257			—		477		24,780
Privately issued		—			410		—		410
Total mortgage-backed securities		1,169,042			8,251		14,669		1,162,624
Total available for sale securities	$	1,184,835		$	8,446	$	14,766	$	1,178,515

(5.) INVESTMENT SECURITIES (Continued)


	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
December 31, 2021 (continued)
Securities held to maturity:
State and political subdivisions	$	111,399		$	2,412	$	300	$	113,511
Mortgage-backed securities:
Federal National Mortgage Association		9,275			411		—		9,686
Federal Home Loan Mortgage Corporation		8,706			137		144		8,699
Government National Mortgage Association		27,400			706		2		28,104
Collateralized mortgage obligations:
Federal National Mortgage Association		19,485			368		3		19,850
Federal Home Loan Mortgage Corporation		23,840			565		—		24,405
Government National Mortgage Association		5,481			84		—		5,565
Total mortgage-backed securities		94,187			2,271		149		96,309
Total held to maturity securities		205,586		$	4,683	$	449	$	209,820
Allowance for credit losses - securities		(5	)
Total held to maturity securities, net	$	205,581

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 $2.1 million as of September 30, 2022 and December 31, 2021, respectively. For held to maturity (“HTM”) debt securities, AIR totaled $1.0 million and $696 thousand as of September 30, 2022 and December 31, 2021, respectively. AIR is included in other assets on the Company’s consolidated statements of financial condition.

For the three months ended September 30, 2022 and 2021, credit loss expense (credit) for HTM investment securities was less than ($1) thousand in each period. For the nine months ended September 30, 2022 and 2021, credit loss expense (credit) for HTM investment securities was less than ($1) thousand and ($2) thousand, respectively.

Investment securities with a total fair value of $866.4 million and $637.8 million at September 30, 2022 and December 31, 2021, 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,
	2022		2021		2022		2021
Proceeds from sales	$	—	$	—	$	6,252	$	51,891
Gross realized gains		—		—		—		251
Gross realized losses		—		—		15		180

The scheduled maturities of securities available for sale and securities held to maturity at September 30, 2022 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	$	5,233	$	5,202
Due from one to five years		80,336		75,020
Due after five years through ten years		155,699		135,519
Due after ten years		908,207		749,790
Total available for sale securities	$	1,149,475	$	965,531
Debt securities held to maturity:
Due in one year or less	$	34,464	$	34,223
Due from one to five years		43,515		41,932
Due after five years through ten years		38,024		35,284
Due after ten years		81,540		68,999
Total held to maturity securities	$	197,543	$	180,438

(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, 2022
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	13,506	$	1,494	$	7,601	$	1,934	$	21,107	$	3,428
Mortgage-backed securities:
Federal National Mortgage Association		216,629		27,834		257,242		55,178		473,871		83,012
Federal Home Loan Mortgage Corporation		95,195		15,907		249,599		58,727		344,794		74,634
Government National Mortgage Association		28,654		3,876		68,779		12,711		97,433		16,587
Collateralized mortgage obligations:
Federal National Mortgage Association		1,086		100		8,994		2,389		10,080		2,489
Federal Home Loan Mortgage Corporation		7,874		1,528		10,028		2,611		17,902		4,139
Total mortgage-backed securities		349,438		49,245		594,642		131,616		944,080		180,861
Total available for sale securities		362,944		50,739		602,243		133,550		965,187		184,289
Total temporarily impaired securities	$	362,944	$	50,739	$	602,243	$	133,550	$	965,187	$	184,289
December 31, 2021
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	9,438	$	97	$	—	$	—	$	9,438	$	97
Mortgage-backed securities:
Federal National Mortgage Association		333,489		3,597		61,249		1,645		394,738		5,242
Federal Home Loan Mortgage Corporation		283,965		3,353		110,931		3,082		394,896		6,435
Government National Mortgage Association		108,448		2,082		—		—		108,448		2,082
Collateralized mortgage obligations:
Federal National Mortgage Association		13,364		433		—		—		13,364		433
Federal Home Loan Mortgage Corporation		24,780		477		—		—		24,780		477
Total mortgage-backed securities		764,046		9,942		172,180		4,727		936,226		14,669
Total available for sale securities		773,484		10,039		172,180		4,727		945,664		14,766
Total temporarily impaired securities	$	773,484	$	10,039	$	172,180	$	4,727	$	945,664	$	14,766

(5.) INVESTMENT SECURITIES (Continued)

The total number of available for sale securities positions in the investment portfolio in an unrealized loss position at September 30, 2022 was 226 compared to 116 at December 31, 2021. At September 30, 2022, the Company had positions in 101 investment securities with a fair value of $602.2 million and a total unrealized loss of $133.5 million that had been in a continuous unrealized loss position for more than 12 months. At September 30, 2022, there were a total of 125 securities positions in the Company’s investment portfolio with a fair value of $362.9 million and a total unrealized loss of $50.7 million that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2021, the Company had a position in 28 investment securities with a fair value of $172.2 million and a total unrealized loss of $4.7 million that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2021, there were a total of 88 securities positions in the Company’s investment portfolio with a fair value of $773.5 million and a total unrealized loss of $10.0 million 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, 2022 and December 31, 2021, 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, 2022, $94.7 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $6.9 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating, and $0.8 million in non-rated bonds, of which $0.6 million mature in 2022 and $0.2 million mature in 2023. Additionally, no municipal bonds were rated below investment grade. As of December 31, 2021, $105.6 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.

As of September 30, 2022 and December 31, 2021, the Company had no past due or nonaccrual held to maturity investment securities.