Debt Securities Available-for-Sale

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

The following is a comparative summary of mortgage-backed and other debt securities available-for-sale at June 30, 2021, and December 31, 2020 (in thousands):


	June 30, 2021
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
U.S. Government agency securities	$	2,758	$	—	$	(4)	$	2,754
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises ("GSEs")	221,513		8,640		(386)		229,767
Real estate mortgage investment conduits ("REMICs"):
GSE	735,021		5,859		(502)		740,378

	956,534		14,499		(888)		970,145
Other debt securities:
Municipal bonds	77		1		—		78

Corporate bonds	123,678		815		(47)		124,446

	123,755		816		(47)		124,524
Total debt securities available-for-sale	$	1,083,047	$	15,315	$	(939)	$	1,097,423


	December 31, 2020
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
U.S. Government agency securities	$	3,168	$	—	$	(10)	$	3,158
Mortgage-backed securities:
Pass-through certificates:
GSE	270,867		10,720		(244)		281,343
REMICs:
GSE	884,414		7,027		(476)		890,965
Non-GSE	4		—		—		4
	1,155,285		17,747		(720)		1,172,312
Other debt securities:
Municipal bonds	122		1		—		123
Corporate bonds	87,319		1,099		—		88,418
Asset-backed securities	779		15		—		794
	88,220		1,115		—		89,335
Total debt securities available-for-sale	$	1,246,673	$	18,862	$	(730)	$	1,264,805

The following is a summary of the expected maturity distribution of debt securities available-for-sale, other than mortgage-backed securities, at June 30, 2021 (in thousands):


Available-for-sale	Amortized cost		Estimated fair value
Due in one year or less	$	35,282	$	35,757
Due after one year through five years	73,463		73,804
Due after five years through ten years	17,768		17,717

	$	126,513	$	127,278

Contractual maturities for mortgage-backed securities are not included above, as expected maturities on mortgage-backed securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.

Certain debt securities available-for-sale are pledged or encumbered to secure borrowings under Pledge Agreements and Repurchase Agreements and for other purposes required by law. At June 30, 2021, the fair value of debt securities available-for-sale that were pledged to secure borrowings and deposits was $557.0 million.

For the three months ended June 30, 2021, the Company had gross proceeds of $89.6 million on sales of debt securities available-for-sale, with gross realized gains of $509,000 and no gross realized losses. For the six months ended June 30, 2021, the Company had gross proceeds of $95.5 million on sales and calls of debt securities available-for-sale, with gross realized gains of $606,000 and no gross realized losses. For the three months ended June 30, 2020, the Company had gross proceeds of $12.6 million on sales of debt securities available-for-sale, with gross realized gains of $74,000 related to sales of securities and gross realized losses of $1,000 related to calls of securities. For the six months ended June 30, 2020, the Company had gross proceeds of $12.6 million on sales of debt securities available-for-sale, with gross realized gains of $74,000 related to sales of securities and gross realized losses of $14,000 related to calls of securities. The Company recognized net gains of $807,000 and $1.2 million on its trading securities portfolio during the three and six months ended June 30, 2021, respectively. During the three and six months ended June 30, 2020, the Company recognized net gains of $1.6 million and net losses of $366,000, respectively, on its trading securities portfolio.

Gross unrealized losses on mortgage-backed and other debt securities available-for-sale, and the estimated fair value of the related securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2021, and December 31, 2020, were as follows (in thousands):


	June 30, 2021
	Less than 12 months				12 months or more				Total
	Unrealized		Estimated		Unrealized		Estimated		Unrealized		Estimated
	losses		fair value		losses		fair value		losses		fair value
U.S. Government agency securities	$	(4)	$	2,754	$	—	$	—	$	(4)	$	2,754
Mortgage-backed securities:
Pass-through certificates:
GSE	(378)		31,540		(8)		383		(386)		31,923
REMICs:
GSE	(502)		124,255		—		—		(502)		124,255

Other debt securities:
Corporate bonds	(47)		14,964		—		—		(47)		14,964


Total	$	(931)	$	173,513	$	(8)	$	383	$	(939)	$	173,896


	December 31, 2020
	Less than 12 months				12 months or more				Total
	Unrealized		Estimated		Unrealized		Estimated		Unrealized		Estimated
	losses		fair value		losses		fair value		losses		fair value
U.S. Government agency securities	$	(10)	$	3,158	$	—	$	—	$	(10)	$	3,158
Mortgage-backed securities:
Pass-through certificates:
GSE	(233)		28,419		(11)		459		(244)		28,878
REMICs:
GSE	(476)		210,569		—		—		(476)		210,569




Total	$	(719)	$	242,146	$	(11)	$	459	$	(730)	$	242,605

The Company held nine pass-through mortgage-backed securities issued or guaranteed by GSEs that were in a continuous unrealized loss position of twelve months or greater at June 30, 2021. There were 17 pass-through mortgage-backed securities issued or guaranteed by GSEs, 41 REMIC mortgage-backed securities issued or guaranteed by GSEs, two corporate bonds and one U.S. Government agency security that were in an unrealized loss position of less than twelve months at June 30, 2021. All securities referred to above were rated investment grade at June 30, 2021.

Available for sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses on a quarterly basis. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level such as credit deterioration of the issuer or collateral underlying the security. In assessing the impairment, the Company compares the present value of cash flows expected to be collected with the amortized cost basis of the security. If it is determined that the decline in fair value was due to credit losses, an allowance for credit losses is recorded, limited to the amount the fair value is less than amortized cost basis. The Company did not recognize any allowance for credit losses on its available-for-sale debt securities during the three and six months ended June 30, 2021.

The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income, net of tax. The Company also assesses the intent to sell the securities (as well as the likelihood of a near-term recovery). If the Company intends to sell an available for sale debt security or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.

The Company has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Accrued interest receivable associated with debt securities available-for-sale totaling $1.9 million at June 30, 2021 is reported in accrued interest receivable on the consolidated balance sheet.

Equity SecuritiesAt June 30, 2021, and December 31, 2020, equity securities totaled $219,000 and $253,000, respectively. Equity securities consist of money market mutual funds recorded at fair value.