Debt Securities Available-for-Sale

12 Months Ended

Dec. 31, 2021

Investments, Debt and Equity Securities [Abstract]

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


	December 31, 2021
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
U.S. Government agency securities	$	2,344	$	—	$	(54)	$	2,290
Mortgage-backed securities:
Pass-through certificates:
Government sponsored enterprises ("GSEs")	579,035		5,233		(2,862)		581,406
Real estate mortgage investment conduits ("REMICs"):
GSE	390,755		2,398		(1,443)		391,710

	969,790		7,631		(4,305)		973,116
Other debt securities:
Municipal bonds	71		1		—		72
Corporate bonds	233,311		192		(744)		232,759

	233,382		193		(744)		232,831
Total debt securities available-for-sale	$	1,205,516	$	7,824	$	(5,103)	$	1,208,237


	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 December 31, 2021 (in thousands):


Available-for-sale	Amortized cost		Estimated fair value
Due in one year or less	$	57,299	$	57,295
Due after one year through five years	161,074		160,835
Due after five years through ten years	17,353		16,991

	$	235,726	$	235,121

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 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 December 31, 2021, and December 31, 2020, the fair value of debt securities available-for-sale that were pledged to secure borrowings and deposits was $522.1 million and $542.1 million, respectively. See Note 10 - “Borrowings” for further discussion regarding securities pledged or encumbered for borrowings.

For the year ended December 31, 2021, the Company had gross proceeds of $329.0 million on sales of securities available-for-sale with gross realized gains of $1.5 million and no gross realized losses. For the year ended December 31, 2020, the Company had gross proceeds of $23.6 million on sales of securities available-for-sale with gross realized gains of $350,000 and gross realized losses of $23,000. For the year ended December 31, 2019, the Company had gross proceeds of $79.3 million on sales of securities available-for-sale with gross realized gains of $514,000 and no gross realized losses. The Company recognized net gains of $1.7 million, $1.6 million, and $2.0 million on its trading securities portfolio during the years ended December 31, 2021 and December 31, 2020, and December 31, 2019 respectively. The Company routinely sells securities when market pricing presents, in management’s assessment, an economic benefit that outweighs holding such security, and when smaller balance securities become cost prohibitive to carry.

Gross unrealized losses on mortgage-backed securities 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 December 31, 2021 and 2020, were as follows (in thousands):


	December 31, 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	$	—	$	—	$	(54)	$	2,290	$	(54)	$	2,290
Mortgage-backed securities:
Pass-through certificates:
GSE	(2,543)		417,291		(318)		14,625		(2,861)		431,916
REMICs:
GSE	(1,350)		125,725		(94)		4,413		(1,444)		130,138

Other debt securities:

Corporate bonds	(744)		146,853		—		—		(744)		146,853
Total	$	(4,637)	$	689,869	$	(466)	$	21,328	$	(5,103)	$	711,197


	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 15 pass-through mortgage-backed securities issued or guaranteed by GSEs, 20 REMIC mortgage-backed securities issued or guaranteed by GSEs, and one U.S. Government agency security that were in a continuous unrealized loss position of twelve months or greater at December 31, 2021. There were 27 pass-through mortgage-backed securities issued or guaranteed by GSEs, 28 REMIC mortgage-backed securities issued or guaranteed by GSEs, and 21 corporate bonds that were in an unrealized loss position of less than twelve months at December 31, 2021. All securities referred to above were rated investment grade at December 31, 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 year ended December 31, 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 $2.5 million at December 31, 2021 was reported in accrued interest receivable on the consolidated balance sheet.

Equity Securities At December 31, 2021 and December 31, 2020, equity securities totaled $5.3 million and $253,000, respectively. Equity securities consist of money market mutual funds, recorded at fair value of $328,000 and $253,000, at December 31, 2021 and December 31, 2020, respectively, and in addition, an investment in a private Small Business Administration (“SBA”) Loan Fund (the "SBA Loan Fund") recorded at net asset value of $5.0 million and $0 at December 31, 2021 and December 31, 2020, respectively. As the SBA Loan Fund operates as a private fund, its shares are not publicly traded and therefore have no readily determinable market value. The SBA Loan Fund was recorded at net asset value as a practical expedient for reporting fair value.