Securities

3 Months Ended

Mar. 31, 2020

Investments Debt And Equity Securities [Abstract]

NOTE 3: SECURITIES

The following table provides a summary of the Company’s securities AFS portfolio as of:

		Amortized	Gross Unrealized					Estimated
(dollars in thousands)		Cost	Gains		Losses			Fair Value
March 31, 2020:
Agency mortgage-backed securities	$	855,835	$	17,589	$	(10,613	)	$	862,811
Beneficial interests in FHLMC securitization		40,433		878		(2,896	)		38,415
Corporate bonds		57,000		1,921		(135	)		58,786
Other		1,392		73		—			1,465
Total	$	954,660	$	20,461	$	(13,644	)	$	961,477

December 31, 2019:
Agency mortgage-backed securities	$	905,949	$	9,174	$	(146	)	$	914,977
Beneficial interests in FHLMC securitization		47,586		1,801		(6,681	)		42,706
Corporate bonds		54,000		1,834		—			55,834
Other		1,386		63		—			1,449
Total	$	1,008,921	$	12,872	$	(6,827	)	$	1,014,966

US Treasury securities of $0.4 million as of March 31, 2020 that are included in the table above as Other are pledged as collateral to the State of California to meet regulatory requirements related to the Bank’s trust operations. As of March 31, 2020, $74 million of agency mortgage-backed securities are pledged as collateral as support for the Bank’s obligations under loan sales and securitization agreements entered into in 2019 and 2018.

The tables below indicate, as of March 31, 2020 and December 31, 2019, the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

	Securities with Unrealized Loss at March 31, 2020
	Less than 12 months					12 months or more					Total
(dollars in thousands)	Fair Value			Unrealized Loss		Fair Value			Unrealized Loss		Fair Value		Unrealized Loss
Agency mortgage-backed securities	$	501,901	$	(10,613	)	$	—	$	—		$	501,901	$	(10,613	)
Beneficial interests in FHLMC securitization		18,667		(2,607	)		503		(289	)		19,170		(2,896	)
Corporate bonds		14,865		(135	)		—		—			14,865		(135	)
Other		—		—			—		—			—		—
Total temporarily impaired securities	$	535,433		(13,355	)	$	503	$	(289	)	$	535,936	$	(13,644	)

	Securities with Unrealized Loss at December 31, 2019
	Less than 12 months					12 months or more					Total
(dollars in thousands)	Fair Value			Unrealized Loss		Fair Value			Unrealized Loss		Fair Value		Unrealized Loss
Agency mortgage-backed securities	$	5,488	$	(2	)	$	13,880	$	(144	)	$	19,368	$	(146	)
Beneficial interests in FHLMC securitization		20,609		(2,856	)		3,220		(3,825	)		23,829		(6,681	)
Total temporarily impaired securities	$	26,097	$	(2,858	)	$	17,100	$	(3,969	)	$	43,197	$	(6,827	)

Unrealized losses in agency mortgage-backed securities, beneficial interests in FHLMC securitizations, and other securities have not been recognized into income because the issuer bonds are of high credit quality, management does not intend to sell, it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in discount rates and assumptions regarding future interest rates. The fair value is expected to recover as the bonds approach maturity. The assessment of determining if a decline in fair value resulted from a credit loss is performed at the individual security level. Among other factors considered are: 1) the extent to which the fair value is less than the amortized cost basis; 2) the financial condition and near term prospects of the issuer, including consideration of relevant financial metrics or ratios of the issuer; 3) any adverse conditions related to an industry or geographic area of an issuer; 4) any changes to the rating of the security by a

rating agency; and 5) any past due principal or interest payments from the issuer. If an assessment of the above factors indicates that a credit loss exists, the Company records an allowance for credit losses for the excess of the amortized cost basis over the present value of cash flows expected to be collected, limited to the amount that the security's fair value is less than its amortized cost basis. Subsequent changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Interest accruals and amortization and accretion of premiums and discounts are suspended when the credit loss is recognized in earnings. Any interest received after the security has been placed on nonaccrual status is recognized on a cash basis.

Allowance for credit losses – Securities AFS
(dollars in thousands)
Balance: December 31, 2019	$	—
Provision for credit losses		1,800
Impairment recorded		(1,800	)
Balance: March 31, 2020		—

Due to higher than expected prepayments on an underlying 2016 securitization, especially during the last three quarters, the value of an interest only strip security became impaired and we were required to reduce the value of the security by $1.8 million. The impairment was included as a charge in provision for credit losses on the consolidated income statement.

The scheduled maturities of securities AFS and the related weighted average yields were as follows for the periods indicated:

(dollars in thousands)	Less than 1 Year			1 Through 5 years			5 Through 10 Years			After 10 Years			Total
March 31, 2020
Amortized Cost:
Corporate bonds	$	—		$	—		$	57,000		$	—		$	57,000
Other		—			400			992			—			1,392
Total		—			400			57,992			—			58,392
Weighted average yield		—	%		2.26	%		5.35	%		—	%		5.33	%
Estimated Fair Value:
Corporate bonds	$	—		$	—		$	58,786		$	—		$	58,786
Other		—			409			1,056			—			1,465
Total	$	—		$	409		$	59,842		$	—		$	60,251

(dollars in thousands)	Less than 1 Year			1 Through 5 years			5 Through 10 Years			After 10 Years			Total
December 31, 2019
Amortized Cost:
Corporate bonds	$	—		$	—		$	54,000		$	—		$	54,000
Other		—			400			986			—			1,386
Total	$	—		$	400		$	54,986		$	—		$	55,386
Weighted average yield		—	%		2.25	%		5.29	%		—	%		5.27	%
Estimated Fair Value:
Corporate bonds	$	—		$	—		$	55,834		$	—		$	55,834
Other		—			403			1,046			—			1,449
Total	$	—		$	403		$	56,880		$	—		$	57,283

Agency mortgage-backed securities and beneficial interests in FHLMC securitizations are excluded from the above table because such securities are not due at a single maturity date. The weighted average yield of the agency mortgage-backed securities and beneficial interests as of March 31, 2020 was 2.37%.