Investment Securities

9 Months Ended

Sep. 30, 2023

(4.) 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, 2023
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	24,535		$	—	$	3,626	$	20,909
Mortgage-backed securities:
Federal National Mortgage Association		514,062			—		88,324		425,738
Federal Home Loan Mortgage Corporation		381,764			—		81,037		300,727
Government National Mortgage Association		109,402			—		26,410		82,992
Collateralized mortgage obligations:
Federal National Mortgage Association		11,219			—		2,773		8,446
Federal Home Loan Mortgage Corporation		20,199			—		5,121		15,078
Privately issued		—			325		—		325
Total mortgage-backed securities		1,036,646			325		203,665		833,306
Total available for sale securities	$	1,061,181		$	325	$	207,291	$	854,215
Securities held to maturity:
U.S. Government agency and government sponsored enterprises	$	16,476		$	—	$	1,095	$	15,381
State and political subdivisions		72,666			20		8,374		64,312
Mortgage-backed securities:
Federal National Mortgage Association		5,942			—		809		5,133
Federal Home Loan Mortgage Corporation		7,686			—		1,695		5,991
Government National Mortgage Association		20,655			—		2,806		17,849
Collateralized mortgage obligations:
Federal National Mortgage Association		12,088			—		1,165		10,923
Federal Home Loan Mortgage Corporation		14,981			—		1,376		13,605
Government National Mortgage Association		3,714			—		368		3,346
Total mortgage-backed securities		65,066			—		8,219		56,847
Total held to maturity securities		154,208		$	20	$	17,688	$	136,540
Allowance for credit losses – securities		(4	)
Total held to maturity securities, net	$	154,204
December 31, 2022
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	24,535		$	—	$	3,420	$	21,115
Mortgage-backed securities:
Federal National Mortgage Association		545,797			—		76,193		469,604
Federal Home Loan Mortgage Corporation		410,829			—		68,608		342,221
Government National Mortgage Association		112,202			1		18,037		94,166
Collateralized mortgage obligations:
Federal National Mortgage Association		12,175			—		2,603		9,572
Federal Home Loan Mortgage Corporation		21,519			—		4,163		17,356
Privately issued		—			337		—		337
Total mortgage-backed securities		1,102,522			338		169,604		933,256
Total available for sale securities	$	1,127,057		$	338	$	173,024	$	954,371

(4.) INVESTMENT SECURITIES (Continued)


	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
December 31, 2022 (continued)
Securities held to maturity:
U.S. Government agencies and government sponsored enterprises	$	16,363		$	—	$	848	$	15,515
State and political subdivisions		97,583			24		7,172		90,435
Mortgage-backed securities:
Federal National Mortgage Association		8,332			—		582		7,750
Federal Home Loan Mortgage Corporation		7,959			—		1,396		6,563
Government National Mortgage Association		22,541			—		2,116		20,425
Collateralized mortgage obligations:
Federal National Mortgage Association		14,268			—		1,119		13,149
Federal Home Loan Mortgage Corporation		17,712			—		1,253		16,459
Government National Mortgage Association		4,222			—		330		3,892
Total mortgage-backed securities		75,034			—		6,796		68,238
Total held to maturity securities		188,980		$	24	$	14,816	$	174,188
Allowance for credit losses – securities		(5	)
Total held to maturity securities, net	$	188,975

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 $2.1 million as of September 30, 2023 and December 31, 2022, respectively. For held to maturity (“HTM”) debt securities, AIR totaled $847 thousand and $695 thousand as of September 30, 2023 and December 31, 2022, respectively. AIR is included in other assets on the Company’s consolidated statements of financial condition.

For the three months ended September 30, 2023 and 2022, provision for credit loss for HTM investment securities was less than $1 thousand in each period. For the nine months ended September 30, 2023 and 2022, provision for credit loss for HTM investment securities was $1 thousand and less than $1 thousand, respectively.

Investment securities with a total fair value of $786.7 million and $850.4 million at September 30, 2023 and December 31, 2022, 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,
	2023		2022		2023		2022
Proceeds from sales	$	—	$	—	$	—	$	6,252
Gross realized gains		—		—		—		—
Gross realized losses		—		—		—		15

(4.) INVESTMENT SECURITIES (Continued)

The scheduled maturities of securities available for sale and securities held to maturity at September 30, 2023 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	$	2,767	$	2,707
Due from one to five years		92,910		84,604
Due after five years through ten years		137,900		117,404
Due after ten years		827,604		649,500
Total available for sale securities	$	1,061,181	$	854,215
Debt securities held to maturity:
Due in one year or less	$	26,552	$	26,156
Due from one to five years		34,730		33,141
Due after five years through ten years		30,712		26,658
Due after ten years		62,214		50,585
Total held to maturity securities	$	154,208	$	136,540

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, 2023
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	20,909	$	3,626	$	20,909	$	3,626
Mortgage-backed securities:
Federal National Mortgage Association		14		—		425,724		88,324		425,738		88,324
Federal Home Loan Mortgage Corporation		—		—		300,727		81,037		300,727		81,037
Government National Mortgage Association		—		—		82,992		26,410		82,992		26,410
Collateralized mortgage obligations:
Federal National Mortgage Association		—		—		8,446		2,773		8,446		2,773
Federal Home Loan Mortgage Corporation		—		—		15,078		5,121		15,078		5,121
Total mortgage-backed securities		14		—		832,967		203,665		832,981		203,665
Total available for sale securities		14		—		853,876		207,291		853,890		207,291
Total AFS debt securities with unrealized losses	$	14	$	—	$	853,876	$	207,291	$	853,890	$	207,291
December 31, 2022
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	21,115	$	3,420	$	21,115	$	3,420
Mortgage-backed securities:
Federal National Mortgage Association		154,006		14,708		315,598		61,485		469,604		76,193
Federal Home Loan Mortgage Corporation		28,493		2,199		313,728		66,409		342,221		68,608
Government National Mortgage Association		10,301		921		83,841		17,116		94,142		18,037
Collateralized mortgage obligations:
Federal National Mortgage Association		1,000		94		8,572		2,509		9,572		2,603
Federal Home Loan Mortgage Corporation		—		—		17,356		4,163		17,356		4,163
Total mortgage-backed securities		193,800		17,922		739,095		151,682		932,895		169,604
Total available for sale securities		193,800		17,922		760,210		155,102		954,010		173,024
Total AFS debt securities with unrealized losses	$	193,800	$	17,922	$	760,210	$	155,102	$	954,010	$	173,024

(4.) INVESTMENT SECURITIES (Continued)

The total number of AFS securities positions in the investment portfolio in an unrealized loss position at September 30, 2023 was 219 compared to 226 at December 31, 2022. At September 30, 2023, the Company had positions in 215 investment securities with a fair value of $853.9 million and a total unrealized loss of $207.3 million that had been in a continuous unrealized loss position for more than 12 months. At September 30, 2023, there were a total of four securities positions in the Company’s investment portfolio with a fair value of $14 thousand and a total unrealized loss of less than $1 thousand that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2022, the Company had a position in 127 investment securities with a fair value of $760.2 million and a total unrealized loss of $155.1 million that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2022, there were a total of 99 securities positions in the Company’s investment portfolio with a fair value of $193.8 million and a total unrealized loss of $17.9 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 the Company’s portfolio fluctuates as market interest rates change.

Securities Available for Sale

As of September 30, 2023 and December 31, 2022, no allowance for credit losses has been recognized on AFS 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, the Company expects to recover the amortized cost basis of its investments and more than likely will not need to sell before the recovery period for operating purposes, with no impairment identified. As the portfolio is managed from a liquidity, earnings, and risk standpoint, sales from the AFS portfolio may be warranted based upon prevailing market factors. 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, 2023, $68.2 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $3.8 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating, and $0.7 million in non-rated bonds, all of which mature in 2023. Additionally, no municipal bonds were rated below investment grade. As of December 31, 2022, $90.6 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 no municipal bonds were rated below investment grade.

As of September 30, 2023 and December 31, 2022, the Company had no past due or nonaccrual held to maturity investment securities.