Investment Securities

3 Months Ended

Mar. 31, 2020

(3.)INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):

	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
March 31, 2020
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	9,587		$	492	$	—	$	10,079
Mortgage-backed securities:
Federal National Mortgage Association		284,725			14,302		217		298,810
Federal Home Loan Mortgage Corporation		83,977			2,597		—		86,574
Government National Mortgage Association		20,271			338		165		20,444
Collateralized mortgage obligations:
Federal National Mortgage Association		23,182			530		36		23,676
Federal Home Loan Mortgage Corporation		4,808			—		48		4,760
Privately issued		—			502		—		502
Total mortgage-backed securities		416,963			18,269		466		434,766
Total available for sale securities	$	426,550		$	18,761	$	466	$	444,845
Securities held to maturity:
State and political subdivisions	$	187,401		$	2,797	$	3	$	190,195
Mortgage-backed securities:
Federal National Mortgage Association		11,908			530		—		12,438
Federal Home Loan Mortgage Corporation		6,703			245		—		6,948
Government National Mortgage Association		43,727			1,313		—		45,040
Collateralized mortgage obligations:
Federal National Mortgage Association		39,216			1,263		—		40,479
Federal Home Loan Mortgage Corporation		46,854			1,855		—		48,709
Government National Mortgage Association		10,443			319		—		10,762
Total mortgage-backed securities		158,851			5,525		—		164,376
Total held to maturity securities		346,252		$	8,322	$	3	$	354,571
Allowance for credit losses - securities		(13	)
Total held to maturity securities, net	$	346,239
December 31, 2019
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	26,440		$	437	$	—	$	26,877
Mortgage-backed securities:
Federal National Mortgage Association		293,873			2,263		1,380		294,756
Federal Home Loan Mortgage Corporation		52,733			318		172		52,879
Government National Mortgage Association		14,065			60		4		14,121
Collateralized mortgage obligations:
Federal National Mortgage Association		23,834			—		57		23,777
Federal Home Loan Mortgage Corporation		4,907			—		18		4,889
Privately issued		—			618		—		618
Total mortgage-backed securities		389,412			3,259		1,631		391,040
Total available for sale securities	$	415,852		$	3,696	$	1,631	$	417,917

(3.)INVESTMENT SECURITIES (Continued)

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2019 (continued)
Securities held to maturity:
State and political subdivisions	$	192,215	$	3,803	$	—	$	196,018
Mortgage-backed securities:
Federal National Mortgage Association		12,049		227		6		12,270
Federal Home Loan Mortgage Corporation		6,995		77		47		7,025
Government National Mortgage Association		45,758		306		128		45,936
Collateralized mortgage obligations:
Federal National Mortgage Association		41,561		150		256		41,455
Federal Home Loan Mortgage Corporation		49,389		307		103		49,593
Government National Mortgage Association		11,033		12		83		10,962
Total mortgage-backed securities		166,785		1,079		623		167,241
Total held to maturity securities	$	359,000	$	4,882	$	623	$	363,259

The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities disclosed throughout this footnote. For AFS debt securities, AIR totaled $1.0 million as of March 31, 2020 and December 31, 2019. For HTM debt securities, AIR totaled $1.7 million and $1.2 million as of March 31, 2020 and December 31, 2019, respectively. AIR is included in other assets on the Company’s consolidated statements of financial condition.

Investment securities with a total fair value of $660.1 million and $676.9 million at March 31, 2020 and December 31, 2019, 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 March 31,
	2020		2019
Proceeds from sales	$	20,257	$	4,948
Gross realized gains		230		—
Gross realized losses		9		53

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2020 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	$	-	$	-
Due from one to five years		49,466		51,454
Due after five years through ten years		160,496		170,193
Due after ten years		216,588		223,198
Total available for sale securities	$	426,550	$	444,845
Debt securities held to maturity:
Due in one year or less	$	54,240	$	54,455
Due from one to five years		121,443		123,697
Due after five years through ten years		32,208		33,278
Due after ten years		138,361		143,141
Total held to maturity securities	$	346,252	$	354,571

(3.)INVESTMENT SECURITIES (Continued)

Unrealized losses on investment securities 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
March 31, 2020
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
Federal National Mortgage Association		5,502		217		—		—		5,502		217
Federal Home Loan Mortgage Corporation		—		—		—		—		—		—
Government National Mortgage Association		5,681		165		—		—		5,681		165
Collateralized mortgage obligations:
Federal National Mortgage Association		3,808		36		8		—		3,816		36
Federal Home Loan Mortgage Corporation		4,761		48		—		—		4,761		48
Total mortgage-backed securities		19,752		466		8		—		19,760		466
Total available for sale securities		19,752		466		8		—		19,760		466
Total temporarily impaired securities	$	19,752	$	466	$	8	$	-	$	19,760	$	466
December 31, 2019
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
Federal National Mortgage Association		104,634		1,277		7,196		103		111,830		1,380
Federal Home Loan Mortgage Corporation		10,347		11		9,409		161		19,756		172
Government National Mortgage Association		533		4		—		—		533		4
Collateralized mortgage obligations:
Federal National Mortgage Association		8,803		57		8		—		8,811		57
Federal Home Loan Mortgage Corporation		4,889		18		0		—		4,889		18
Total mortgage-backed securities		129,206		1,367		16,613		264		145,819		1,631
Total available for sale securities		129,206		1,367		16,613		264		145,819		1,631
Securities held to maturity:
State and political subdivisions		—		—		—		—		—		—
Mortgage-backed securities:
Federal National Mortgage Association		2,388		6		—		—		2,388		6
Federal Home Loan Mortgage Corporation		2,967		19		2,598		28		5,565		47
Government National Mortgage Association		11,155		61		5,625		67		16,780		128
Collateralized mortgage obligations:
Federal National Mortgage Association		9,120		40		13,486		216		22,606		256
Federal Home Loan Mortgage Corporation		15,127		30		7,988		73		23,115		103
Government National Mortgage Association		8,760		72		892		11		9,652		83
Total mortgage-backed securities		49,517		228		30,589		395		80,106		623
Total held to maturity securities		49,517		228		30,589		395		80,106		623
Total temporarily impaired securities	$	178,723	$	1,595	$	47,202	$	659	$	225,925	$	2,254

(3.)	INVESTMENT SECURITIES (Continued)

The total number of security positions in the investment portfolio in an unrealized loss position at March 31, 2020 was six compared to 91 at December 31, 2019. At March 31, 2020, the Company had positions in one investment security with a fair value of $8 thousand and a total unrealized loss of less than $1 thousand that has been in a continuous unrealized loss position for more than 12 months. At March 31, 2020, there were a total of five securities positions in the Company’s investment portfolio with a fair value of $19.8 million and a total unrealized loss of $466 thousand that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2019, the Company had positions in 34 investment securities with a fair value of $47.2 million and a total unrealized loss of $659 thousand that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2019, there were a total of 57 securities positions in the Company’s investment portfolio with a fair value of $178.7 million and a total unrealized loss of $1.6 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 March 31, 2020, 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 are 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 March 31, 2020, $180.0 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $7.1 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating. Additionally, one municipal bond is rated below investment grade, with a BB- Standard & Poor’s equivalent rating. The below investment grade bond represents exposure of $278 thousand, or 0.15% of the municipal bond portfolio and is closely monitored for repayment.

As of March 31, 2020, the Company had no past due or nonaccrual held to maturity investment securities.