Investment Securities

3 Months Ended

Mar. 31, 2021

(5.)	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, 2021
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	16,244		$	348	$	59	$	16,533
Mortgage-backed securities:
Federal National Mortgage Association		435,287			8,798		4,432		439,653
Federal Home Loan Mortgage Corporation		250,091			1,239		5,760		245,570
Government National Mortgage Association		21,605			495		126		21,974
Collateralized mortgage obligations:
Federal National Mortgage Association		22,361			89		43		22,407
Federal Home Loan Mortgage Corporation		6,943			—		22		6,921
Privately issued		—			431		—		431
Total mortgage-backed securities		736,287			11,052		10,383		736,956
Total available for sale securities	$	752,531		$	11,400	$	10,442	$	753,489
Securities held to maturity:
State and political subdivisions	$	139,264		$	3,767	$	—	$	143,031
Mortgage-backed securities:
Federal National Mortgage Association		10,147			522		—		10,669
Federal Home Loan Mortgage Corporation		5,521			193		—		5,714
Government National Mortgage Association		34,568			1,313		—		35,881
Collateralized mortgage obligations:
Federal National Mortgage Association		27,230			920		—		28,150
Federal Home Loan Mortgage Corporation		32,206			1,242		—		33,448
Government National Mortgage Association		7,198			238		—		7,436
Total mortgage-backed securities		116,870			4,428		—		121,298
Total held to maturity securities		256,134		$	8,195	$	—	$	264,329
Allowance for credit losses - securities		(7	)
Total held to maturity securities, net	$	256,127
December 31, 2020
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	6,239		$	396	$	—	$	6,635
Mortgage-backed securities:
Federal National Mortgage Association		350,627			15,549		44		366,132
Federal Home Loan Mortgage Corporation		225,645			3,155		24		228,776
Government National Mortgage Association		22,107			830		—		22,937
Collateralized mortgage obligations:
Federal National Mortgage Association		3,047			97		—		3,144
Federal Home Loan Mortgage Corporation		—			—		—		-
Privately issued		—			435		—		435
Total mortgage-backed securities		601,426			20,066		68		621,424
Total available for sale securities	$	607,665		$	20,462	$	68	$	628,059

(5.)	INVESTMENT SECURITIES (Continued)

	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
December 31, 2020 (continued)
Securities held to maturity:
State and political subdivisions	$	144,506		$	4,478	$	—	$	148,984
Mortgage-backed securities:
Federal National Mortgage Association		10,776			703		—		11,479
Federal Home Loan Mortgage Corporation		5,858			382		—		6,240
Government National Mortgage Association		37,084			1,578		—		38,662
Collateralized mortgage obligations:
Federal National Mortgage Association		29,988			1,075		—		31,063
Federal Home Loan Mortgage Corporation		35,897			1,581		—		37,478
Government National Mortgage Association		7,864			265		—		8,129
Total mortgage-backed securities		127,467			5,584		—		133,051
Total held to maturity securities		271,973		$	10,062	$	—	$	282,035
Allowance for credit losses - securities		(7	)
Total held to maturity securities, net	$	271,966

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 $1.4 million and $1.2 million as of March 31, 2021 and December 31, 2020. For HTM debt securities, AIR totaled $1.3 million and $905 thousand as of March 31, 2021 and December 31, 2020, respectively. AIR is included in other assets on the Company’s consolidated statements of financial condition.

For each of the three months ended March 31, 2021 and 2020, credit loss expense (credit) for HTM investment securities was less than $(1) thousand.

Investment securities with a total fair value of $660.1 million and $567.4 million at March 31, 2021 and December 31, 2020, 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,
	2021		2020
Proceeds from sales	$	26,675	$	3,157
Gross realized gains		89		—
Gross realized losses		15		9

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2021 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	$	4,887	$	4,946
Due from one to five years		57,462		60,632
Due after five years through ten years		148,739		153,492
Due after ten years		541,443		534,419
Total available for sale securities	$	752,531	$	753,489
Debt securities held to maturity:
Due in one year or less	$	46,389	$	46,684
Due from one to five years		92,903		96,303
Due after five years through ten years		20,252		21,018
Due after ten years		96,590		100,324
Total held to maturity securities	$	256,134	$	264,329

(5.)	INVESTMENT SECURITIES (Continued)

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
March 31, 2021
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	9,941	$	59	$	—	$	—	$	9,941	$	59
Mortgage-backed securities:
Federal National Mortgage Association		224,499		4,432		13		—		224,512		4,432
Federal Home Loan Mortgage Corporation		209,482		5,760		—		—		209,482		5,760
Government National Mortgage Association		5,165		126		—		—		5,165		126
Collateralized mortgage obligations:
Federal National Mortgage Association		9,665		43		—		—		9,665		43
Federal Home Loan Mortgage Corporation		6,921		22		—		—		6,921		22
Total mortgage-backed securities		455,732		10,383		13		—		455,745		10,383
Total available for sale securities		465,673		10,442		13		—		465,686		10,442
Total temporarily impaired securities	$	465,673	$	10,442	$	13	$	—	$	465,686	$	10,442
December 31, 2020
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
Federal National Mortgage Association		18,155		44		—		—		18,155		44
Federal Home Loan Mortgage Corporation		10,932		24		—		—		10,932		24
Government National Mortgage Association		—		—		—		—		—		—
Collateralized mortgage obligations:
Federal National Mortgage Association		—		—		8		—		8		—
Federal Home Loan Mortgage Corporation		—		—		—		—		—		—
Total mortgage-backed securities		29,087		68		8		—		29,095		68
Total available for sale securities		29,087		68		8		—		29,095		68
Total temporarily impaired securities	$	29,087	$	68	$	8	$	—	$	29,095	$	68

(5.)	INVESTMENT SECURITIES (Continued)

The total number of securities positions in the investment portfolio in an unrealized loss position at March 31, 2021 was 62 compared to eight at December 31, 2020. At March 31, 2021, the Company had a position in one investment security with a fair value of $13 thousand and a total unrealized loss of less than one thousand dollars that has been in a continuous unrealized loss position for more than 12 months. At March 31, 2021, there were a total of 61 securities positions in the Company’s investment portfolio with a fair value of $465.7 million and a total unrealized loss of $10.4 million that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2020, the Company had a position in one investment security with a fair value of eight thousand dollars and a total unrealized loss of less than one thousand dollars that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2020, there were a total of seven securities positions in the Company’s investment portfolio with a fair value of $29.1 million and a total unrealized loss of $68 thousand 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, 2021 and December 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 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, 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, 2021, $131.4 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $7.6 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating. Additionally, one municipal bond was rated below investment grade, with a BB+ Standard & Poor’s equivalent rating. The below investment grade bond represented exposure of $280 thousand, or 0.20% of the municipal bond portfolio and has been closely monitored for repayment. As of December 31, 2020, $135.7 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $8.5 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating. Additionally, one municipal bond was rated below investment grade, with a BB+ Standard & Poor’s equivalent rating. The below investment grade bond represented exposure of $279 thousand, or 0.19% of the municipal bond portfolio and has been closely monitored for repayment.

As of March 31, 2021 and December 31, 2020, the Company had no past due or nonaccrual held to maturity investment securities.