Securities

3 Months Ended

Mar. 31, 2021

Notes To Financial Statements

Securities

4.     Securities

The Company did not hold any trading securities at March 31, 2021 and December 31, 2020. Securities available for sale are recorded at fair value. Securities held-to-maturity (“HTM”) are recorded at amortized cost.

Allowance for credit losses

The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical information, current conditions and a reasonable and supportable forecast. The Company’s portfolio is made up of three securities totaling $58.7 million (before allowance for credit losses) : one with an amortized cost of $29.8 million which is structured similar to a commercial owner occupied loan and is modeled for credit losses similar to commercial business loans secured by real estate with a reserve of $0.3 million at March 31, 2021. The second security with an amortized cost of $21.0 million that currently has an active forbearance with a specific reserve of $0.6 million at March 31, 2021 and the third security with an amortized cost of $7.9 million which is issued and guaranteed by Fannie Mae, which is a government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S. government. Accordingly, the Company assumes a zero loss expectation from the portfolio. The security currently in forbearance is considered current and as such, continues to accrue interest at its original contractual terms. Accrued interest receivable on held-to-maturity securities totaled $0.1 million each at March 31, 2021 and December 31, 2020 and is excluded from estimates of credit losses.

The following table summarizes the Company’s portfolio of securities held-to-maturity at March 31, 2021:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities held-to-maturity:
Municipals	$	50,827	$	52,543	$	1,981	$	265
Total other securities		50,827		52,543		1,981		265
FNMA		7,909		8,492		583		—
Total mortgage-backed securities		7,909		8,492		583		—
Allowance for Credit Losses		(915)		—		—		—
Total	$	57,821	$	61,035	$	2,564	$	265

The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2020:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities held-to-maturity:
Municipals	$	50,825	$	54,538	$	3,713	$	—
Total other securities		50,825		54,538		3,713		—
FNMA		7,914		8,991		1,077		—
Total mortgage-backed securities		7,914		8,991		1,077		—
Allowance for Credit Losses		(907)		—		—		—
Total	$	57,832	$	63,529	$	4,790	$	—

The following table summarizes the Company’s portfolio of securities available for sale at March 31, 2021:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities available for sale:
U.S Government Agencies	$	6,253	$	6,219	$	—	$	34
Corporate		130,000		129,598		538		940
Mutual funds		12,525		12,525		—		—
Collateralized loan obligations		93,120		92,756		40		404
Other		1,342		1,342		—		—
Total other securities		243,240		242,440		578		1,378
REMIC and CMO		210,836		213,146		3,570		1,260
GNMA		12,600		12,339		51		312
FNMA		171,453		171,074		1,817		2,196
FHLMC		124,432		122,222		472		2,682
Total mortgage-backed securities		519,321		518,781		5,910		6,450
Total securities available for sale	$	762,561	$	761,221	$	6,488	$	7,828

The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2020:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities available for sale:
U.S Government Agencies	$	6,452	$	6,453	$	2	$	1
Corporate		130,000		123,865		131		6,266
Mutual funds		12,703		12,703		—		—
Collateralized loan obligations		100,561		99,198		—		1,363
Other		1,295		1,295		—		—
Total other securities		251,011		243,514		133		7,630
REMIC and CMO		175,142		180,877		5,735		—
GNMA		13,009		13,053		66		22
FNMA		143,154		146,169		3,046		31
FHLMC		63,796		64,361		648		83
Total mortgage-backed securities		395,101		404,460		9,495		136
Total securities available for sale	$	646,112	$	647,974	$	9,628	$	7,766

We did not hold any private issue CMO’s that are collateralized by commercial real estate mortgages at March 31, 2021 and December 31, 2020.

The corporate securities held by the Company at March 31, 2021 and December 31, 2020 are issued by U.S. banking institutions.

The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-maturity and available for sale at March 31, 2021, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized
Securities held-to-maturity:	Cost		Fair Value
	(In thousands)
Due after ten years	$	50,827	$	52,543
Total other securities		50,827		52,543
Mortgage-backed securities		7,909		8,492
Total held-to-maturity securities		58,736		61,035
Allowance for Credit Losses		(915)		—
Total held-to-maturity securities, net of allowance for credit losses	$	57,821	$	61,035

	Amortized
Securities available for sale:	Cost		Fair Value
	(In thousands)
Due after one year through five years	$	45,000	$	45,181
Due after five years through ten years		152,453		151,553
Due after ten years		33,262		33,181
Total		230,715		229,915
Mutual funds		12,525		12,525
Total other securities		243,240		242,440
Mortgage-backed securities		519,321		518,781
Total available for sale securities	$	762,561	$	761,221

The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated:

	At March 31, 2021
	Total					Less than 12 months				12 months or more
				Unrealized				Unrealized				Unrealized
	Count	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
Held-to-maturity securities
Municipals	1	$	19,908	$	265	$	19,908	$	265	$	—	$	—
Total other securities	1		19,908		265		19,908		265		—		—
Total securities held-to-maturity	1	$	19,908	$	265	$	19,908	$	265	$	—	$	—
Available for sale securities
U.S Government Agencies	2	$	6,205	$	34	$	6,205	$	34	$	—	$	—
Corporate	8		79,061		940		—		—		79,061		940
Collateralized loan obligations	8		56,504		404		—		—		56,504		404
Total other securities	18		141,770		1,378		6,205		34		135,565		1,344
REMIC and CMO	8		56,685		1,260		56,685		1,260		—		—
GNMA	2		10,932		312		10,932		312		—		—
FNMA	16		116,082		2,196		116,082		2,196		—		—
FHLMC	13		97,765		2,682		97,765		2,682		—		—
Total mortgage-backed securities	39		281,464		6,450		281,464		6,450		—		—
Total securities available for sale	57	$	423,234	$	7,828	$	287,669	$	6,484	$	135,565	$	1,344

	At December 31, 2020
	Total					Less than 12 months				12 months or more
				Unrealized				Unrealized				Unrealized
	Count	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
Available for sale securities
U.S Government Agencies	1	$	4,988	$	1	$	4,988	$	1	$	—	$	—
Corporate	14		113,734		6,266		—		—		113,734		6,266
Collateralized loan obligations	13		99,199		1,363		7,441		52		91,758		1,311
Total other securities	28		217,921		7,630		12,429		53		205,492		7,577
GNMA	1		10,341		22		10,341		22		—		—
FNMA	5		32,463		31		23,864		28		8,599		3
FHLMC	3		30,095		83		30,095		83		—		—
Total mortgage-backed securities	9		72,899		136		64,300		133		8,599		3
Total securities available for sale	37	$	290,820	$	7,766	$	76,729	$	186	$	214,091	$	7,580

The Company reviewed each available for sale debt security that had an unrealized loss at March 31, 2021 and December 31, 2020. At March 31, 2021 and December 31, 2020, the Company evaluated whether the decline in fair value of a debt security resulted from credit losses or other factors under Accounting Standards Codification (“ASC”) Topic 326, Credit Losses also referred as Current Expected Credit Losses (“CECL”). The Company does not have the intent to sell these securities and it is more likely than not the Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion is based upon considering the Company’s cash and working capital requirements and contractual and regulatory obligations, none of which the Company believes would cause the sale of the securities. All of these securities are rated investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s investment.

In determining the risk of loss for available for sale securities, the Company considered that mortgage-backed securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to U.S. government, the issuer of Corporate securities are global systematically important banks, and the tranche of the purchased CLO’s. Each of these securities is performing according to its terms and, in the opinion of management, will continue to perform according to its terms. Based on this review, management believes that the unrealized losses have resulted from other factors not deemed credit-related and no allowance for credit loss was recorded.

Accrued interest receivable on available-for-sale debt securities totaled $1.5 million and $1.3 million at March 31, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three months ended March 31, 2021:

	Mortgage-backed securities		Other securities
	(In thousands)
Beginning balance	$	—	$	907
Provision		—		8
Allowance for credit losses	$	—	$	915

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three months ended March 31, 2020:

	Mortgage-backed securities		Other securities
	(In thousands)
Beginning balance	$	—	$	—
CECL adoption		—		340
Provision		—		62
Allowance for credit losses	$	—	$	402

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company sold $64.6 million in mortgage-backed securities during the three months ended March 31, 2020. The Company did not sell any securities during the three months ended March 31, 2021.

The following table represents the gross gains and gross losses realized from the sale of securities available for sale for the periods indicated:

	For the three months ended
	March 31,
	2021		2020
Gross gains from the sale of securities	$	—	$	713
Gross losses from the sale of securities		—		(750)
Net losses from the sale of securities	$	—	$	(37)