Securities

9 Months Ended

Sep. 30, 2021

Notes To Financial Statements

Securities

4.     Securities

The Company did not hold any trading securities at September 30, 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): the first with an amortized cost of $29.9 million structured similar to a commercial owner occupied loan and modeled for credit losses similar to commercial business loans secured by real estate with an allowance for credit losses of $0.2 million at September 30, 2021; the second with an amortized cost of $21.0 million that currently is under forbearance with an individually evaluated allowance for credit loss of $0.6 million at September 30, 2021; and the third with an amortized cost of $7.9 million 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 at September 30, 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 September 30, 2021:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities held-to-maturity:
Municipals	$	50,832	$	52,753	$	2,078	$	157
Total other securities		50,832		52,753		2,078		157
FNMA		7,899		8,698		799		—
Total mortgage-backed securities		7,899		8,698		799		—
Allowance for Credit Losses		(843)		—		—		—
Total	$	57,888	$	61,451	$	2,877	$	157

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 September 30, 2021:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities available for sale:
U.S Government Agencies	$	5,643	$	5,645	$	5	$	3
Corporate		107,421		105,956		189		1,654
Mutual funds		12,572		12,572		—		—
Collateralized loan obligations		87,167		86,933		5		239
Other		1,548		1,548		—		—
Total other securities		214,351		212,654		199		1,896
REMIC and CMO		229,499		229,890		2,372		1,981
GNMA		11,362		11,088		38		312
FNMA		194,973		195,030		1,815		1,758
FHLMC		149,751		148,137		445		2,059
Total mortgage-backed securities		585,585		584,145		4,670		6,110
Total securities available for sale	$	799,936	$	796,799	$	4,869	$	8,006

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 September 30, 2021 and December 31, 2020.

The corporate securities held by the Company at September 30, 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 September 30, 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	$	50,832	$	52,753
Total other securities		50,832		52,753
Mortgage-backed securities		7,899		8,698
Total held-to-maturity securities		58,731		61,451
Allowance for Credit Losses		(843)		—
Total held-to-maturity securities, net of allowance for credit losses	$	57,888	$	61,451

	Amortized
Securities available for sale:	Cost		Fair Value
	(In thousands)
Due after one year through five years	$	20,000	$	19,932
Due after five years through ten years		169,572		167,957
Due after ten years		12,207		12,193
Total		201,779		200,082
Mutual funds		12,572		12,572
Total other securities		214,351		212,654
Mortgage-backed securities		585,585		584,145
Total available for sale securities	$	799,936	$	796,799

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 September 30, 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	$	20,819	$	157	$	20,819	$	157	$	—	$	—
Total other securities	1		20,819		157		20,819		157		—		—
Total securities held-to-maturity	1	$	20,819	$	157	$	20,819	$	157	$	—	$	—
Available for sale securities
U.S Government Agencies	1	$	4,489	$	3	$	4,489	$	3	$	—	$	—
Corporate	11		80,792		1,654		51,698		748		29,094		906
Collateralized loan obligations	3		21,027		239		—		—		21,027		239
Total other securities	15		106,308		1,896		56,187		751		50,121		1,145
REMIC and CMO	12		110,359		1,981		110,359		1,981		—		—
GNMA	2		10,196		312		10,196		312		—		—
FNMA	17		136,324		1,758		136,324		1,758		—		—
FHLMC	15		123,759		2,059		123,759		2,059		—		—
Total mortgage-backed securities	46		380,638		6,110		380,638		6,110		—		—
Total securities available for sale	61	$	486,946	$	8,006	$	436,825	$	6,861	$	50,121	$	1,145

	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 security that had an unrealized loss at September 30, 2021 and December 31, 2020. At September 30, 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 to 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, the tranche of the purchased CLO’s and municipal securities remain investment grade. 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.

The Company reviewed the held-to-maturity security that had an unrealized loss at September 30, 2021 as part of its quarterly CECL process. This security is currently under forbearance with an allowance for credit losses of $0.6 million at September 30, 2021.

Accrued interest receivable on available-for-sale debt securities totaled $1.6 million and $1.3 million at September 30, 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.

	Other Securities
	For the three months ended				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
	(In thousands)
Beginning balance	$	844	$	402	$	907	$	340
Provision (benefit)		(1)		—		(64)		62
Allowance for credit losses	$	843	$	402	$	843	$	402

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company sold $20.0 million and $45.0 million in corporate securities during the three and nine months ended September 30, 2021, respectively. The Company sold $130.8 million in mortgage-backed securities during the nine months ended September 30, 2020. The Company did not sell any securities during the three months ended September 30, 2020.

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				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
	(In thousands)
Gross gains from the sale of securities	$	—	$	—	$	123	$	1,476
Gross losses from the sale of securities		(10)		—		(10)		(1,567)
Net gains (losses) from the sale of securities	$	(10)	$	—	$	113	$	(91)