Securities

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Securities

4.     Securities

The following table summarizes the Company’s portfolio of securities held-to-maturity on September 30, 2023:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Municipals	$	66,353	$	51,031	$	—	$	15,322
Total municipals		66,353		51,031		—		15,322
FNMA		7,860		6,634		—		1,226
Total mortgage-backed securities		7,860		6,634		—		1,226
Allowance for credit losses		(1,082)		—		—		—
Total	$	73,131	$	57,665	$	—	$	16,548

The following table summarizes the Company’s portfolio of securities held-to-maturity on December 31, 2022:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Municipals	$	66,936	$	55,561	$	—	$	11,375
Total municipals		66,936		55,561		—		11,375
FNMA		7,875		6,989		—		886
Total mortgage-backed securities		7,875		6,989		—		886
Allowance for credit losses		(1,100)		—		—		—
Total	$	73,711	$	62,550	$	—	$	12,261

The following table summarizes the Company’s portfolio of securities available for sale on September 30, 2023:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
U.S. government agencies	$	83,037	$	81,481	$	138	$	1,694
Corporate		173,139		152,345		—		20,794
Mutual funds		11,066		11,066		—		—
Collateralized loan obligations		260,727		259,441		411		1,697
Other		1,451		1,451		—		—
Total other securities		529,420		505,784		549		24,185
REMIC and CMO		164,303		131,476		—		32,827
GNMA		8,678		6,542		1		2,137
FNMA		157,897		128,781		—		29,116
FHLMC		90,942		71,080		—		19,862
Total mortgage-backed securities		421,820		337,879		1		83,942
Total Securities excluding portfolio layer adjustments		951,240		843,663		550		108,127
Unallocated portfolio layer basis adjustments (1)		(7,721)		n/a		—		(7,721)
Total securities available for sale	$	943,519	$	843,663	$	550	$	100,406

(1) Represents the amount of portfolio layer method basis adjustments related to available for sale (“AFS”) securities hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual securities, however, the amounts impact the unrealized gains or losses for the individual securities being hedged. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

The following table summarizes the Company’s portfolio of securities available for sale on December 31, 2022:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
U.S. government agencies	$	83,720	$	81,103	$	2	$	2,619
Corporate		146,430		131,766		—		14,664
Mutual funds		11,211		11,211		—		—
Collateralized loan obligations		129,684		125,478		—		4,206
Other		1,516		1,516		—		—
Total other securities		372,561		351,074		2		21,489
REMIC and CMO		175,712		148,414		—		27,298
GNMA		9,193		7,317		3		1,879
FNMA		172,690		148,265		—		24,425
FHLMC		96,725		80,287		—		16,438
Total mortgage-backed securities		454,320		384,283		3		70,040
Total securities available for sale	$	826,881	$	735,357	$	5	$	91,529

The corporate securities held by the Company at September 30, 2023 and December 31, 2022, are issued by U.S. banking institutions. The CMOs held by the Company at September 30, 2023 and December 31, 2022, are either fully guaranteed or issued by a government sponsored enterprise.

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, 2023, 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	$	66,353	$	51,031
Total other securities		66,353		51,031
Mortgage-backed securities		7,860		6,634
		74,213		57,665
Allowance for credit losses		(1,082)		-
Total securities held-to-maturity	$	73,131	$	57,665

	Amortized
Securities available for sale (1):	Cost		Fair Value
	(In thousands)
Due in one year or less	$	59,934	$	58,951
Due after one year through five years		84,849		79,070
Due after five years through ten years		244,126		227,135
Due after ten years		129,445		129,562
Total other securities		518,354		494,718
Mutual funds		11,066		11,066
Mortgage-backed securities		421,820		337,879
Total securities available for sale	$	951,240	$	843,663

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $7.7 million related to AFS securities hedged in a closed portfolio at September 30, 2023. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

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, 2023
		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	3	$	51,031	$	15,322	$	—	$	—	$	51,031	$	15,322
Total other securities	3		51,031		15,322		—		—		51,031		15,322
FNMA	1		6,634		1,226		—		—		6,634		1,226
Total mortgage-backed securities	1		6,634		1,226		—		—		6,634		1,226
Total	4	$	57,665	$	16,548	$	—	$	—	$	57,665	$	16,548
Available for sale securities (1)
U.S. Government Agencies & Treasury	8	$	74,192	$	1,694	$	5,316	$	26	$	68,876	$	1,668
Corporate	26		152,345		20,794		29,023		2,679		123,322		18,115
CLO	20		148,517		1,697		28,056		71		120,461		1,626
Total other securities	54		375,054		24,185		62,395		2,776		312,659		21,409
REMIC and CMO	46		131,210		32,827		—		—		131,210		32,827
GNMA	12		6,458		2,137		113		2		6,345		2,135
FNMA	47		128,781		29,116		2,085		101		126,696		29,015
FHLMC	18		71,080		19,862		—		—		71,080		19,862
Total mortgage-backed securities	123		337,529		83,942		2,198		103		335,331		83,839
Total	177	$	712,583	$	108,127	$	64,593	$	2,879	$	647,990	$	105,248

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $7.7 million related to AFS securities hedged in a closed portfolio at September 30, 2023. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

	At December 31, 2022
		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	3	$	55,561	$	11,375	$	55,561	$	11,375	$	—	$	—
Total other securities	3		55,561		11,375		55,561		11,375		—		—
FNMA	1		6,989		886		6,989		886		—		—
Total mortgage-backed securities	1		6,989		886		6,989		886		—		—
Total	4	$	62,550	$	12,261	$	62,550	$	12,261	$	—	$	—
Available for sale securities
U.S. government agencies	7	$	77,856	$	2,619	$	77,059	$	2,517	$	797	$	102
Corporate	20		131,766		14,664		45,447		3,553		86,319		11,111
CLO	19		125,478		4,206		95,518		2,916		29,960		1,290
Total other securities	46		335,100		21,489		218,024		8,986		117,076		12,503
REMIC and CMO	47		148,120		27,298		40,911		3,457		107,209		23,841
GNMA	8		7,133		1,879		64		—		7,069		1,879
FNMA	47		148,229		24,425		38,296		3,871		109,933		20,554
FHLMC	18		80,287		16,438		24,838		2,397		55,449		14,041
Total mortgage-backed securities	120		383,769		70,040		104,109		9,725		279,660		60,315
Total	166	$	718,869	$	91,529	$	322,133	$	18,711	$	396,736	$	72,818

The Company reviewed each available for sale security that had an unrealized loss at September 30, 2023, and December 31, 2022. 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. If the Company identifies any decline in the fair value due to credit loss factors and evaluation indicates that a credit loss exists, then the present value of cash flows that is expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. 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 the U.S. government, and that issuers of the collateralized loan obligations (“CLO”) and the issuer of corporate securities are global systematically important banks. 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 each held-to-maturity security at September 30, 2023, and December 31, 2022 as part of its quarterly Current Expected Credit Loss (“CECL”) process, resulting in an allowance for credit losses of $1.1 million at each of September 30, 2023 and December 31, 2022.

It is the Company’s policy to exclude accrued interest receivable from the calculation of the allowance for credit losses on held-to-maturity and the valuation of available for sale securities. Accrued interest receivable on held-to-maturity securities totaled $0.1 million each at September 30, 2023 and December 31, 2022 and accrued interest receivable on available for sale debt securities totaled $6.7 million and $3.7 million at September 30, 2023 and December 31, 2022, respectively.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity.

	For the three months ended				For the nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
		(In thousands)
Beginning balance	$	1,079	$	1,085	$	1,100	$	862
Provision (benefit)		3		11		(18)		234
Allowance for credit losses	$	1,082	$	1,096	$	1,082	$	1,096

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company did not sell any securities during the three and nine months ended September 30, 2023 and 2022.