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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.