Securities

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Securities

4.     Securities

The following table summarizes the Company’s portfolio of securities held-to-maturity on March 31, 2024:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Municipals	$	65,696	$	56,856	$	—	$	(8,840)
Total municipals		65,696		56,856		—		(8,840)
FNMA		7,850		6,944		—		(906)
Total mortgage-backed securities		7,850		6,944		—		(906)
Total before allowance for credit losses	$	73,546	$	63,800	$	—	$	(9,746)
Allowance for credit losses		(1,084)
Total	$	72,462

The following table summarizes the Company’s portfolio of securities held-to-maturity on December 31, 2023:

					Gross		Gross
	Amortized				Unrecognized		Unrecognized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Municipals	$	66,155	$	58,697	$	—	$	(7,458)
Total municipals		66,155		58,697		—		(7,458)
FNMA		7,855		7,058		—		(797)
Total mortgage-backed securities		7,855		7,058		—		(797)
Total before allowance for credit losses	$	74,010	$	65,755	$	—	$	(8,255)
Allowance for credit losses		(1,087)
Total	$	72,923

The following table summarizes the Company’s portfolio of securities available for sale on March 31, 2024:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
U.S. government agencies	$	31,357	$	30,835	$	107	$	(629)
Corporate		163,228		145,666		7		(17,569)
Mutual funds		11,618		11,618		—		—
Collateralized loan obligations		476,039		477,577		1,884		(346)
Other		1,460		1,460		—		—
Total other securities		683,702		667,156		1,998		(18,544)
REMIC and CMO		309,347		281,894		12		(27,465)
GNMA		27,197		25,297		7		(1,907)
FNMA		153,314		130,338		5		(22,981)
FHLMC		87,834		71,998		—		(15,836)
Total mortgage-backed securities		577,692		509,527		24		(68,189)
Total Securities excluding portfolio layer adjustments		1,261,394		1,176,683		2,022		(86,733)
Unallocated portfolio layer basis adjustments (1)		(5,051)		n/a		—		5,051
Total securities available for sale	$	1,256,343	$	1,176,683	$	2,022	$	(81,682)

(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, 2023:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
U.S. government agencies	$	82,548	$	81,734	$	123	$	(937)
Corporate		173,184		155,449		—		(17,735)
Mutual funds		11,660		11,660		—		—
Collateralized loan obligations		269,600		270,129		1,215		(686)
Other		1,437		1,437		—		—
Total other securities		538,429		520,409		1,338		(19,358)
REMIC and CMO		160,165		133,574		—		(26,591)
GNMA		12,402		10,665		3		(1,740)
FNMA		155,995		135,074		14		(20,935)
FHLMC		89,427		75,031		—		(14,396)
Total mortgage-backed securities		417,989		354,344		17		(63,662)
Total Securities excluding portfolio layer adjustments		956,418		874,753		1,355		(83,020)
Unallocated portfolio layer basis adjustments (1)		(2,254)		n/a		—		2,254
Total securities available for sale	$	954,164	$	874,753	$	1,355	$	(80,766)

(1) Represents the amount of portfolio layer method basis adjustments related to 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 corporate securities held by the Company at March 31, 2024 and December 31, 2023, are issued by U.S. banking institutions. The CMOs held by the Company at March 31, 2024 and December 31, 2023, 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 March 31, 2024, 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	$	65,696	$	56,856
Total other securities		65,696		56,856
Mortgage-backed securities		7,850		6,944
Total before allowance for credit losses		73,546	$	63,800
Allowance for credit losses		(1,084)
Total	$	72,462

	Amortized
Securities available for sale:	Cost		Fair Value
	(In thousands)
Due in one year or less	$	29,901	$	29,101
Due after one year through five years		75,185		70,275
Due after five years through ten years		223,390		211,299
Due after ten years		343,608		344,863
Total other securities		672,084		655,538
Mutual funds		11,618		11,618
Mortgage-backed securities		577,692		509,527
Total securities available for sale (1)	$	1,261,394	$	1,176,683

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $5.1 million related to AFS securities hedged in a closed portfolio at March 31, 2024. 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 March 31, 2024
		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	$	56,856	$	(8,840)	$	—	$	—	$	56,856	$	(8,840)
Total other securities	3		56,856		(8,840)		—		—		56,856		(8,840)
FNMA	1		6,944		(906)		—		—		6,944		(906)
Total mortgage-backed securities	1		6,944		(906)		—		—		6,944		(906)
Total	4	$	63,800	$	(9,746)	$	—	$	—	$	63,800	$	(9,746)
Available for sale securities (1)
U.S. Government Agencies	5	$	24,308	$	(629)	$	—	$	—	$	24,308	$	(629)
Corporate	23		144,206		(17,569)		—		—		144,206		(17,569)
Collateralized loan obligations	18		154,564		(346)		105,125		(285)		49,439		(61)
Total other securities	46		323,078		(18,544)		105,125		(285)		217,953		(18,259)
REMIC and CMO	50		212,565		(27,465)		83,511		(120)		129,054		(27,345)
GNMA	7		23,079		(1,907)		16,772		(35)		6,307		(1,872)
FNMA	43		128,678		(22,981)		—		—		128,678		(22,981)
FHLMC	18		71,998		(15,836)		—		—		71,998		(15,836)
Total mortgage-backed securities	118		436,320		(68,189)		100,283		(155)		336,037		(68,034)
Total	164	$	759,398	$	(86,733)	$	205,408	$	(440)	$	553,990	$	(86,293)

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $5.1 million related to AFS securities hedged in a closed portfolio at March 31, 2024. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

	At December 31, 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	$	58,697	$	(7,458)	$	—	$	—	$	58,697	$	(7,458)
Total other securities	3		58,697		(7,458)		—		—		58,697		(7,458)
FNMA	1		7,058		(797)		—		—		7,058		(797)
Total mortgage-backed securities	1		7,058		(797)		—		—		7,058		(797)
Total	4	$	65,755	$	(8,255)	$	—	$	—	$	65,755	$	(8,255)
Available for sale securities (1)
U.S. government agencies	8	$	74,517	$	(937)	$	2,517	$	(7)	$	72,000	$	(930)
Corporate	26		155,449		(17,735)		25,428		(1,318)		130,021		(16,417)
Collateralized loan obligations	17		120,609		(686)		—		—		120,609		(686)
Total other securities	51		350,575		(19,358)		27,945		(1,325)		322,630		(18,033)
REMIC and CMO	46		133,312		(26,591)		—		—		133,312		(26,591)
GNMA	7		10,466		(1,740)		3,867		(34)		6,599		(1,706)
FNMA	44		133,394		(20,935)		2,044		(1)		131,350		(20,934)
FHLMC	18		75,031		(14,396)		—		—		75,031		(14,396)
Total mortgage-backed securities	115		352,203		(63,662)		5,911		(35)		346,292		(63,627)
Total	166	$	702,778	$	(83,020)	$	33,856	$	(1,360)	$	668,922	$	(81,660)

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $2.3 million related to AFS securities hedged in a closed portfolio at December 31, 2023. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

The Company reviewed each available for sale security that had an unrealized loss at March 31, 2024 and December 31, 2023. 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. 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 but one of these securities are rated investment grade or better, and all these securities have a long history of no credit losses. The Bank holds approximately $10 million of corporate debt from a New York based bank holding company that on February 6, 2024 was downgraded two levels to Ba2 (Moody’s non-investment grade). On March 1, 2024 the bond was downgraded four levels to B3 and then on March 15, 2024 the bond was upgraded one level to B2. At this time, we do not consider the decline in fair value to be credit related given the underlying bond has not missed any payments and financial performance has not deteriorated to a level where the institution is not well capitalized. The Bank has placed the security on the watch list and will continue to monitor this risk position closely to determine if any action steps and valuation adjustments are required in the future. It is not anticipated that this security or any other available for sale security held at March 31, 2024 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 March 31, 2024 and December 31, 2023 as part of its quarterly Current Expected Credit Loss (“CECL”) process, resulting in an allowance for credit losses of $1.1 million at both March 31, 2024 and December 31, 2023.

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 at both March 31, 2024 and December 31, 2023 and accrued interest receivable on available for sale debt securities totaled $10.0 million and $7.1 million at March 31, 2024 and December 31, 2023, respectively.

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,
	2024		2023
		(In thousands)
Beginning balance	$	1,087	$	1,100
Provision (benefit)		(3)		(13)
Allowance for credit losses	$	1,084	$	1,087

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 months ended March 31, 2024 and 2023.