Investment Securities

12 Months Ended

Dec. 31, 2019

Debt Securities, Available-for-sale [Abstract]

Securities

Available-for-Sale Debt Securities

The following is a summary of available-for-sale debt securities:



(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2019
Available-for-sale debt securities:
Residential mortgage-backed securities	$	4,991	$	275	$	—		$	5,266
Tax-exempt asset-backed securities	183,225		13,802		—			197,027
Credit risk transfer securities	14,713		—		(2,749		)	11,964
	$	202,929	$	14,077	$	(2,749	)	$	214,257

December 31, 2018
Available-for-sale debt securities:
Residential mortgage-backed securities	$	6,874	$	368	$	—		$	7,242
Tax-exempt asset-backed securities	95,518		286		—			95,804
	$	102,392	$	654	$	—		$	103,046

During the first quarter of 2019, we acquired a $92.0 million tax-exempt security backed with underlying cash flows from municipal revenue bonds, as well as $15.0 million in credit risk transfer ("CRT") securities. The securities were all recorded as available-for-sale upon acquisition and subsequently marked to fair value as of December 31, 2019.

CRT securities represent unsecured obligations issued by GSEs such as Freddie Mac and are designed to transfer mortgage credit risk from the GSE to private investors. CRT securities are structured to be subject to the performance of a reference pool of mortgage loans in which we share in 50% of the first losses with the GSE. If the reference pool incurs losses, the amount we will recover on the notes is reduced by our share of the amount of such losses, which could potentially be up to 100% of the amount outstanding. The CRT securities are generally interest-only for an initial period of time and are restricted from being transferred until a future date.

The amortized cost and estimated fair value of available-for-sale debt securities are presented below by contractual maturity:



(in thousands, except percentage data)	Less Than One Year			After One Through Five Years			After Five Through Ten Years			After Ten Years			Total
December 31, 2019
Available-for-sale:
Residential mortgage-backed securities:(1)
Amortized cost	$	—		$	1,005		$	—		$	3,986		$	4,991
Estimated fair value	—			1,088			—			4,178			5,266
Weighted average yield(3)	—		%	5.54		%	—		%	4.31		%	4.55		%
Tax-exempt asset-backed securities:(1)
Amortized Cost	—			—			—			183,225			183,225
Estimated fair value	—			—			—			197,027			197,027
Weighted average yield(2)(3)	—		%	—		%	—		%	4.20		%	4.20		%
CRT securities:(1)
Amortized Cost	—			—			—			14,713			14,713
Estimated fair value	—			—			—			11,964			11,964
Weighted average yield(3)	—		%	—		%	—		%	1.71		%	1.71		%
Total available-for-sale debt securities:
Amortized cost													$	202,929
Estimated fair value													$	214,257

December 31, 2018
Available-for-sale:
Residential mortgage-backed securities:(1)
Amortized cost	$	3		$	1,573		$	—		$	5,298		$	6,874
Estimated fair value	4			1,668			—			5,570			7,242
Weighted average yield(3)	6.50		%	5.54		%	—		%	4.53		%	4.76		%
Tax-exempt asset-backed securities:(1)
Amortized Cost	—			—			—			95,518			95,518
Estimated fair value	—			—			—			95,804			95,804
Weighted average yield(2)(3)	—		%	—		%	—		%	4.25		%	4.25		%
Total available-for-sale debt securities:
Amortized cost													$	102,392
Estimated fair value													$	103,046


(1)	Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.


(2)	Yields have been adjusted to a tax equivalent basis assuming a 21% federal tax rate.


(3)	Yields are calculated based on amortized cost.

The following table discloses our available-for-sale debt securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months:



December 31, 2019	Less Than 12 Months					12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
CRT securities	$	11,964	$	(2,749	)	$	—	$	—	$	11,964	$	(2,749	)

At December 31, 2019, the CRT securities were the only available-for-sale debt securities in an unrealized loss position. There were no available-for-sale debt securities in an unrealized loss position at December 31, 2018.

We conduct periodic reviews of securities with unrealized losses to evaluate whether the impairment is other-than-temporary. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for available-for-sale debt securities. When we have the intent to sell or we believe we will more likely than not be required to sell an available-for-sale debt security, the entire excess of its amortized cost basis over its fair value is recognized in earnings. For available-for-sale debt securities that we do not intend to sell and are not likely to be required to sell, only the credit-related impairment is recognized in earnings and any non-credit-related impairment is recorded in AOCI.

Based on the results of our periodic review of available-for-sale debt securities in an unrealized loss position at March 31, 2019, we recorded a $331,000 other-than-temporary credit-related impairment on the CRT securities, reducing the amortized cost of the securities. The loss was measured as the excess of the amortized cost basis of the security over the present value of cash flows expected to be collected and was recorded in other non-interest expense. Based on the results of our periodic review at December 31, 2019, no additional other-than-temporary credit-related impairment was recorded on the CRT securities, as the remaining loss position is not believed to be other-than-temporary. Our periodic review at December 31, 2019 included an evaluation of the near-term prospects of the investments in relation to the severity and duration of the unrealized losses. Based on that evaluation we have determined that we have the ability and intent to hold the investments until recovery of fair value.

Available-for-sale debt securities with carrying values of approximately $3.5 million and $1.2 million were pledged to secure certain customer repurchase agreements and deposits, respectively, at December 31, 2019. The comparative amounts at December 31, 2018 were $4.8 million and $1.7 million, respectively.

Equity Securities

Equity securities consist of Community Reinvestment Act funds and investments related to our non-qualified deferred compensation plan. At December 31, 2019 and December 31, 2018, we had $25.6 million and $17.2 million, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains/(losses) recognized on equity securities and included in other non-interest income in the consolidated statements of income:



		Year Ended December 31,
(in thousands)		2019		2018
Net gains/(losses) recognized during the period	$	2,383	$	(975	)
Less: Realized net gains/(losses) recognized during the period on equity securities sold	119			460
Unrealized net gains/(losses) recognized during the period on equity securities still held	$	2,264	$	(1,435	)