Securities Held-to-Maturity

9 Months Ended

Sep. 30, 2022

Securities Held-to-Maturity

Securities Held-to-Maturity

Note 7 — Securities Held-to-Maturity

Agency Private Label Certificates (“APL certificates”). In connection with our Private Label securitizations, we retain the most subordinate class of the APL certificates in satisfaction of credit risk retention requirements. At September 30, 2022, we retained APL certificates with an initial face value of $192.8 million, which were purchased at a discount for $119.0 million. These certificates are collateralized by 5-year to 10-year fixed rate first mortgage loans on multifamily properties, bear interest at an initial weighted average variable rate of 3.94% and have an estimated weighted average remaining maturity of 7.78 years. The weighted average effective interest rate was 8.85% and 9.11% at September 30, 2022 and December 31, 2021, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $6.8 million is estimated to mature after one year through five years and $186.0 million is estimated to mature after five years through ten years.

Agency B Piece Bonds. Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program. As part of the securitizations under the SBL program, we have the ability to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. At September 30, 2022, we retained 49%, or $106.2 million initial face value, of seven B Piece bonds, which were purchased at a discount for $74.7 million, and sold the remaining 51% to a third-party. These securities are collateralized by a pool of multifamily mortgage loans, bear interest at an initial weighted average variable rate of 3.74% and have an estimated weighted average remaining maturity of 6.0 years. The weighted average effective interest rate was 11.92% and 11.32% at September 30, 2022 and December 31, 2021, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $7.5 million is estimated to mature within one year, $19.8 million is estimated to mature after one year through five years, $0.8 million is estimated to mature after five years through ten years and $15.8 million is estimated to mature after ten years.

A summary of our securities held-to-maturity is as follows (in thousands):

			Net Carrying		Unrealized		Estimated		Allowance for
	Face Value		Value		Gain (Loss)		Fair Value		Credit Losses
September 30, 2022
APL certificates	$	192,791	$	123,291	$	(9,786)	$	113,505	$	1,803
B Piece bonds		43,921		34,527		1,995		36,522		287
Total	$	236,712	$	157,818	$	(7,791)	$	150,027	$	2,090
December 31, 2021
APL certificates	$	149,368	$	92,869	$	5,007	$	97,876	$	1,422
B Piece bonds		61,360		47,615		4,420		52,035		331
Total	$	210,728	$	140,484	$	9,427	$	149,911	$	1,753

A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):

	Three Months Ended September 30, 2022
	APL		B Piece
	Certificates		Bonds		Total
Beginning balance	$	1,756	$	266	$	2,022
Provision for credit loss expense/(reversal)		47		21		68
Ending balance	$	1,803	$	287	$	2,090

	Nine Months Ended September 30, 2022
Beginning balance	$	1,422	$	331	$	1,753
Provision for credit loss expense/(reversal)		381		(44)		337
Ending balance	$	1,803	$	287	$	2,090

The allowance for credit losses on our held-to-maturity securities was estimated on a collective basis by major security type and was based on a reasonable and supportable forecast period and a historical loss reversion for similar securities. The issuers continue to make timely principal and interest payments and we continue to accrue interest on all our securities. At September 30, 2022, no other-than-temporary impairment was recorded on our held-to-maturity securities.

We recorded interest income (including the amortization of discount) related to these investments of $3.7 million and $13.9 million during the three and nine months ended September 30, 2022, respectively, and $3.4 million and $9.4 million during the three and nine months ended September 30, 2021, respectively.