Securities

6 Months Ended

Jun. 30, 2022

3.	Securities

Securities available for sale (“AFS”) consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
June 30, 2022
U.S. agency	$	14,549	$	23	$	581	$	13,991
U.S. agency residential mortgage-backed		108,141		35		7,487		100,689
U.S. agency commercial mortgage-backed		16,873		-		1,282		15,591
Private label mortgage-backed		106,549		256		6,966		99,839
Other asset backed		240,479		3		6,247		234,235
Obligations of states and political subdivisions		358,103		42		45,230		312,915
Corporate		88,644		50		7,685		81,009
Trust preferred		977		-		41		936
Foreign government		500		-		1		499
Total	$	934,815	$	409	$	75,520	$	859,704

December 31, 2021
U.S. agency	$	34,634	$	152	$	112	$	34,674
U.S. agency residential mortgage-backed		309,907		1,952		3,874		307,985
U.S. agency commercial mortgage-backed		23,066		84		224		22,926
Private label mortgage-backed		102,480		807		672		102,615
Other asset backed		215,235		1,204		269		216,170
Obligations of states and political subdivisions		568,355		9,942		2,221		576,076
Corporate		148,707		2,446		1,194		149,959
Trust preferred		1,975		-		56		1,919
Foreign government		499		7		-		506
Total	$	1,404,858	$	16,594	$	8,622	$	1,412,830

Securities held to maturity (“HTM”) consist of the following:

			Transferred
	Carrying		Unrealized				Amortized		Unrealized
	Value		Loss (1)		ACL		Cost		Gains		Losses		Fair Value
							(In thousands)
June 30, 2022
U.S. agency	$	28,432	$	1,959	$	-	$	30,391	$	-	$	3,533	$	26,858
U.S. agency residential mortgage-backed		123,483		11,556		-		135,039		1		19,271		115,769
U.S. agency commercial mortgage-backed		5,071		273		-		5,344		-		432		4,912
Private label mortgage-backed		7,211		473		2		7,686		-		796		6,890
Obligations of states and political subdivisions		168,189		9,542		30		177,761		38		20,166		157,633
Corporate		48,283		1,292		121		49,696		12		3,058		46,650
Trust preferred		939		56		5		1,000		-		11		989
Total	$	381,608	$	25,151	$	158	$	406,917	$	51	$	47,267	$	359,701

(1)	Represents the remaining unrealized loss to be accreted on securities that were transferred from AFS to HTM on April 1, 2022.

On April 1, 2022, we transferred certain securities AFS with an amortized cost and unrealized loss at the date of transfer of $418.1 million and $26.5 million, respectively to HTM. The transfer was made at fair value, with the unrealized loss becoming part of the purchase discount which will be accreted over the remaining life of the securities. The other comprehensive loss component is separated from the remaining available for sale securities and is accreted over the remaining life of the securities transferred. We have the ability and intent to hold these securities until they mature, at which time we expect to receive full value for these securities.

Gross unrealized losses and fair values for securities available for sale aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position follows:

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
June 30, 2022
U.S. agency	$	11,436	$	580	$	864	$	1	$	12,300	$	581
U.S. agency residential mortgage-backed		78,099		6,344		18,542		1,143		96,641		7,487
U.S. agency commercial mortgage-backed		15,156		1,234		435		48		15,591		1,282
Private label mortgage-backed		97,269		6,863		1,950		103		99,219		6,966
Other asset backed		231,837		6,213		1,432		34		233,269		6,247
Obligations of states and political subdivisions		277,070		39,550		28,336		5,680		305,406		45,230
Corporate		74,016		7,368		1,711		317		75,727		7,685
Trust preferred		-		-		936		41		936		41
Foreign government		499		1		-		-		499		1
Total	$	785,382	$	68,153	$	54,206	$	7,367	$	839,588	$	75,520

December 31, 2021
U.S. agency	$	11,986	$	109	$	1,286	$	3	$	13,272	$	112
U.S. agency residential mortgage-backed		171,398		3,555		19,024		319		190,422		3,874
U.S. agency commercial mortgage-backed		19,900		224		-		-		19,900		224
Private label mortgage-backed		64,408		640		2,180		32		66,588		672
Other asset backed		86,581		248		978		21		87,559		269
Obligations of states and political subdivisions		178,484		2,151		7,093		70		185,577		2,221
Corporate		75,166		1,150		1,050		44		76,216		1,194
Trust preferred		-		-		1,919		56		1,919		56
Total	$	607,923	$	8,077	$	33,530	$	545	$	641,453	$	8,622

Securities AFS in unrealized loss positions are evaluated quarterly for impairment related to credit losses. For securities AFS in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities AFS that do not meet this criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, adverse conditions specifically related to the security and the issuer and the impact of changes in market interest rates on the market value of the security, among other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an ACL is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of applicable taxes. No ACL for securities AFS was needed at June 30, 2022. Accrued interest receivable on securities AFS totaled $4.5 million and $6.0 million at June 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses and is included in accrued income and other assets in the Condensed Consolidated Statements of Financial Condition.

U.S. agency, U.S. agency residential mortgage-backed and U.S. agency commercial mortgage-backed securities — at June 30, 2022, we had 27 U.S. agency, 162 U.S. agency residential mortgage-backed and 16 U.S. agency commercial mortgage-backed securities whose fair value is less than amortized cost. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. The unrealized losses are largely attributed to widening spreads to Treasury bonds and/or an increase in interest rates since acquisition.

Private label mortgage backed, other asset backed, corporate and foreign securities — at June 30, 2022, we had 96 private label mortgage backed, 145 other asset backed, 81 corporate and one foreign securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and/or an increase in interest rates since acquisition.

Obligations of states and political subdivisions — at June 30, 2022, we had 339 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to an increase in interest rates since acquisition.

Trust preferred securities — at June 30, 2022, we had one trust preferred security whose fair value is less than amortized cost. This trust preferred security is a single issue security issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. This security is rated by a major rating agency as investment grade.

At June 30, 2022 management does not intend to liquidate any of the securities discussed above and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses.

We recorded no credit related charges in our Condensed Consolidated Statements of Operations related to securities AFS during the three and six month periods ended June 30, 2022 and 2021, respectively.

The ACL on securities HTM is a contra asset valuation account that is deducted from the carrying amount of securities HTM to present the net amount expected to be collected. Securities HTM are charged off against the ACL when deemed uncollectible. Adjustments to the ACL are reported in our Condensed Consolidated Statements of Operations in provision for credit loss. We measure expected credit losses on securities HTM on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Accrued interest receivable on securities HTM totaled $1.7 million at June 30, 2022, and is excluded from the estimate of credit losses and is included in accrued income and other assets in the Condensed Consolidated Statements of Financial Condition. With regard to U.S. Government-sponsored agency and mortgage-backed securities (residential and commercial), all these securities are issued by a U.S. government-sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has been recorded for these securities. With regard to obligations of states and political subdivisions, private label-mortgage-backed, corporate and trust preferred securities HTM, we consider (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss rates associated with securities having similar grades as those in our portfolio have been insignificant. Furthermore, as of June 30, 2022, there were no past due principal and interest payments associated with these securities. An allowance for credit losses of $158,000 was recorded on non U.S. agency securities HTM based on applying the long-term historical credit loss rate, as published by Moody’s, for similarly rated securities.

On a quarterly basis, we monitor the credit quality of securities HTM through the use of credit ratings. The carrying value of securities HTM at June 30, 2022, aggregated by credit quality follow:

	Private Label Mortgage- Backed		Obligations of States and Political Subdivisions		Corporate		Trust Preferred		Carrying Value Total
	(In thousands)
Credit rating:
AAA	$	7,211	$	34,598	$	-	$	-	$	41,809
AA		-		109,674		-		-		109,674
A		-		5,197		6,884		-		12,081
BBB		-		1,174		38,515		-		39,689
Non-rated		-		17,546		2,884		939		21,369
Total	$	7,211	$	168,189	$	48,283	$	939	$	224,622

An analysis of the allowance for credit losses by security HTM type follows:

	Private Label Mortgage- Backed		Obligations of States and Political Subdivisions		Corporate		Trust Preferred		Total
	(In thousands)
Three months ended June 30, 2022
Balance at beginning of period	$	-	$	-	$	-	$	-	$	-
Additions (deductions)										-
Provision for credit losses		2		30		121		5		158
Recoveries credited to the allowance		-		-		-		-		-
Securities HTM charged against the allowance		-		-		-		-		-
Balance at end of period	$	2	$	30	$	121	$	5	$	158

Six months ended June 30, 2022
Balance at beginning of period	$	-	$	-	$	-	$	-	$	-
Additions (deductions)										-
Provision for credit losses		2		30		121		5		158
Recoveries credited to the allowance		-		-		-		-		-
Securities HTM charged against the allowance		-		-		-		-		-
Balance at end of period	$	2	$	30	$	121	$	5	$	158

The amortized cost and fair value of securities AFS and securities HTM at June 30, 2022, by contractual maturity, follow:

	Securities AFS				Securities HTM
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	10,083	$	10,109	$	4,247	$	4,241
Maturing after one year but within five years		100,901		94,331		41,546		39,085
Maturing after five years but within ten years		134,151		118,515		119,016		108,172
Maturing after ten years		217,638		186,395		94,039		80,632
		462,773		409,350		258,848		232,130
U.S. agency residential mortgage-backed		108,141		100,689		135,039		115,769
U.S. agency commercial mortgage-backed		16,873		15,591		5,344		4,912
Private label mortgage-backed		106,549		99,839		7,686		6,890
Other asset backed		240,479		234,235		-		-
Total	$	934,815	$	859,704	$	406,917	$	359,701

The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Gains and losses realized on the sale of securities AFS are determined using the specific identification method and are recognized on a trade-date basis. A summary of proceeds from the sale of securities AFS and gains and losses for the six month periods ending June 30, follows:

			Realized
	Proceeds		Gains		Losses
	(In thousands)
2022	$	70,523	$	164	$	439
2021		81,178		1,466		50