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Investment Securities
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

6. Investment Securities

Investment securities have been classified in the unaudited consolidated balance sheets according to management’s intent. The carrying amounts of securities and their approximate fair values were as follows:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

 

 

(dollars in thousands)

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Sponsored
   Enterprise obligations

 

$

22,998

 

 

$

—

 

 

$

(3,512

)

 

$

19,486

 

 

$

22,997

 

 

$

—

 

 

$

(3,264

)

 

$

19,733

 

Mortgage-backed securities

 

 

144,905

 

 

 

1

 

 

 

(28,139

)

 

 

116,767

 

 

 

158,034

 

 

 

3

 

 

 

(25,354

)

 

 

132,683

 

Corporate debt securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

996

 

 

 

4

 

 

 

—

 

 

 

1,000

 

Total available for sale securities

 

$

167,903

 

 

$

1

 

 

$

(31,651

)

 

$

136,253

 

 

$

182,027

 

 

$

7

 

 

$

(28,618

)

 

$

153,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

4,023

 

 

$

—

 

 

$

(43

)

 

$

3,980

 

 

$

3,970

 

 

$

—

 

 

$

(18

)

 

$

3,952

 

Mortgage-backed securities

 

 

890,160

 

 

 

2

 

 

 

(182,990

)

 

 

707,172

 

 

 

951,372

 

 

 

4

 

 

 

(157,208

)

 

 

794,168

 

Corporate debt securities

 

 

250

 

 

 

—

 

 

 

(4

)

 

 

246

 

 

 

250

 

 

 

—

 

 

 

(6

)

 

 

244

 

Municipal securities

 

 

86,158

 

 

 

—

 

 

 

(12,920

)

 

 

73,238

 

 

 

96,405

 

 

 

88

 

 

 

(9,271

)

 

 

87,222

 

Total held to maturity securities

 

$

980,591

 

 

$

2

 

 

$

(195,957

)

 

$

784,636

 

 

$

1,051,997

 

 

$

92

 

 

$

(166,503

)

 

$

885,586

 

Total

 

$

1,148,494

 

 

$

3

 

 

$

(227,608

)

 

$

920,889

 

 

$

1,234,024

 

 

$

99

 

 

$

(195,121

)

 

$

1,039,002

 

All of the Company’s mortgage-backed securities have been issued by, or are collateralized by securities issued by, the Government National Mortgage Association (“Ginnie Mae” or “GNMA”), the Federal National Mortgage Association (“Fannie Mae” or “FNMA”), or the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”).

 

The following tables show the Company’s investment securities with gross unrealized losses for which an allowance for credit losses has not been recorded at September 30, 2023 or at December 31, 2022, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position:

 

 

 

September 30, 2023

 

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

 

(dollars in thousands)

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Sponsored Enterprise
   obligations

 

$

—

 

 

$

—

 

 

$

19,486

 

 

$

(3,512

)

 

$

19,486

 

 

$

(3,512

)

Mortgage-backed securities

 

 

170

 

 

 

(5

)

 

 

116,498

 

 

 

(28,134

)

 

 

116,668

 

 

 

(28,139

)

Total available for sale securities

 

$

170

 

 

$

(5

)

 

$

135,984

 

 

$

(31,646

)

 

$

136,154

 

 

$

(31,651

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

3,980

 

 

$

(43

)

 

$

—

 

 

$

—

 

 

$

3,980

 

 

$

(43

)

Mortgage-backed securities

 

 

—

 

 

 

—

 

 

 

706,702

 

 

 

(182,990

)

 

 

706,702

 

 

 

(182,990

)

Corporate debt securities

 

 

—

 

 

 

—

 

 

 

246

 

 

 

(4

)

 

 

246

 

 

 

(4

)

Municipal securities

 

 

31,670

 

 

 

(1,420

)

 

 

41,568

 

 

 

(11,500

)

 

 

73,238

 

 

 

(12,920

)

Total held to maturity securities

 

$

35,650

 

 

$

(1,463

)

 

$

748,516

 

 

$

(194,494

)

 

$

784,166

 

 

$

(195,957

)

Total

 

$

35,820

 

 

$

(1,468

)

 

$

884,500

 

 

$

(226,140

)

 

$

920,320

 

 

$

(227,608

)

 

 

 

 

December 31, 2022

 

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

 

(dollars in thousands)

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Sponsored Enterprise
   obligations

 

$

10,722

 

 

$

(2,278

)

 

$

9,012

 

 

$

(986

)

 

$

19,734

 

 

$

(3,264

)

Mortgage-backed securities

 

 

41,832

 

 

 

(3,097

)

 

 

90,545

 

 

 

(22,257

)

 

 

132,377

 

 

 

(25,354

)

Total available for sale securities

 

$

52,554

 

 

$

(5,375

)

 

$

99,557

 

 

$

(23,243

)

 

$

152,111

 

 

$

(28,618

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

3,952

 

 

$

(18

)

 

$

—

 

 

$

—

 

 

$

3,952

 

 

$

(18

)

Mortgage-backed securities

 

 

230,708

 

 

 

(22,362

)

 

 

562,835

 

 

 

(134,846

)

 

 

793,543

 

 

 

(157,208

)

Corporate debt securities

 

 

243

 

 

 

(6

)

 

 

—

 

 

 

—

 

 

 

243

 

 

 

(6

)

Municipal securities

 

 

51,969

 

 

 

(4,388

)

 

 

13,714

 

 

 

(4,883

)

 

 

65,683

 

 

 

(9,271

)

Total held to maturity securities

 

$

286,872

 

 

$

(26,774

)

 

$

576,549

 

 

$

(139,729

)

 

$

863,421

 

 

$

(166,503

)

Total

 

$

339,426

 

 

$

(32,149

)

 

$

676,106

 

 

$

(162,972

)

 

$

1,015,532

 

 

$

(195,121

)

As of September 30, 2023, 464 debt securities had gross unrealized losses, with an aggregate depreciation of 19.8% from the Company’s amortized cost basis. The largest unrealized dollar loss of any single security was $2.5 million, or 28.0% of its amortized cost. The largest unrealized loss percentage of any single security was 44.1% of its amortized cost, or $1.0 million.

The Company believes that the nature and duration of unrealized losses on its debt security positions are primarily a function of interest rate movements and changes in investment spreads and does not consider full repayment of principal on the reported debt obligations to be at risk. Since nearly all of these securities are rated “investment grade” and (a) the Company does not intend to sell these securities before recovery and (b) it is more likely than not that the Company will not be required to sell these securities before recovery, the Company does not expect to suffer a credit loss as of September 30, 2023.

The Company had no pledged securities as collateral for repurchase agreements at September 30, 2023. The Company pledged U.S. Government obligations with an amortized cost of $9.1 million and a fair value of $8.0 million as collateral for repurchase agreements at December 31, 2022.

 

The amortized cost and fair value of debt securities, aggregated by the earlier of call date or contractual maturity, are shown below. Maturities of mortgage-backed securities do not take into consideration scheduled amortization or prepayments. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

The accrued interest receivable on held to maturity securities totaled $2.0 million and $2.2 million as of September 30, 2023 and December 31, 2022 and is included within accrued interest receivable on the Consolidated Balance Sheets. The Company did not record any write-offs of accrued interest receivable on held to maturity securities during either the three or nine months ended September 30, 2023 or 2022. No securities held by the Company were delinquent on contractual payments as of either September 30, 2023 or December 31, 2022, nor were any securities placed on non-accrual status during the nine and twelve month periods then ended.

 

 

 

September 30, 2023

 

 

 

Within One Year

 

 

After One, But
Within Five Years

 

 

After Five, But
Within Ten Years

 

 

After Ten Years

 

 

Total

 

 

 

Amortized
Cost

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Fair
Value

 

 

Amortized
Cost

 

 

Fair
Value

 

 

 

(dollars in thousands)

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Sponsored Enterprise obligations

 

$

—

 

 

$

—

 

 

$

9,998

 

 

$

9,139

 

 

$

5,000

 

 

$

4,243

 

 

$

8,000

 

 

$

6,104

 

 

$

22,998

 

 

$

19,486

 

Mortgage-backed securities

 

 

—

 

 

 

—

 

 

 

12,119

 

 

 

11,282

 

 

 

37,607

 

 

 

30,222

 

 

 

95,179

 

 

 

75,263

 

 

 

144,905

 

 

 

116,767

 

Corporate debt securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total available for sale securities

 

$

—

 

 

$

—

 

 

$

22,117

 

 

$

20,421

 

 

$

42,607

 

 

$

34,465

 

 

$

103,179

 

 

$

81,367

 

 

$

167,903

 

 

$

136,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes

 

$

3,064

 

 

$

3,040

 

 

$

959

 

 

$

940

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

4,023

 

 

$

3,980

 

Mortgage-backed securities

 

 

—

 

 

 

—

 

 

 

24,211

 

 

 

22,481

 

 

 

50,175

 

 

 

41,070

 

 

 

815,774

 

 

 

643,621

 

 

 

890,160

 

 

 

707,172

 

Corporate debt securities

 

 

250

 

 

 

246

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

250

 

 

 

246

 

Municipal securities

 

 

3,559

 

 

 

3,541

 

 

 

22,455

 

 

 

21,576

 

 

 

22,583

 

 

 

20,739

 

 

 

37,561

 

 

 

27,382

 

 

 

86,158

 

 

 

73,238

 

Total held to maturity securities

 

$

6,873

 

 

$

6,827

 

 

$

47,625

 

 

$

44,997

 

 

$

72,758

 

 

$

61,809

 

 

$

853,335

 

 

$

671,003

 

 

$

980,591

 

 

$

784,636

 

Total

 

$

6,873

 

 

$

6,827

 

 

$

69,742

 

 

$

65,418

 

 

$

115,365

 

 

$

96,274

 

 

$

956,514

 

 

$

752,370

 

 

$

1,148,494

 

 

$

920,889

 

There were no sales of investment securities during the three and nine months ended September 30, 2023 or September 30, 2022.

 

The Company monitors the credit quality of certain debt securities through the use of credit rating among other factors on a quarterly basis. Credit ratings are opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and are generally considered to be of low risk. At September 30, 2023 and December 31, 2022 respectively, the Company’s debt securities portfolio did not contain any securities below investment grade, as reported by major credit rating agencies. At September 30, 2023 and December 31, 2022, respectively, none of the Company's investment securities were delinquent or in non-accrual status.

 

The following tables summarize the credit rating of the Company’s debt securities portfolio at September 30, 2023 and December 31, 2022.

 

 

 

September 30, 2023

 

 

 

Mortgage-backed Securities (1)

 

 

Corporate Debt Securities

 

 

Municipal Securities

 

 

U.S. GSE Obligations

 

 

U.S. Treasury Notes

 

 

Total

 

 

 

(dollars in thousands)

 

Available for sale securities, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAA/AA/A

 

$

116,767

 

 

$

—

 

 

$

—

 

 

$

19,486

 

 

$

—

 

 

$

136,253

 

Total available for sale securities

 

$

116,767

 

 

$

—

 

 

$

—

 

 

$

19,486

 

 

$

—

 

 

$

136,253

 

Held to maturity securities, at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAA/AA/A

 

$

890,160

 

 

$

250

 

 

$

86,158

 

 

$

—

 

 

$

4,023

 

 

$

980,591

 

Total held to maturity securities

 

$

890,160

 

 

$

250

 

 

$

86,158

 

 

$

—

 

 

$

4,023

 

 

$

980,591

 

 

 

 

December 31, 2022

 

 

 

Mortgage-backed Securities (1)

 

 

Corporate Debt Securities

 

 

Municipal Securities

 

 

U.S. GSE Obligations

 

 

U.S. Treasury Notes

 

 

Total

 

 

 

(dollars in thousands)

 

Available for sale securities, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAA/AA/A

 

$

132,683

 

 

$

—

 

 

$

—

 

 

$

19,733

 

 

$

—

 

 

$

152,416

 

BBB/BB/B

 

 

—

 

 

 

1,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,000

 

Total available for sale securities

 

$

132,683

 

 

$

1,000

 

 

$

—

 

 

$

19,733

 

 

$

—

 

 

$

153,416

 

Held to maturity securities, at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAA/AA/A

 

$

951,372

 

 

$

250

 

 

$

96,405

 

 

$

—

 

 

$

3,970

 

 

$

1,051,997

 

Total held to maturity securities

 

$

951,372

 

 

$

250

 

 

$

96,405

 

 

$

—

 

 

$

3,970

 

 

$

1,051,997

 

 

 

(1)
Includes agency mortgage-backed pass-through securities and collateralized mortgage obligations issued by U.S. Government Sponsored Enterprises (“GSEs”) and U.S. government agencies, such as FNMA, FHLMC, and GNMA that are not rated by Moody’s or Standard & Poor's. Each security contains a guarantee by the issuing U.S. GSE or agency and therefore carries an implicit guarantee of the U.S. government. These have been categorized as AAA/AA/A.