Investment Securities

3 Months Ended

Mar. 31, 2023

(4.) INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):


	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
March 31, 2023
Securities available for sale:
U.S. Government agency and government sponsored enterprises	$	24,535		$	—	$	2,877	$	21,658
Mortgage-backed securities:
Federal National Mortgage Association		536,221			—		68,817		467,404
Federal Home Loan Mortgage Corporation		398,487			—		62,373		336,114
Government National Mortgage Association		111,527			1		18,295		93,233
Collateralized mortgage obligations:
Federal National Mortgage Association		11,938			—		2,326		9,612
Federal Home Loan Mortgage Corporation		21,143			—		4,064		17,079
Privately issued		—			342		—		342
Total mortgage-backed securities		1,079,316			343		155,875		923,784
Total available for sale securities	$	1,103,851		$	343	$	158,752	$	945,442
Securities held to maturity:
U.S. Government agency and government sponsored enterprises	$	16,400		$	—	$	544	$	15,856
State and political subdivisions		93,678			32		6,012		87,698
Mortgage-backed securities:
Federal National Mortgage Association		6,038			—		457		5,581
Federal Home Loan Mortgage Corporation		7,786			—		1,256		6,530
Government National Mortgage Association		21,783			—		1,723		20,060
Collateralized mortgage obligations:
Federal National Mortgage Association		13,536			—		963		12,573
Federal Home Loan Mortgage Corporation		16,781			—		1,022		15,759
Government National Mortgage Association		4,055			—		300		3,755
Total mortgage-backed securities		69,979			—		5,721		64,258
Total held to maturity securities		180,057		$	32	$	12,277	$	167,812
Allowance for credit losses – securities		(5	)
Total held to maturity securities, net	$	180,052
December 31, 2022
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	24,535		$	—	$	3,420	$	21,115
Mortgage-backed securities:
Federal National Mortgage Association		545,797			—		76,193		469,604
Federal Home Loan Mortgage Corporation		410,829			—		68,608		342,221
Government National Mortgage Association		112,202			1		18,037		94,166
Collateralized mortgage obligations:
Federal National Mortgage Association		12,175			—		2,603		9,572
Federal Home Loan Mortgage Corporation		21,519			—		4,163		17,356
Privately issued		—			337		—		337
Total mortgage-backed securities		1,102,522			338		169,604		933,256
Total available for sale securities	$	1,127,057		$	338	$	173,024	$	954,371

(4.) INVESTMENT SECURITIES (Continued)


	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
December 31, 2022 (continued)
Securities held to maturity:
U.S. Government agencies and government sponsored enterprises	$	16,363		$	—	$	848	$	15,515
State and political subdivisions		97,583			24		7,172		90,435
Mortgage-backed securities:
Federal National Mortgage Association		8,332			—		582		7,750
Federal Home Loan Mortgage Corporation		7,959			—		1,396		6,563
Government National Mortgage Association		22,541			—		2,116		20,425
Collateralized mortgage obligations:									-
Federal National Mortgage Association		14,268			—		1,119		13,149
Federal Home Loan Mortgage Corporation		17,712			—		1,253		16,459
Government National Mortgage Association		4,222			—		330		3,892
Total mortgage-backed securities		75,034			—		6,796		68,238
Total held to maturity securities		188,980		$	24	$	14,816	$	174,188
Allowance for credit losses – securities		(5	)
Total held to maturity securities, net	$	188,975

The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities disclosed throughout this footnote. For available for sale (“AFS”) debt securities, AIR totaled $2.0 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively. For held to maturity (“HTM”) debt securities, AIR totaled $1.0 million and $695 thousand as of March 31, 2023 and December 31, 2022, respectively. AIR is included in other assets on the Company’s consolidated statements of financial condition.

For the three months ended March 31, 2023 and 2022, credit loss (credit) expense for HTM investment securities was a credit of less than $1 thousand in each period.

Investment securities with a total fair value of $891.5 million and $850.4 million at March 31, 2023 and December 31, 2022, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

There were no sales of securities available for sale for the three months ended March 31, 2023 and 2022.

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2023 are shown below (in thousands). Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.


	Amortized		Fair
	Cost		Value
Debt securities available for sale:
Due in one year or less	$	6	$	6
Due from one to five years		94,972		88,334
Due after five years through ten years		136,369		121,867
Due after ten years		872,504		735,235
Total available for sale securities	$	1,103,851	$	945,442
Debt securities held to maturity:
Due in one year or less	$	29,636	$	29,584
Due from one to five years		41,802		41,036
Due after five years through ten years		39,142		36,799
Due after ten years		69,477		60,393
Total held to maturity securities	$	180,057	$	167,812

(4.) INVESTMENT SECURITIES (Continued)

Unrealized losses on investment securities for which an allowance for credit losses has not been recorded and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):


	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2023
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	21,658	$	2,877	$	21,658	$	2,877
Mortgage-backed securities:
Federal National Mortgage Association		276		3		467,128		68,814		467,404		68,817
Federal Home Loan Mortgage Corporation		8,698		514		327,416		61,859		336,114		62,373
Government National Mortgage Association		138		3		93,071		18,292		93,209		18,295
Collateralized mortgage obligations:
Federal National Mortgage Association		—		—		9,612		2,326		9,612		2,326
Federal Home Loan Mortgage Corporation		—		—		17,079		4,064		17,079		4,064
Total mortgage-backed securities		9,112		520		914,306		155,355		923,418		155,875
Total available for sale securities		9,112		520		935,964		158,232		945,076		158,752
Total AFS debt securities with unrealized losses	$	9,112	$	520	$	935,964	$	158,232	$	945,076	$	158,752
December 31, 2022
Securities available for sale:
U.S. Government agencies and government sponsored enterprises	$	—	$	—	$	21,115	$	3,420	$	21,115	$	3,420
Mortgage-backed securities:
Federal National Mortgage Association		154,006		14,708		315,598		61,485		469,604		76,193
Federal Home Loan Mortgage Corporation		28,493		2,199		313,728		66,409		342,221		68,608
Government National Mortgage Association		10,301		921		83,841		17,116		94,142		18,037
Collateralized mortgage obligations:
Federal National Mortgage Association		1,000		94		8,572		2,509		9,572		2,603
Federal Home Loan Mortgage Corporation		—		—		17,356		4,163		17,356		4,163
Total mortgage-backed securities		193,800		17,922		739,095		151,682		932,895		169,604
Total available for sale securities		193,800		17,922		760,210		155,102		954,010		173,024
Total AFS debt securities with unrealized losses	$	193,800	$	17,922	$	760,210	$	155,102	$	954,010	$	173,024

(4.) INVESTMENT SECURITIES (Continued)

The total number of available for sale securities positions in the investment portfolio, for which an allowance for credit losses has not been recorded, in the investment portfolio in an unrealized loss position at March 31, 2023 was 222 compared to 226 at December 31, 2022. At March 31, 2023, the Company had positions in 189 investment securities with a fair value of $936.0 million and a total unrealized loss of $158.2 million that had been in a continuous unrealized loss position for more than 12 months. At March 31, 2023, there were a total of 33 securities positions in the Company’s investment portfolio with a fair value of $9.1 million and a total unrealized loss of $520 thousand that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2022, the Company had a position in 127 investment securities with a fair value of $760.2 million and a total unrealized loss of $155.1 million that had been in a continuous unrealized loss position for more than 12 months. At December 31, 2022, there were a total of 99 securities positions in the Company’s investment portfolio with a fair value of $193.8 million and a total unrealized loss of $17.9 million that had been in a continuous unrealized loss position for less than 12 months. The unrealized loss on investment securities was predominantly caused by changes in market interest rates subsequent to purchase. The fair value of most of the investment securities in the Company’s portfolio fluctuates as market interest rates change.

Securities Available for Sale

As of March 31, 2023 and December 31, 2022, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities were impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our available for sale securities and in consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Securities Held to Maturity

The Company’s HTM investment securities include debt securities that are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. In addition, the Company’s HTM investment securities include debt securities that are issued by state and local government agencies, or municipal bonds.

The Company monitors the credit quality of our municipal bonds through the use of a credit rating agency or by ratings that are derived by an internal scoring model. The scoring methodology for the internally derived ratings is based on a series of financial ratios for the municipality being reviewed as compared to typical industry figures. This information is used to determine the financial strengths and weaknesses of the municipality, which is indicated with a numeric rating. This number is then converted into a letter rating to better match the system used by the credit rating agencies. As of March 31, 2023, $87.3 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $6.0 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating, and $0.4 million in non-rated bonds all of which mature in 2023. Additionally, no municipal bonds were rated below investment grade. As of December 31, 2022, $90.6 million of our municipal bonds were rated as an equivalent to Standard & Poor’s A/AA/AAA, with $6.9 million internally rated to be the equivalent of Standard & Poor’s A/AA/AAA rating, no municipal bonds were rated below investment grade.

As of March 31, 2023 and December 31, 2022, the Company had no past due or nonaccrual held to maturity investment securities.