Securities

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Securities

4.     Securities

The Company did not hold any trading securities at March 31, 2020 and December 31, 2019. Securities available for sale are recorded at fair value. Securities held-to-maturity (“HTM”) are recorded at amortized cost.

Upon adoption of ASC Topic 326, “Credit Losses” on January 1, 2020, see Note 16 related to the adoption of Topic 326, we recorded a transition adjustment of $0.3 million in the allowance for credit losses for held-to-maturity debt securities.

Allowance for credit losses

The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical information, current conditions and a reasonable and supportable forecast. The Company’s portfolio is made up of three securities, two of which are structured similar to a Commercial owner occupied loan, which is modeled for credit losses similar to Commercial business loans secured by real estate. The other security is issued and guaranteed by Fannie Mae, which is a government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S. government and therefore the Company assumes a zero loss expectation. Accrued interest receivable on held-to-maturity securities totaled $0.1 million at March 31, 2020 and is excluded from estimates of credit losses.

The following table summarizes the Company’s portfolio of securities held-to-maturity at March 31, 2020:

					Gross		Gross		Allowance
	Amortized				Unrealized		Unrealized		for Credit
	Cost		Fair Value		Gains		Losses		Losses
	(In thousands)
Securities held-to-maturity:
Municipals	$	50,627	$	51,938	$	1,311	$	—	$	(402)
Total other securities		50,627		51,938		1,311		—		(402)
FNMA		7,929		8,953		1,024		—		—
Total mortgage-backed securities		7,929		8,953		1,024		—		—
Total	$	58,556	$	60,891	$	2,335	$	—	$	(402)

The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2019:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities held-to-maturity:
Municipals	$	50,954	$	53,998	$	3,044	$	—
Total other securities		50,954		53,998		3,044		—
FNMA		7,934		8,114		180		—
Total mortgage-backed securities		7,934		8,114		180		—
Total	$	58,888	$	62,112	$	3,224	$	—

The following table summarizes the Company’s portfolio of securities available for sale at March 31, 2020:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities available for sale:
Corporate	$	130,000	$	111,852	$	—	$	18,148
Municipals		12,743		12,801		58		—
Mutual funds		12,476		12,476		—		—
Collateralized loan obligations		100,361		87,372		—		12,989
Other		1,355		1,355		—		—
Total other securities		256,935		225,856		58		31,137
REMIC and CMO		341,170		348,109		7,329		390
GNMA		602		659		57		—
FNMA		99,676		102,224		2,572		24
FHLMC		37,630		38,564		934		—
Total mortgage-backed securities		479,078		489,556		10,892		414
Total securities available for sale	$	736,013	$	715,412	$	10,950	$	31,551

The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2019:

					Gross		Gross
	Amortized				Unrealized		Unrealized
	Cost		Fair Value		Gains		Losses
	(In thousands)
Securities available for sale:
Corporate	$	130,000	$	123,050	$	—	$	6,950
Municipals		12,797		12,916		119		—
Mutual funds		12,216		12,216		—		—
Collateralized loan obligations		100,349		99,137		—		1,212
Other		1,332		1,332		—		—
Total other securities		256,694		248,651		119		8,162
REMIC and CMO		348,236		348,989		2,193		1,440
GNMA		653		704		51		—
FNMA		104,235		104,882		1,073		426
FHLMC		68,476		69,274		871		73
Total mortgage-backed securities		521,600		523,849		4,188		1,939
Total securities available for sale	$	778,294	$	772,500	$	4,307	$	10,101

We did not hold any private issue CMO’s that are collateralized by commercial real estate mortgages at March 31, 2020 and December 31, 2019.

The corporate securities held by the Company at March 31, 2020 and December 31, 2019 are issued by U.S. banking institutions.

The following tables detail the amortized cost and fair value of the Company’s securities classified as held-to-maturity and available for sale at March 31, 2020, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized
Securities held-to-maturity:	Cost		Fair Value
	(In thousands)
Due in one year or less	$	—	$	—
Due after ten years		50,627		51,938
Total other securities		50,627		51,938
Mortgage-backed securities		7,929		8,953
Total	$	58,556	$	60,891

	Amortized
Securities available for sale:	Cost		Fair Value
	(In thousands)
Due after one year through five years	$	20,000	$	18,276
Due after five years through ten years		127,923		109,510
Due after ten years		96,536		85,594
Total other securities		244,459		213,380
Mutual funds		12,476		12,476
Mortgage-backed securities		479,078		489,556
Total	$	736,013	$	715,412

The following tables show the Company’s securities with gross unrealized losses and their fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated:

	At March 31, 2020
	Total					Less than 12 months				12 months or more
				Unrealized				Unrealized				Unrealized
	Count	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
Available for sale securities
Corporate	16	$	111,853	$	18,148	$	9,620	$	380	$	102,233	$	17,768
Collateralized loan obligations	13		87,372		12,989		22,521		3,046		64,851		9,943
Total other securities	29		199,225		31,137		32,141		3,426		167,084		27,711
REMIC and CMO	12		67,416		390		64,541		371		2,875		19
FNMA	1		8,812		24		—		—		8,812		24
Total mortgage-backed securities	13		76,228		414		64,541		371		11,687		43
Total	42	$	275,453	$	31,551	$	96,682	$	3,797	$	178,771	$	27,754

	At December 31, 2019
	Total					Less than 12 months				12 months or more
				Unrealized				Unrealized				Unrealized
	Count	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
Available for sale securities
Corporate	16	$	123,050	$	6,950	$	—	$	—	$	123,050	$	6,950
Collateralized loan obligations	13		99,137		1,212		25,451		108		73,686		1,104
Total other securities	29		222,187		8,162		25,451		108		196,736		8,054
REMIC and CMO	23		120,989		1,440		102,384		1,117		18,605		323
GNMA	1		49		—		49		—		—		—
FNMA	8		67,618		426		19,073		138		48,545		288
FHLMC	1		30,200		73		—		—		30,200		73
Total mortgage-backed securities	33		218,856		1,939		121,506		1,255		97,350		684
Total securities available for sale	62	$	441,043	$	10,101	$	146,957	$	1,363	$	294,086	$	8,738

The Company reviewed each available for sale debt securities that had an unrealized loss at March 31, 2020 to evaluate whether the decline in fair value resulted from credit losses or other factors. The Company does not have the intent to sell these securities and it is more likely than not the Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion is based upon considering the Company’s cash and working capital requirements and contractual and regulatory obligations, none of which the Company believes would cause the sale of the securities. All of these securities are rated investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be settled at a price that is less than the amortized cost of the Company’s investment.

In determining the risk of loss for available for sale securities, the Company considered that Mortgage-Backed Securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to U.S. government, the issuer of Corporate securities are global systematically important banks, and the tranche of the purchased CLO’s. Each of these securities is performing according to its terms and, in the opinion of management, will continue to perform according to its terms. Based on this review management believes that the unrealized losses have resulted from other factors not deemed credit-related and no allowance for credit loss was recorded.

Accrued interest receivable on available-for-sale debt securities totaled $2.4 million at March 31, 2020 and is excluded from the estimate of credit losses.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity for the three months ended March 31, 2020:

	Mortgage-backed securities		Other securities
	(In thousands)
Beginning balance	$	—	$	—
CECL adoption		—		340
Provision		—		62
Allowance for credit losses - securities	$	—	$	402

Realized gains and losses on the sales of securities are determined using the specific identification method. The Company sold $64.6 million in mortgage-backed securities during the three months ended March 31, 2020. The Company did not sell any securities during the three months ended March 31, 2019.

The following table represents the gross gains and gross losses realized from the sale of securities available for sale for the periods indicated:

	For the three months ended
	March 31,
	2020		2019
Gross gains from the sale of securities	$	713	$	—
Gross losses from the sale of securities		(750)		—
Net losses from the sale of securities	$	(37)	$	—