Securities

12 Months Ended

Dec. 31, 2021

Investments, Debt and Equity Securities [Abstract]

Equity Securities

Equity securities are reported at fair value on the Company’s Consolidated Balance Sheets. The Company’s portfolio of equity securities had an estimated fair value of $8.2 million and $36.0 million as of December 31, 2021 and December 31, 2020, respectively. Realized gains and losses from sales of equity securities, as well as changes in fair value of equity securities still held at the reporting date are recognized in the Consolidated Statements of Income.

The following table presents the disaggregated net gains and losses on equity securities reported in the Consolidated Statements of Income:


	For the Year Ended December 31,
	2021		2020	2019
	(In thousands)
Unrealized gains recognized on equity securities	$	356	256	150
Net losses recognized on equity securities sold	(248)		—	—
Net gains recognized on equity securities	$	108	256	150

Debt Securities

The following tables present the amortized cost, gross unrealized gains and losses, and estimated fair value for available-for-sale debt securities and the amortized cost, net unrealized losses, carrying value, gross unrecognized gains and losses, estimated fair value and allowance for credit losses for held-to-maturity debt securities as of the dates indicated.


	At December 31, 2021
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Estimated fair value
	(In thousands)
Available-for-sale:

Debt securities:
Government-sponsored enterprises	$	3,434	152	—	3,586

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	1,242,073		13,979	6,009	1,250,043
Federal National Mortgage Association	1,022,851		18,076	6,591	1,034,336
Government National Mortgage Association	105,289		1,161	875	105,575
Total mortgage-backed securities available-for-sale	2,370,213		33,216	13,475	2,389,954
Total debt securities available-for-sale	$	2,373,647	33,368	13,475	2,393,540


	At December 31, 2021
	Amortized cost		Net unrealized losses (1)	Carrying value	Gross unrecognized gains (2)	Gross unrecognized losses (2)	Estimated fair value
	(In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	$	133,128	—	133,128	2,254	3,326	132,056
Municipal bonds	214,298		—	214,298	12,906	260	226,944
Corporate and other debt securities	140,795		12,621	128,174	36,035	279	163,930
Total debt securities held-to-maturity	488,221		12,621	475,600	51,195	3,865	522,930
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	478,684		30	478,654	4,158	5,069	477,743
Federal National Mortgage Association	620,026		72	619,954	11,519	2,694	628,779
Government National Mortgage Association	21,444		—	21,444	608	—	22,052

Total mortgage-backed securities held-to-maturity	1,120,154		102	1,120,052	16,285	7,763	1,128,574
Total debt securities held-to-maturity	$	1,608,375	12,723	1,595,652	67,480	11,628	1,651,504
Allowance for credit losses				1,867
Total debt securities held-to-maturity, net of allowance for credit losses				1,593,785

(1) Net unrealized losses of held-to-maturity corporate and other debt securities represent the other than temporary impairment related to other non-credit factors recorded prior to the adoption of the current expected credit losses accounting standard on January 1, 2020 that is being amortized through accumulated other comprehensive income over the remaining life of the securities. For mortgage-backed securities, it represents the net loss on previously designated available-for sale debt securities transferred to held-to-maturity at fair value and is being amortized through accumulated other comprehensive income over the remaining life of the securities.

(2) Unrecognized gains and losses of held-to-maturity debt securities are not reflected in the financial statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as held-to-maturity; or (ii) the date that an other than temporary impairment charge is recognized on a held-to-maturity security, through the date of the balance sheet. Effective January 1, 2020, held-to-maturity debt securities are evaluated for credit losses to determine if an allowance is necessary. Any allowance required is recorded through the provision for credit losses.


	At December 31, 2020
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Estimated fair value
	(In thousands)
Available-for-sale:

Debt securities:
Government-sponsored enterprises	$	4,260	222	—	4,482

Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	1,286,195		30,930	73	1,317,052
Federal National Mortgage Association	1,167,057		38,568	199	1,205,426
Government National Mortgage Association	225,810		5,700	33	231,477

Total mortgage-backed securities available-for-sale	2,679,062		75,198	305	2,753,955
Total debt securities available-for-sale	$	2,683,322	75,420	305	2,758,437


	At December 31, 2020
	Amortized cost		Net unrealized losses (1)	Carrying value	Gross unrecognized gains (2)	Gross unrecognized losses (2)	Estimated fair value
	(In thousands)
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	$	109,016	—	109,016	4,107	709	112,414
Municipal bonds	246,601		—	246,601	14,990	—	261,591
Corporate and other debt securities	144,209		13,644	130,565	20,033	885	149,713
Total debt securities held-to-maturity	499,826		13,644	486,182	39,130	1,594	523,718
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	308,285		66	308,219	9,733	266	317,686
Federal National Mortgage Association	413,601		175	413,426	20,905	—	434,331
Government National Mortgage Association	43,290		—	43,290	1,847	—	45,137


Total mortgage-backed securities held-to-maturity	765,176		241	764,935	32,485	266	797,154
Total debt securities held-to-maturity	$	1,265,002	13,885	1,251,117	71,615	1,860	1,320,872
Allowance for credit losses				3,264
Total debt securities held-to-maturity, net of allowance for credit losses				1,247,853

(2) Unrecognized gains and losses of held-to-maturity debt securities are not reflected in the financial statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as held-to-maturity; or (ii) the date that an other-than-temporary impairment charge is recognized on a held-to-maturity security, through the date of the balance sheet. Effective January 1, 2020, held-to-maturity debt securities are evaluated for credit losses to determine if an allowance is necessary. Any allowance required is recorded through the provision for credit losses.

Gross unrealized losses on debt securities and the estimated 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 at December 31, 2021 and December 31, 2020, were as follows:


	December 31, 2021
	Less than 12 months			12 months or more		Total
	Estimated fair value		Unrealized losses	Estimated fair value	Unrealized losses	Estimated fair value	Unrealized losses
	(In thousands)
Available-for-sale:




Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	$	413,182	5,409	18,017	600	431,199	6,009
Federal National Mortgage Association	315,762		5,721	119,547	870	435,309	6,591
Government National Mortgage Association	20,713		477	7,714	398	28,427	875

Total debt securities available-for-sale	749,657		11,607	145,278	1,868	894,935	13,475
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	62,529		2,074	26,068	1,252	88,597	3,326
Municipal bonds	16,623		260	—	—	16,623	260
Corporate and other debt securities	6,746		279	—	—	6,746	279
Total debt securities held-to-maturity	85,898		2,613	26,068	1,252	111,966	3,865
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	286,238		4,327	11,287	742	297,525	5,069
Federal National Mortgage Association	319,015		2,694	—	—	319,015	2,694

Total mortgage-backed securities held-to-maturity	605,253		7,021	11,287	742	616,540	7,763
Total debt securities held-to-maturity	691,151		9,634	37,355	1,994	728,506	11,628
Total	$	1,440,808	21,241	182,633	3,862	1,623,441	25,103


	December 31, 2020
	Less than 12 months			12 months or more		Total
	Estimated fair value		Unrealized losses	Estimated fair value	Unrealized losses	Estimated fair value	Unrealized losses
	(In thousands)
Available-for-sale:



Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	$	60,502	73	—	—	60,502	73
Federal National Mortgage Association	123,329		199	—	—	123,329	199
Government National Mortgage Association	9,062		33	—	—	9,062	33

Total debt securities available-for-sale	192,893		305	—	—	192,893	305
Held-to-maturity:
Debt securities:
Government-sponsored enterprises	66,558		709	—	—	66,558	709

Corporate and other debt securities	15,038		885	—	—	15,038	885
Total debt securities held-to-maturity	81,596		1,594	—	—	81,596	1,594
Mortgage-backed securities:
Federal Home Loan Mortgage Corporation	40,013		266	—	—	40,013	266




Total debt securities held-to-maturity	121,609		1,860	—	—	121,609	1,860
Total	$	314,502	2,165	—	—	314,502	2,165

We conduct periodic reviews of individual securities to assess whether an allowance for credit loss is required. Held-to-maturity debt securities are evaluated for expected credit loss utilizing a historical loss methodology, or a discounted cash flows approach which is assessed against the book value of the investment security excluding accrued interest. Refer to Note 1, Summary of Significant Accounting Principles, for additional information. Available-for-sale debt securities are evaluated to determine if a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment on available-for-sale securities related to credit factors would be recorded through an allowance for credit losses. The allowance would be limited to the amount by which the security’s amortized cost basis exceeds the fair value. An impairment on available-for-sale securities that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. Investment securities will be written down to fair value through the consolidated statement of income when management intends to sell (or may be required to sell) the securities before they recover in value.

The majority of our held-to-maturity debt securities portfolio is comprised of agency mortgage-backed securities. For agency (FNMA, FHLMC and GNMA) mortgage-backed securities, and other agency debt instruments, the expectation of non-payment is zero. The timely payment of principal and interest on FNMA and FHLMC securities is guaranteed by each corporation. As each of these corporations is in conservatorship with the federal government, the payment guarantees are considered implicit obligations of the US government. GNMA securities carry the full faith and credit guarantee of the federal government. Because of the existence of government guarantees of timely payment of principal and interest, expected losses on agency securities are assumed to be zero. Changes in the fair value of agency securities in this portfolio are primarily driven by changes in interest rates and other non-credit related factors. At December 31, 2021, our held-to-maturity debt securities portfolio had an allowance for credit losses of $1.9 million. The allowance is related to non-agency corporate and other debt securities. The majority of the allowance is related to a portfolio of collateralized debt obligations backed by pooled TruPS, principally issued by banks and to a lesser extent insurance companies and real estate investment trusts. At December 31, 2021 the TruPS had a carrying value before allowance for credit losses and estimated fair value of $50.6 million and $83.1 million, respectively. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. Refer to Note 6, Allowance for Credit Losses, for additional information on the Company’s allowance for credit losses.

At December 31, 2021, the available-for-sale debt securities portfolio was almost entirely comprised of agency securities. As such, the unrealized losses in this portfolio are primarily driven by changes in interest rates and other non-credit related factors. The Company does not have the intent to sell these securities and does not believe it is more likely than not that the Company will be required to sell these securities before a recovery of amortized cost. At December 31, 2021, there is no allowance for credit losses related to the Company’s available-for-sale debt securities as the decline in fair value did not result from credit issues.

Debt securities with a carrying value before allowance for credit losses of $2.07 billion and an estimated fair value of $2.11 billion are pledged to secure borrowings and municipal deposits. The contractual maturities of the Bank’s mortgage-backed securities are generally less than 20 years with effective lives expected to be shorter due to prepayments. Expected maturities may differ from contractual maturities due to underlying loan prepayments or early call privileges of the issuer; therefore, mortgage-backed securities are not included in the following table. Excluding the allowance for credit losses, the amortized cost and estimated fair value of debt securities other than mortgage-backed securities at December 31, 2021, by contractual maturity, are shown below.


	December 31, 2021
	Carrying value		Estimated fair value
	(In thousands)
Due in one year or less	$	9,988	9,996
Due after one year through five years	20,710		21,252
Due after five years through ten years	156,798		159,392
Due after ten years	288,104		332,290
Total	$	475,600	522,930

Gains and Losses

Gains and losses are determined using the specific identification method. The Company recognized net unrealized gains on equity securities of $356,000 for the year ended December 31, 2021. For the year ended December 31, 2021, the Company received proceeds of $34.0 million from the sale of equity securities which resulted in a net loss of $248,000 and received proceeds of $8.2 million from the sale of available-for-sale debt securities which resulted in gains of $398,000.

The Company recognized net unrealized gains on equity securities of $256,000 for the year ended December 31, 2020. For the year ended December 31, 2020, there were no sales of securities; however, the Company received proceeds of $16.5 million from the call of a held-to-maturity debt security which resulted in a gain of $124,000 and received a principal payment of $26,000 on a held-to-maturity debt security.

The Company recognized net unrealized gains on equity securities of $150,000 for the year ended December 31, 2019. For the year ended December 31, 2019, the Company received proceeds of $399.4 million on securities sold from the debt securities available-for-sale portfolio resulting in gross realized losses of $5.7 million recognized in non-interest income. Proceeds from the sale were reinvested in higher yielding debt securities. There were no sales of equity securities or debt securities held-to-maturity for the year ended December 31, 2019.

Other-Than-Temporary Impairment (“OTTI”)

Prior to January 1, 2020, under previous other-than-temporary impairment guidance, the Company conducted a quarterly review and evaluation of the securities portfolio to determine if the value of any security had declined below its cost or amortized cost, and whether such decline was other-than-temporary. If a determination was made that a debt security was other-than-temporarily impaired, the Company would estimate the amount of the unrealized loss that was attributable to credit and all other non-credit related factors. The credit related component would be recognized as an other-than-temporary impairment charge in non-interest income. The non-credit related component would be recorded as an adjustment to accumulated other comprehensive income (loss), net of tax.

With the assistance of a valuation specialist, the Company evaluated the credit and performance of each issuer underlying the Company’s pooled TruPS. Cash flows for each security were forecasted using assumptions for defaults, recoveries, pre-payments and amortization. At December 31, 2019, the Company deemed that the present value of projected cash flows for each security was greater than the book value and did not recognize any additional OTTI charges for the year ended December 31, 2019.

The following table presents the changes in the credit loss component of the impairment loss of debt securities that the Company has written down for such loss as an other-than-temporary impairment recognized in earnings.


	For the Year Ended December 31,
	2019

Balance of credit related OTTI, beginning of period	$	80,595



Reductions:
Accretion of credit loss impairment due to an increase in expected cash flows	(3,530)
Reductions for securities sold or paid off during the period	—
Balance of credit related OTTI, end of period	$	77,065

The credit loss component of the impairment loss represented the difference between the present value of expected future cash flows and the amortized cost basis of the securities prior to considering credit losses. The beginning balance represented the credit loss component for debt securities for which OTTI occurred prior to the period presented. If OTTI was recognized in earnings for credit impaired debt securities, it would have been presented as an addition based upon whether it was the first time a debt security was credit impaired (initial credit impairment) or was not the first time a debt security was credit impaired (subsequent credit impairments). The credit loss component was reduced if the Company sold, intended to sell or believed it would have been required to sell previously credit impaired debt securities. Additionally, the credit loss component was reduced if (i) the Company received cash flows in excess of what it expected to receive over the remaining life of the credit impaired debt security, (ii) the security matured or (iii) the security was fully written down.

Investors Bancorp, Inc. 10-K