Investment Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

The amortized cost and estimated fair value of the Company's available-for-sale and held-to-maturity securities are summarized as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
September 30, 2023
Investment securities available-for-sale:
U.S. treasury bonds	$	49,868	$	—	$	(2,818)	$	—	$	47,050
U.S. agency securities	736,078		1		(79,802)		—		656,277
Residential mortgage-backed securities	848,555		—		(134,407)		—		714,148
Commercial mortgage-backed securities	54,904		—		(6,900)		—		48,004
Municipal bonds	8,828		—		(1,026)		—		7,802
Corporate bonds	2,000		—		(319)		(17)		1,664

Total available-for-sale securities	$	1,700,233	$	1	$	(225,272)	$	(17)	$	1,474,945


(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
September 30, 2023
Investment securities held-to-maturity:


Residential mortgage-backed securities	$	685,648	$	—	$	(109,590)	$	576,058
Commercial mortgage-backed securities	91,337		—		(16,805)		74,532
Municipal bonds	125,224		2,828		(19,533)		108,519
Corporate bonds	132,286		—		(18,685)		113,601

Total	$	1,034,495	$	2,828	$	(164,613)	$	872,710
Allowance for credit losses	(2,010)
Total held-to-maturity securities, net of ACL	$	1,032,485


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2022
Investment securities available-for-sale:
U.S. treasury bonds	$	49,793	$	—	$	(3,466)	$	—	$	46,327
U.S. agency securities	747,777		—		(78,049)		—		669,728
Residential mortgage-backed securities	937,557		18		(117,072)		—		820,503
Commercial mortgage-backed securities	56,071		—		(5,858)		—		50,213
Municipal bonds	10,700		45		(658)		—		10,087
Corporate bonds	2,000		—		(175)		(17)		1,808
Total available-for-sale securities	$	1,803,898	$	63	$	(205,278)	$	(17)	$	1,598,666


(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
December 31, 2022
Investment securities held-to-maturity:


Residential mortgage-backed securities	$	741,057	$	—	$	(88,390)	$	652,667
Commercial mortgage-backed securities	92,557		—		(11,993)		80,564
Municipal bonds	128,273		—		(12,092)		116,181
Corporate bonds	132,253		—		(12,958)		119,295

Total	$	1,094,140	$	—	$	(125,433)	$	968,707
Allowance for credit losses	(766)
Total held-to-maturity securities, net of ACL	$	1,093,374

In addition, at September 30, 2023 and December 31, 2022 the Company held $25.7 million and $65.1 million, respectively, in equity securities in a combination of Federal Reserve Bank and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

The Company reassessed classification of certain investments in the first quarter of 2022 and, effective March 31, 2022, it transferred a total of $1.1 billion of mortgage-backed securities, municipal bonds and corporate bonds from available-for-sale to held-to-maturity securities, including $237.0 million of securities acquired in the first quarter of 2022 for which its intention to hold to maturity was finalized. At the time of transfer, the Company reversed the allowance for credit losses associated with the available-for-sale securities through the provision for credit losses. The securities were transferred at their amortized cost basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income. The related unrealized loss of $66.2 million was included in other comprehensive loss at the time of transfer and, as of September 30, 2023, $53.5 million remains in accumulated other comprehensive loss, to be amortized through interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer. Subsequent to transfer, the allowance for credit losses on these securities was evaluated under the accounting policy for held-to-maturity securities.

Accrued interest receivable on available-for-sale securities totaled $4.0 million and $4.3 million at September 30, 2023 and December 31, 2022, respectively, and accrued interest receivable on held-to-maturity securities totaled $3.6 million and $3.5 million at September 30, 2023 and December 31, 2022, respectively. The accrued interest on investment securities is excluded from the amortized cost of the securities and is reported in other assets in the Consolidated Balance Sheets.

The following tables summarizes available-for-sale and held-to-maturity securities in an unrealized loss position by length of time:


		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
September 30, 2023
Investment securities available-for-sale:
U.S. treasury bonds	2	$	—	$	—	$	47,050	$	(2,818)	$	47,050	$	(2,818)
U. S. agency securities	78	485,494		(59,495)		167,358		(20,307)		652,852		(79,802)
Residential mortgage-backed securities	156	8		—		714,068		(134,407)		714,076		(134,407)
Commercial mortgage-backed securities	13	—		—		48,004		(6,900)		48,004		(6,900)
Municipal bonds	1	—		—		7,802		(1,026)		7,802		(1,026)
Corporate bonds	1	—		—		1,664		(319)		1,664		(319)
Total	251	$	485,502	$	(59,495)	$	985,946	$	(165,777)	$	1,471,448	$	(225,272)


		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses
September 30, 2023
Investment securities held-to-maturity:
Residential mortgage-backed securities	143	$	—	$	—	$	576,058	$	(109,590)	$	576,058	$	(109,590)
Commercial mortgage-backed securities	16	—		—		74,532		(16,805)		74,532		(16,805)
Municipal bonds	41	5,866		(162)		97,879		(19,371)		103,745		(19,533)
Corporate bonds	30	23,577		(3,434)		77,964		(15,251)		101,541		(18,685)
Total	230	$	29,443	$	(3,596)	$	826,433	$	(161,017)	$	855,876	$	(164,613)


		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
December 31, 2022
Investment securities available-for-sale:
U.S. treasury bond	2	$	—	$	—	$	46,327	$	(3,466)	$	46,327	$	(3,466)
U. S. agency securities	85	490,699		(58,437)		179,029		(19,612)		669,728		(78,049)
Residential mortgage-backed securities	157	3,994		—		808,697		(117,072)		812,691		(117,072)
Commercial mortgage-backed securities	14	471		(2)		49,742		(5,856)		50,213		(5,858)
Municipal bonds	1	—		—		8,299		(658)		8,299		(658)
Corporate bonds	1	—		—		1,825		(175)		1,825		(175)
Total	260	$	495,164	$	(58,439)	$	1,093,919	$	(146,839)	$	1,589,083	$	(205,278)


		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses
December 31, 2022
Investment securities held-to-maturity:
Residential mortgage-backed securities	143	$	—	$	—	$	652,667	$	(88,390)	$	652,667	$	(88,390)
Commercial mortgage-backed securities	16	—		—		80,564		(11,993)		80,564		(11,993)
Municipal bonds	43	3,110		(45)		113,071		(12,047)		116,181		(12,092)
Corporate bonds	30	20,771		(3,183)		86,451		(9,775)		107,222		(12,958)
Total	232	$	23,881	$	(3,228)	$	932,753	$	(122,205)	$	956,634	$	(125,433)

Unrealized losses at September 30, 2023 were generally attributable to changes in market interest rates and interest spread relationships subsequent to the dates the securities were originally purchased, and not due to credit quality concerns on the investment securities. The Company measures its AFS and HTM security portfolios for current expected credit losses as part of its allowance for credit losses analysis. During the nine months ended September 30, 2023, the Company recorded a provision for credit losses on its held-to-maturity portfolio of $1.2 million. No provision was recorded for its available-for-sale security portfolio during the nine months ended September 30, 2023. At September 30, 2023, the Company had a total allowance of $17 thousand and $2.0 million on its available-for-sale securities and held-to-maturity securities, respectively, each of which primarily comprise allowances for corporate bonds. The weighted average duration of debt securities, which comprise 100% of total investment securities, is 4.59 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company currently has no plans to sell the investments, and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at September 30, 2023 and December 31, 2022 by contractual maturity are shown in the table below. Contractual maturities for mortgage-backed securities ("MBS") are excluded as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost (1)		Fair Value		Cost		Fair Value
Investment securities available-for-sale
U.S. Treasury bonds (after one year through five years)	49,868		47,050		49,793		46,327
U. S. agency securities maturing:
One year or less	544,988		485,494		$	549,137	$	490,699
After one year through five years	135,014		122,355		111,742		100,297
After five years through ten years	43,971		39,077		73,886		68,180
After ten years	12,105		9,351		13,012		10,552
Residential mortgage-backed securities	848,555		714,148		937,557		820,503
Commercial mortgage-backed securities	54,904		48,004		56,071		50,213
Municipal bonds maturing:
One year or less	—		—		300		300
After one year through five years	—		—		1,444		1,488
After five years through ten years	8,828		7,802		8,956		8,299
After ten years	—		—		—		—
Corporate bonds maturing:
One year or less	—		—		—		—
After one year through five years	2,000		1,681		2,000		1,825
After five years through ten years	—		—		—		—
Allowance for credit losses	—		(17)		—		(17)
	1,700,233		1,474,945		1,803,898		1,598,666
Investment securities held-to-maturity




Residential mortgage-backed securities	685,648		576,058		741,057		652,667
Commercial mortgage-backed securities	91,337		74,532		92,557		80,564
Municipal bonds maturing:
One year or less	6,028		5,866		3,139		3,110
After one year through five years	35,000		31,813		35,579		33,743
After five years through ten years	72,011		60,765		77,262		67,945
After ten years	12,185		10,075		12,293		11,383
Corporate bonds maturing:
One year or less	27,011		23,577		23,954		20,771
After one year through five years	88,443		76,666		84,953		77,997
After five years through ten years	16,832		13,358		23,346		20,527

Allowance for credit losses	(2,010)		—		(766)		—
	1,032,485		872,710		1,093,374		968,707
	$	2,732,718	$	2,347,655	$	2,897,272	$	2,567,373

(1)Amortized cost for investment securities held-to-maturity is presented net of the allowance for credit losses on the Consolidated Balance Sheet.

For the three and nine months ended September 30, 2023, gross realized gains on sales and calls of investments securities were $5 thousand and $126 thousand, respectively, as compared to $4 thousand and $16 thousand for the three and nine months ended September 30, 2022.

For the nine months ended September 30, 2023, gross realized losses on sales of investments securities were $140 thousand as compared to $187 thousand for the three and nine months ended September 30, 2022, respectively. There were no realized losses incurred during the three months ended September 30, 2023 and 2022.

Gross sales and call proceeds were $2.6 million and $11.2 million for the three and nine months ended September 30, 2023, respectively, and $6.2 million and $26.2 million for the three and nine months ended September 30, 2022, respectively.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2023 and December 31, 2022 was $2.3 billion and $220.1 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of September 30, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders' equity.