Investment Securities

3 Months Ended

Mar. 31, 2025

Investment Securities

Investment Securities

2. Investment Securities

As of March 31, 2025 and December 31, 2024, investment securities consisted predominantly of the following investment categories:

Debt securities – includes debt securities issued by U.S. government agencies.

Mortgage-backed securities – includes securities backed by notes or receivables secured by mortgage assets with cash flows based on actual or scheduled payments.

Collateralized mortgage obligations – includes securities backed by a pool of mortgages with cash flows distributed based on certain rules rather than pass through payments.

Collateralized loan obligations – includes structured debt securities backed by a pool of loans, consisting of primarily non-investment grade broadly syndicated corporate loans with additional credit enhancement. These are floating rate securities that have an investment grade rating of AA or better.

Debt securities issued by states and political subdivisions – includes general obligation bonds issued by state and local governments.

As of March 31, 2025 and December 31, 2024, the Company’s investment securities were classified as either available-for-sale or held-to-maturity. Amortized cost, gross unrealized holding gains and losses and fair value of available-for-sale and held-to-maturity investment securities as of March 31, 2025 and December 31, 2024 were as follows:

	March 31, 2025								December 31, 2024
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
Government agency debt securities	$	—	$	—	$	—	$	—	$	8,170	$	—	$	(23)	$	8,147
Mortgage-backed securities:
Residential - Government agency		36,376		243		(1,305)		35,314		37,473		—		(1,614)		35,859
Residential - Government-sponsored enterprises		814,089		5		(86,677)		727,417		840,836		—		(102,723)		738,113
Commercial - Government agency		246,139		—		(50,373)		195,766		249,348		—		(53,223)		196,125
Commercial - Government-sponsored enterprises		46,380		—		(2,368)		44,012		48,015		—		(3,107)		44,908
Commercial - Non-agency		22,000		5		—		22,005		22,000		83		—		22,083
Collateralized mortgage obligations:
Government agency		440,756		13		(49,095)		391,674		452,038		—		(54,914)		397,124
Government-sponsored enterprises		348,881		—		(43,144)		305,737		359,416		—		(48,734)		310,682
Collateralized loan obligations		136,413		109		(19)		136,503		173,152		323		—		173,475
Total available-for-sale securities	$	2,091,034	$	375	$	(232,981)	$	1,858,428	$	2,190,448	$	406	$	(264,338)	$	1,926,516
Government agency debt securities	$	49,104	$	—	$	(4,478)	$	44,626	$	49,267	$	—	$	(5,398)	$	43,869
Mortgage-backed securities:
Residential - Government agency		39,912		—		(5,671)		34,241		40,888		—		(6,579)		34,309
Residential - Government-sponsored enterprises		91,523		—		(13,511)		78,012		92,573		—		(14,854)		77,719
Commercial - Government agency		31,056		—		(8,698)		22,358		31,009		—		(8,666)		22,343
Commercial - Government-sponsored enterprises		1,103,962		209		(137,358)		966,813		1,114,549		201		(149,244)		965,506
Collateralized mortgage obligations:
Government agency		887,439		—		(111,525)		775,914		907,565		—		(126,020)		781,545
Government-sponsored enterprises		1,467,222		—		(187,697)		1,279,525		1,500,212		—		(210,721)		1,289,491
Debt securities issued by states and political subdivisions		54,690		—		(5,904)		48,786		54,587		—		(6,860)		47,727
Total held-to-maturity securities	$	3,724,908	$	209	$	(474,842)	$	3,250,275	$	3,790,650	$	201	$	(528,342)	$	3,262,509

Accrued interest receivable related to available-for-sale investment securities was $5.0 million and $5.6 million as of March 31, 2025 and December 31, 2024, respectively. Accrued interest receivable related to held-to-maturity investment securities was $6.8 million and $6.6 million as of March 31, 2025 and December 31, 2024, respectively. Accrued interest receivable is recorded separately from the amortized cost basis of investment securities on the Company’s unaudited interim consolidated balance sheets.

Proceeds from calls and sales of investment securities were $40.2 million and nil, respectively, for the three months ended March 31, 2025, and $10.3 million and nil, respectively, for the three months ended March 31, 2024. The Company recorded gross realized gains of nil and gross realized losses of nil for the three months ended March 31, 2025 and 2024. The income tax expense related to the Company’s net realized gain on the sale of investment securities was nil for the three months ended March 31, 2025 and 2024. Gains and losses realized on sales of securities are determined using the specific identification method.

Interest income from taxable investment securities was $26.7 million and $29.1 million, respectively, for the three months ended March 31, 2025 and 2024. Interest income from non-taxable investment securities was $3.1 million and $3.2 million, respectively, for the three months ended March 31, 2025 and 2024.

The amortized cost and fair value of debt securities issued by government agencies and states and political subdivisions, non-agency mortgage-backed securities and collateralized loan obligations as of March 31, 2025, by contractual maturity, are shown below. Mortgage-backed securities and collateralized mortgage obligations issued by government agencies and government-sponsored enterprises are disclosed separately in the table below as remaining expected maturities will differ from contractual maturities as borrowers have the right to prepay obligations.

	March 31, 2025
	Amortized		Fair
(dollars in thousands)	Cost		Value
Available-for-sale securities
Due in one year or less	$	—	$	—
Due after one year through five years		9,275		9,285
Due after five years through ten years		127,138		127,218
Due after ten years		22,000		22,005
		158,413		158,508
Mortgage-backed securities:
Residential - Government agency		36,376		35,314
Residential - Government-sponsored enterprises		814,089		727,417
Commercial - Government agency		246,139		195,766
Commercial - Government-sponsored enterprises		46,380		44,012
Total mortgage-backed securities		1,142,984		1,002,509
Collateralized mortgage obligations:
Government agency		440,756		391,674
Government-sponsored enterprises		348,881		305,737
Total collateralized mortgage obligations		789,637		697,411
Total available-for-sale securities	$	2,091,034	$	1,858,428
Held-to-maturity securities
Due in one year or less	$	—	$	—
Due after one year through five years		—		—
Due after five years through ten years		52,632		48,343
Due after ten years		51,162		45,069
		103,794		93,412
Mortgage-backed securities:
Residential - Government agency		39,912		34,241
Residential - Government-sponsored enterprises		91,523		78,012
Commercial - Government agency		31,056		22,358
Commercial - Government-sponsored enterprises		1,103,962		966,813
Total mortgage-backed securities		1,266,453		1,101,424
Collateralized mortgage obligations:
Government agency		887,439		775,914
Government-sponsored enterprises		1,467,222		1,279,525
Total collateralized mortgage obligations		2,354,661		2,055,439
Total held-to-maturity securities	$	3,724,908	$	3,250,275

At March 31, 2025, pledged securities totaled $4.2 billion, of which $2.3 billion was pledged to secure borrowing capacity, $1.9 billion was pledged to secure public deposits and $20.1 million was pledged to secure other financial transactions. At December 31, 2024, pledged securities totaled $3.8 billion, of which $2.1 billion was pledged to secure borrowing capacity, $1.7 billion was pledged to secure public deposits and $19.3 million was pledged to secure other financial transactions.

The Company held no securities of any single issuer, other than debt securities issued by government agencies and government-sponsored enterprises, which were in excess of 10% of stockholders’ equity as of March 31, 2025 and December 31, 2024.

The following tables present the unrealized gross losses and fair values of securities in the available-for-sale portfolio by length of time that the 154 and 159 individual securities in each category have been in a continuous loss position as of March 31, 2025 and December 31, 2024, respectively. The unrealized losses on available-for-sale investment securities were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.

	Time in Continuous Loss as of March 31, 2025
	Less Than 12 Months				12 Months or More				Total
	Unrealized				Unrealized				Unrealized
(dollars in thousands)	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
Mortgage-backed securities:
Residential - Government agency	$	—	$	—	$	(1,305)	$	8,718	$	(1,305)	$	8,718
Residential - Government-sponsored enterprises		(1,512)		114,923		(85,165)		606,556		(86,677)		721,479
Commercial - Government agency		—		—		(50,373)		195,766		(50,373)		195,766
Commercial - Government-sponsored enterprises		—		—		(2,368)		44,012		(2,368)		44,012
Collateralized mortgage obligations:
Government agency		(937)		75,714		(48,158)		306,599		(49,095)		382,313
Government-sponsored enterprises		(165)		56,582		(42,979)		249,155		(43,144)		305,737
Collateralized loan obligations		(19)		15,721		—		—		(19)		15,721
Total available-for-sale securities with unrealized losses	$	(2,633)	$	262,940	$	(230,348)	$	1,410,806	$	(232,981)	$	1,673,746

	Time in Continuous Loss as of December 31, 2024
	Less Than 12 Months				12 Months or More				Total
	Unrealized				Unrealized				Unrealized
(dollars in thousands)	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
Government agency debt securities	$	—	$	—	$	(23)	$	8,147	$	(23)	$	8,147
Mortgage-backed securities:
Residential - Government agency		(154)		27,127		(1,460)		8,732		(1,614)		35,859
Residential - Government-sponsored enterprises		(2,997)		116,084		(99,726)		622,029		(102,723)		738,113
Commercial - Government agency		—		—		(53,223)		196,125		(53,223)		196,125
Commercial - Government-sponsored enterprises		—		—		(3,107)		44,908		(3,107)		44,908
Collateralized mortgage obligations:
Government agency		(712)		76,968		(54,202)		310,171		(54,914)		387,139
Government-sponsored enterprises		(912)		57,509		(47,822)		253,173		(48,734)		310,682
Total available-for-sale securities with unrealized losses	$	(4,775)	$	277,688	$	(259,563)	$	1,443,285	$	(264,338)	$	1,720,973

At March 31, 2025 and December 31, 2024, the Company did not have any available-for-sale securities with the intent to sell and determined it was more likely than not that the Company would not be required to sell the securities prior to recovery of the amortized cost basis. As the Company had the intent and ability to hold the remaining available-for-sale securities in an unrealized loss position as of March 31, 2025 and December 31, 2024, each security with an unrealized loss position in the above tables has been further assessed to determine if a credit loss exists. As of March 31, 2025 and December 31, 2024, the Company did not expect any credit losses in its available-for-sale debt securities and no credit losses were recognized on available-for-sale securities during the three months ended March 31, 2025 and for the year ended December 31, 2024.

As of March 31, 2025 and December 31, 2024, the Company’s investment securities were comprised primarily of debt securities, mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies and government-sponsored enterprises, with under 4% of the investment securities comprised of collateralized loan obligations rated AA or better and obligations issued by local state and political subdivisions rated AA or better. For investment securities issued by the U.S. Government, its agencies and government-sponsored enterprises, management has concluded that the long history with no credit losses from these issuers indicates an expectation that nonpayment of the amortized cost basis is zero, and these securities are explicitly or implicitly fully guaranteed by the U.S. government. The U.S. government can print its own currency and its currency is routinely held by central banks and other major financial institutions. The dollar is used in international commerce, and commonly is viewed as a reserve currency, all of which qualitatively indicates that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. For collateralized loan obligations and debt securities issued by local state and political subdivisions, these securities are investment grade and highly rated and carry either sufficient credit enhancement or days cash on hand to support timely payments of principal and interest. As a result, the Company does not expect any future payment defaults and has not recorded an allowance for credit losses for its available-for-sale and held-to-maturity debt securities as of March 31, 2025 or December 31, 2024.