INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2024

Investments, Debt and Equity Securities [Abstract]

The following tables summarize the amortized cost, gross unrealized gains and losses and approximate fair value of investment securities available for sale as of June 30, 2024 and December 31, 2023.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at June 30, 2024

U.S. Government-sponsored agency securities	$	108,842	$	—	$	17,565	$	91,277
State and municipal	1,178,364		25		153,482		1,024,907
U.S. Government-sponsored mortgage-backed securities	584,055		376		93,777		490,654
Corporate obligations	12,954		—		899		12,055

Total available for sale	$	1,884,215	$	401	$	265,723	$	1,618,893


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2023

U.S. Government-sponsored agency securities	$	111,521	$	—	$	16,214	$	95,307
State and municipal	1,181,029		364		116,222		1,065,171
U.S. Government-sponsored mortgage-backed securities	541,343		462		86,990		454,815
Corporate obligations	12,947		—		1,128		11,819

Total available for sale	$	1,846,840	$	826	$	220,554	$	1,627,112

The following tables summarize the amortized cost, gross unrealized gains and losses, approximate fair value and allowance for credit losses on investment securities held to maturity as of June 30, 2024 and December 31, 2023.


	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity at June 30, 2024
U.S. Government-sponsored agency securities	$	365,081	$	—	$	365,081	$	—	$	66,005	$	299,076
State and municipal	1,091,714		245		1,091,469		300		183,892		908,122
U.S. Government-sponsored mortgage-backed securities	676,145		—		676,145		—		105,607		570,538
Foreign investment	1,500		—		1,500		—		20		1,480
Total held to maturity	$	2,134,440	$	245	$	2,134,195	$	300	$	355,524	$	1,779,216


	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity at December 31, 2023
U.S. Government-sponsored agency securities	$	374,002	$	—	$	374,002	$	—	$	64,159	$	309,843
State and municipal	1,099,201		245		1,098,956		1,625		152,113		948,713
U.S. Government-sponsored mortgage-backed securities	709,794		—		709,794		—		99,448		610,346
Foreign investment	1,500		—		1,500		—		28		1,472
Total held to maturity	$	2,184,497	$	245	$	2,184,252	$	1,625	$	315,748	$	1,870,374

Accrued interest on investment securities available for sale and held to maturity at June 30, 2024 and December 31, 2023 of $25.3 million and $25.2 million, respectively, are included in the Interest Receivable line on the Corporation's Consolidated Condensed Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available for sale and held to maturity securities presented above.

In determining the allowance for credit losses on investment securities available for sale that are in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through the income statement. For investment securities available for sale that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Corporation considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Unrealized losses that have not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in the income statement as a component of the provision for credit loss. The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities available for sale from the estimate of credit losses. Investment securities available for sale are charged off against the allowance or, in the absence of any allowance, written down through the income statement when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met. The Corporation did not record an allowance for credit losses on its investment securities available for sale as the unrealized losses were attributable to changes in interest rates, not credit quality.

The allowance for credit losses on investment securities held to maturity is a contra asset-valuation account that is deducted from the amortized cost basis of investment securities held to maturity to present the net amount expected to be collected. Investment securities held to maturity are charged off against the allowance when deemed uncollectible. Adjustments to the allowance are reported in the income statement as a component of the provision for credit loss. The Corporation measures expected credit losses on investment securities held to maturity on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities held to maturity from the estimate of credit losses. With regard to U.S. Government-sponsored agency and mortgage-backed securities, all these securities are issued by a U.S. Government-sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has been recorded for these securities. With regard to securities issued by states and municipalities and other investment securities held to maturity, management considers (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss rates associated with securities having similar grades as those in the Corporation's portfolio have been insignificant. Furthermore, as of June 30, 2024, there were no past due principal and interest payments associated with these securities. At current expected credit loss ("CECL") adoption, an allowance for credit losses of $245,000 was recorded on the state and municipal securities classified as held to maturity based on applying the long-term historical credit loss rate, as published by Moody’s, for similarly rated securities. The balance of the allowance for credit losses remained unchanged at $245,000 as of June 30, 2024.

On a quarterly basis, the Corporation monitors the credit quality of investment securities held to maturity through the use of credit ratings. The following table summarizes the amortized cost of investment securities held to maturity at June 30, 2024, aggregated by credit quality indicator.


	Held to Maturity
	State and municipal		Other		Total
Credit Rating:
Aaa	$	113,341	$	70,588	$	183,929
Aa1	161,380		—		161,380
Aa2	167,506		—		167,506
Aa3	133,319		—		133,319
A1	131,193		—		131,193
A2	16,839		—		16,839
A3	3,470		—		3,470

Non-rated	364,666		972,138		1,336,804
Total	$	1,091,714	$	1,042,726	$	2,134,440

The following tables summarize, as of June 30, 2024 and December 31, 2023, investment securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time in a continuous unrealized loss position.


	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Investment securities available for sale at June 30, 2024

U.S. Government-sponsored agency securities	$	—	$	—	$	91,277	$	17,565	$	91,277	$	17,565
State and municipal	50,145		2,900		973,117		150,582		1,023,262		153,482
U.S. Government-sponsored mortgage-backed securities	57,352		903		399,051		92,874		456,403		93,777
Corporate obligations	—		—		12,024		899		12,024		899
Total investment securities available for sale	$	107,497	$	3,803	$	1,475,469	$	261,920	$	1,582,966	$	265,723


	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Investment securities available for sale at December 31, 2023

U.S. Government-sponsored agency securities	$	—	$	—	$	95,307	$	16,214	$	95,307	$	16,214
State and municipal	55,514		1,076		963,584		115,146		1,019,098		116,222
U.S. Government-sponsored mortgage-backed securities	11,493		25		422,868		86,965		434,361		86,990
Corporate obligations	—		—		11,788		1,128		11,788		1,128
Total investment securities available for sale	$	67,007	$	1,101	$	1,493,547	$	219,453	$	1,560,554	$	220,554

The following tables summarize investment securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security type and the number of securities in the portfolio as of the dates indicated.


	Gross Unrealized Losses		Number of Securities
Investment securities available for sale at June 30, 2024

U.S. Government-sponsored agency securities	$	17,565	14
State and municipal	153,482		725
U.S. Government-sponsored mortgage-backed securities	93,777		161
Corporate obligations	899		10
Total investment securities available for sale	$	265,723	910


	Gross Unrealized Losses		Number of Securities
Investment securities available for sale at December 31, 2023

U.S. Government-sponsored agency securities	$	16,214	14
State and municipal	116,222		691
U.S. Government-sponsored mortgage-backed securities	86,990		150
Corporate obligations	1,128		10
Total investment securities available for sale	$	220,554	865

The unrealized losses in the Corporation’s investment portfolio were the result of changes in interest rates and not credit quality. As a result, the Corporation expects to recover the amortized cost basis over the term of the securities. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.

Certain investment securities available for sale are reported in the financial statements at an amount less than their historical cost as indicated in the table below.


	June 30, 2024			December 31, 2023
Investments available for sale reported at less than historical cost:
Historical cost	$	1,848,689		$	1,781,108
Fair value	1,582,966			1,560,554
Gross unrealized losses	$	265,723		$	220,554
Percent of the Corporation's investments available for sale	97.8		%	95.9		%

In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy. The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor classified these securities based upon these inputs. From these discussions, the Corporation’s management is comfortable that the classifications are proper. The Corporation has gained trust in the data for two reasons: (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis; and (b) actual gains or losses resulting from the sale of certain securities has proven the data to be accurate over time. Fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

The amortized cost and fair value of investment securities available for sale and held to maturity at June 30, 2024 and December 31, 2023, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity are shown separately.


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at June 30, 2024
Due in one year or less	$	2,402	$	2,383	$	13,380	$	13,249
Due after one through five years	24,675		22,920		113,750		106,226
Due after five through ten years	160,390		144,580		139,308		125,618
Due after ten years	1,112,693		958,356		1,191,857		963,585
	1,300,160		1,128,239		1,458,295		1,208,678
U.S. Government-sponsored mortgage-backed securities	584,055		490,654		676,145		570,538

Total investment securities	$	1,884,215	$	1,618,893	$	2,134,440	$	1,779,216


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2023
Due in one year or less	$	1,390	$	1,382	$	3,041	$	3,043
Due after one through five years	24,899		23,372		118,592		111,723
Due after five through ten years	127,948		120,385		135,805		126,461
Due after ten years	1,151,260		1,027,158		1,217,265		1,018,801
	1,305,497		1,172,297		1,474,703		1,260,028
U.S. Government-sponsored mortgage-backed securities	541,343		454,815		709,794		610,346

Total investment securities	$	1,846,840	$	1,627,112	$	2,184,497	$	1,870,374

Securities with a carrying value of approximately $1.5 billion and $1.8 billion were pledged at June 30, 2024 and December 31, 2023, respectively, to secure certain deposits and securities sold under repurchase agreements, and for other purposes as permitted or required by law.

The book value of securities pledged and available under agreements to repurchase amounted to $118.8 million at June 30, 2024 and $181.4 million at December 31, 2023.

Gross gains and losses on the sales and redemptions of investment securities available for sale for the three and six months ended June 30, 2024 and 2023 are shown below.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Sales and redemptions of investment securities available for sale:
Gross gains	$	—	$	151	$	—	$	759
Gross losses	(49)		(1,543)		(51)		(3,722)

Net gains (losses) on sales and redemptions of investment securities available for sale	$	(49)	$	(1,392)	$	(51)	$	(2,963)