Investment Securities

6 Months Ended

Jun. 30, 2022

Investment Securities

Investment Securities

Note 5 — Investment Securities

The following is the amortized cost and fair value of investment securities held to maturity:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
June 30, 2022:
U.S. Government agencies	$	197,260	$	—	$	(19,001)	$	178,259
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,685,694		—		(191,302)		1,494,392
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		494,330		—		(41,685)		452,645
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		369,975		—		(53,121)		316,854
Small Business Administration loan-backed securities		59,206		—		(8,670)		50,536
	$	2,806,465	$	—	$	(313,779)	$	2,492,686
December 31, 2021:
U.S. Government agencies	$	112,913	$	—	$	(2,627)	$	110,286
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,120,104		14		(24,278)		1,095,840
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		174,178		—		(4,937)		169,241
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		350,116		304		(8,021)		342,399
Small Business Administration loan-backed securities		62,590		—		(2,292)		60,298
	$	1,819,901	$	318	$	(42,155)	$	1,778,064

The following is the amortized cost and fair value of investment securities available for sale:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
June 30, 2022:
U.S. Treasuries	$	320,391	$	357	$	(4,290)	$	316,458
U.S. Government agencies		220,916		—		(17,829)		203,087
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		2,080,637		2		(220,630)		1,860,009
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		732,616		2		(65,104)		667,514
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,207,129		2,586		(143,893)		1,065,822
State and municipal obligations		1,239,072		622		(171,136)		1,068,558
Small Business Administration loan-backed securities		485,755		813		(31,616)		454,952
Corporate securities		30,607		11		(1,010)		29,608
	$	6,317,123	$	4,393	$	(655,508)	$	5,666,008
December 31, 2021:
U.S. Government agencies	$	98,882	$	—	$	(1,765)	$	97,117
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,851,700		5,324		(25,985)		1,831,039
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		730,949		5,957		(10,911)		725,995
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,220,233		5,438		(18,430)		1,207,241
State and municipal obligations		798,211		16,697		(2,219)		812,689
Small Business Administration loan-backed securities		502,812		2,330		(4,479)		500,663
Corporate securities		18,509		234		(9)		18,734
	$	5,221,296	$	35,980	$	(63,798)	$	5,193,478

During the three and six months ended June 30, 2022, there were no realized gains or losses from the sale of available for sale securities. During the three months ended March 31, 2022, the Company sold securities totaling $414.4 million that were legacy Atlantic Capital securities. These securities were marked to fair value at merger therefore resulted in no gain or loss on sale. During the three and six months ended June 30, 2021, there were gains of $69,000 and losses of $33,000 (a net gain of $36,000) from the sale of available for sale securities.

The following is the amortized cost and carrying value of other investment securities:

	Carrying
(Dollars in thousands)	Value
June 30, 2022:
Federal Home Loan Bank stock	$	15,095
Federal Reserve Bank stock		150,261
Investment in unconsolidated subsidiaries		3,563
Other nonmarketable investment securities		10,896
	$	179,815
December 31, 2021:
Federal Home Loan Bank stock	$	16,283
Federal Reserve Bank stock		129,716
Investment in unconsolidated subsidiaries		3,563
Other nonmarketable investment securities		11,006
	$	160,568

Our other investment securities consist of non-marketable equity securities that have no readily determinable market value. Accordingly, when evaluating these securities for impairment, Management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of June 30, 2022, we determined that there was no impairment on other investment securities.

The amortized cost and fair value of debt securities at June 30, 2022, by contractual maturity are detailed below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

	Securities				Securities
	Held to Maturity				Available for Sale
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Due in one year or less	$	—	$	—	$	58,779	$	58,123
Due after one year through five years		64,365		63,287		539,288		529,936
Due after five years through ten years		414,499		388,263		1,110,003		1,008,452
Due after ten years		2,327,601		2,041,136		4,609,053		4,069,497
	$	2,806,465	$	2,492,686	$	6,317,123	$	5,666,008

Information pertaining to our securities with gross unrealized losses at June 30, 2022 and December 31, 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position is as follows:

	Less Than				Twelve Months
	Twelve Months				or More
	Gross Unrealized		Fair		Gross Unrealized		Fair
(Dollars in thousands)	Losses		Value		Losses		Value
June 30, 2022:
Securities Held to Maturity
U.S. Government agencies	$	11,007	$	136,264	$	7,994	$	41,995
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		108,991		982,694		82,311		511,698
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		31,871		401,276		9,814		51,369
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		29,665		172,523		23,456		144,331
Small Business Administration loan-backed securities		—		—		8,670		50,536
	$	181,534	$	1,692,757	$	132,245	$	799,929
Securities Available for Sale
U.S. Treasuries	$	4,290	$	266,868	$	—	$	—
U.S. Government agencies		13,255		182,661		4,574		20,426
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		156,740		1,495,239		63,890		364,307
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		48,241		583,880		16,863		82,614
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		118,072		884,401		25,821		134,664
State and municipal obligations		162,460		978,854		8,676		31,063
Small Business Administration loan-backed securities		21,967		208,617		9,649		123,954
Corporate securities		1,010		24,099		—		—
	$	526,035	$	4,624,619	$	129,473	$	757,028
December 31, 2021:
Securities Held to Maturity
U.S. Government agencies	$	1,745	$	86,168	$	882	$	24,118
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		18,768		868,327		5,510		184,819
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		4,937		169,240		—		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		4,902		154,963		3,119		75,450
Small Business Administration loan-backed securities		1,281		37,408		1,011		22,890
	$	31,633	$	1,316,106	$	10,522	$	307,277
Securities Available for Sale
U.S. Government agencies	$	529	$	73,353	$	1,236	$	23,763
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		17,381		1,274,934		8,604		221,435
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		10,911		432,300		—		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		13,120		846,581		5,310		98,106
State and municipal obligations		1,867		123,987		352		8,579
Small Business Administration loan-backed securities		2,720		179,168		1,759		110,309
Corporate securities		9		4,991		—		—
	$	46,537	$	2,935,314	$	17,261	$	462,192

Management evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby Management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that we will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third-party guarantees, and (8) collateral values. In analyzing an issuer’s financial

condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. The Company performed an analysis that determined that the following securities have a zero expected credit loss: U.S. Treasury Securities, Agency-Backed Securities including securities issued by Ginnie Mae, Fannie Mae, FHLB, FFCB and SBA. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United States Government or one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. All debt securities in an unrealized loss position as of June 30, 2022 continue to perform as scheduled and we do not believe there is a credit loss or a provision for credit losses is necessary.

Also, as part of our evaluation of our intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, we consider our investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. We do not currently intend to sell the securities within the portfolio and it is not more-likely-than-not that we will be required to sell the debt securities. See Note 2 — Summary of Significant Account Policies for further discussion.

Management continues to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

At June 30, 2022 and December 31, 2021, trading securities, at estimated fair value, were as follows:

	June 30,		December 31,
(Dollars in thousands)	2022		2021
U.S. Government agencies	$	13,428	$	5,154
Residential mortgage pass-through securities issued or guaranteed by U.S.
government agencies or sponsored enterprises		28,079		6,853
Other residential mortgage issued or guaranteed by U.S. government
agencies or sponsored enterprises		2,236		12,315
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		18,570		29,667
State and municipal obligations		9,357		20,798
Other debt securities		16,418		2,902
	$	88,088	$	77,689

Net (losses) gains on trading securities for the three and six months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2022		2021		2022		2021
Net (losses) gains on sales transaction	$	(380)	$	336	$	(1,620)	$	456
Net mark to mark (losses) gains		(458)		268		(2,434)		(189)
Net (losses) gains on trading securities	$	(838)	$	604	$	(4,054)	$	267