Investment Securities

9 Months Ended

Sep. 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
September 30, 2022:
U.S. Government agencies	$	197,261	$	—	$	(30,091)	$	167,170
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,632,761		—		(267,505)		1,365,256
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		483,436		691		(64,602)		419,525
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		366,227		—		(66,366)		299,861
Small Business Administration loan-backed securities		58,493		—		(11,143)		47,350
	$	2,738,178	$	691	$	(439,707)	$	2,299,162
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
September 30, 2022:
U.S. Treasuries	$	271,783	$	—	$	(7,358)	$	264,425
U.S. Government agencies		245,943		—		(27,320)		218,623
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		2,048,537		—		(318,470)		1,730,067
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		729,712		6		(101,906)		627,812
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,224,869		2,551		(199,644)		1,027,776
State and municipal obligations		1,256,045		23		(252,750)		1,003,318
Small Business Administration loan-backed securities		507,412		546		(43,722)		464,236
Corporate securities		35,595		10		(2,252)		33,353
	$	6,319,896	$	3,136	$	(953,422)	$	5,369,610
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 nine months ended September 30, 2022, there were gains of $103,000 and losses of $73,000, a net gain of $30,000, realized 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 and therefore resulted in no gain or loss on sale. During the three months ended September 30, 2021, there were gains of $680,000 and losses of $616,000 and for the nine months ended September 30, 2021, there were gains of $748,000 and losses of $648,000, a net gain of $64,000 and $100,000, respectively, 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
September 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		10,836
	$	179,755
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 September 30, 2022, we determined that there was no impairment on other investment securities.

The amortized cost and fair value of debt securities at September 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	$	—	$	—	$	107,230	$	105,253
Due after one year through five years		101,152		92,747		487,512		466,754
Due after five years through ten years		359,629		321,679		1,149,845		999,829
Due after ten years		2,277,397		1,884,736		4,575,309		3,797,774
	$	2,738,178	$	2,299,162	$	6,319,896	$	5,369,610

Information pertaining to our securities with gross unrealized losses at September 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
September 30, 2022:
Securities Held to Maturity
U.S. Government agencies	$	10,903	$	98,443	$	19,188	$	68,727
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		90,161		627,193		177,344		738,063
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		34,942		265,792		29,660		104,370
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		21,199		113,354		45,167		186,507
Small Business Administration loan-backed securities		—		—		11,143		47,350
	$	157,205	$	1,104,782	$	282,502	$	1,145,017
Securities Available for Sale
U.S. Treasuries	$	7,358	$	264,425	$	—	$	—
U.S. Government agencies		12,248		159,395		15,072		59,228
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		122,435		874,957		196,035		854,926
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		35,684		368,713		66,222		257,017
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		66,849		463,425		132,795		528,853
State and municipal obligations		223,328		917,487		29,422		75,275
Small Business Administration loan-backed securities		18,118		167,715		25,604		178,604
Corporate securities		2,252		28,343		—		—
	$	488,272	$	3,244,460	$	465,150	$	1,953,903
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 September 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 September 30, 2022 and December 31, 2021, trading securities, at estimated fair value, were as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
U.S. Government agencies	$	12,017	$	5,154
Residential mortgage pass-through securities issued or guaranteed by U.S.
government agencies or sponsored enterprises		11,556		6,853
Other residential mortgage issued or guaranteed by U.S. government
agencies or sponsored enterprises		5,921		12,315
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		3,116		29,667
State and municipal obligations		18,060		20,798
Other debt securities		1,270		2,902
	$	51,940	$	77,689

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Net gains (losses) on sales transaction	$	76	$	489	$	(1,544)	$	944
Net mark to mark gains (losses)		465		(693)		(1,969)		(882)
Net gains (losses) on trading securities	$	541	$	(204)	$	(3,513)	$	62