Securities

3 Months Ended

Mar. 31, 2023

Securities

Securities

Note 5 —Securities

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
March 31, 2023:
U.S. Government agencies	$	197,264	$	—	$	(28,175)	$	169,089
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,553,373		—		(238,470)		1,314,903
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		468,794		—		(63,317)		405,477
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		360,962		—		(68,141)		292,821
Small Business Administration loan-backed securities		56,280		—		(10,958)		45,322
	$	2,636,673	$	—	$	(409,061)	$	2,227,612
December 31, 2022:
U.S. Government agencies	$	197,262	$	—	$	(29,787)	$	167,475
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,591,646		—		(255,093)		1,336,553
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		474,660		—		(69,664)		404,996
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		362,586		—		(66,304)		296,282
Small Business Administration loan-backed securities		57,087		—		(12,225)		44,862
	$	2,683,241	$	—	$	(433,073)	$	2,250,168

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
March 31, 2023:
U.S. Treasuries	$	273,035	$	—	$	(4,939)	$	268,096
U.S. Government agencies		246,001		—		(25,742)		220,259
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,951,725		—		(278,563)		1,673,162
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		689,575		—		(98,163)		591,412
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,180,323		8		(192,894)		987,437
State and municipal obligations		1,138,809		4		(171,856)		966,957
Small Business Administration loan-backed securities		466,462		194		(41,164)		425,492
Corporate securities		30,571		—		(3,387)		27,184
	$	5,976,501	$	206	$	(816,708)	$	5,159,999
December 31, 2022:
U.S. Treasuries	$	272,416	$	—	$	(6,778)	$	265,638
U.S. Government agencies		245,972		—		(26,884)		219,088
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,996,405		—		(298,052)		1,698,353
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		708,337		—		(107,292)		601,045
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,196,700		2,542		(198,844)		1,000,398
State and municipal obligations		1,269,525		1,210		(205,883)		1,064,852
Small Business Administration loan-backed securities		491,203		302		(46,695)		444,810
Corporate securities		35,583		—		(2,945)		32,638
	$	6,216,141	$	4,054	$	(893,373)	$	5,326,822

During the three months ended March 31, 2023, there were gross gains of $1.3 million and gross losses of $1.3 million, a net gain of $45,000, 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 acquired from ACBI on March 1, 2022. These securities were marked to fair value at merger and therefore resulted in no gain or loss on sale.

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

	Carrying
(Dollars in thousands)	Value
March 31, 2023:
Federal Home Loan Bank stock	$	53,335
Federal Reserve Bank stock		150,261
Investment in unconsolidated subsidiaries		3,563
Other nonmarketable investment securities		10,832
	$	217,991
December 31, 2022:
Federal Home Loan Bank stock	$	15,085
Federal Reserve Bank stock		150,261
Investment in unconsolidated subsidiaries		3,563
Other nonmarketable investment securities		10,808
	$	179,717

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 March 31, 2023, we determined that there was no impairment on other investment securities.

The amortized cost and fair value of debt securities at March 31, 2023 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	$	—	$	—	$	254,326	$	250,191
Due after one year through five years		101,073		94,058		309,053		295,225
Due after five years through ten years		382,261		337,412		1,148,155		1,001,653
Due after ten years		2,153,339		1,796,142		4,264,967		3,612,930
	$	2,636,673	$	2,227,612	$	5,976,501	$	5,159,999

Information pertaining to our securities with gross unrealized losses at March 31, 2023 and December 31, 2022, 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
March 31, 2023:
Securities Held to Maturity
U.S. Government agencies	$	—	$	—	$	28,175	$	169,089
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—		238,470		1,314,903
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		1,187		45,925		62,130		359,552
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		13,414		57,771		54,727		235,050
Small Business Administration loan-backed securities		—		—		10,958		45,322
	$	14,601	$	103,696	$	394,460	$	2,123,916
Securities Available for Sale
U.S. Treasuries	$	—	$	—	$	4,939	$	268,096
U.S. Government agencies		1,065		53,935		24,677		166,324
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,027		32,334		277,536		1,640,828
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		2,650		73,464		95,513		517,948
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		10,606		107,009		182,288		874,332
State and municipal obligations		4,250		74,784		167,606		888,984
Small Business Administration loan-backed securities		428		80,092		40,736		278,346
Corporate securities		635		5,863		2,752		21,321
	$	20,661	$	427,481	$	796,047	$	4,656,179
December 31, 2022:
Securities Held to Maturity
U.S. Government agencies	$	5,514	$	78,833	$	24,273	$	88,642
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		65,181		513,086		189,912		823,467
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		30,284		277,868		39,380		127,128
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		14,318		82,895		51,986		213,387
Small Business Administration loan-backed securities		—		—		12,225		44,862
	$	115,297	$	952,682	$	317,776	$	1,297,486
Securities Available for Sale
U.S. Treasuries	$	6,778	$	265,638	$	—	$	—
U.S. Government agencies		8,193		138,807		18,691		80,281
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		42,767		459,773		255,285		1,238,580
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		21,450		274,082		85,842		326,963
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		17,156		206,228		181,688		767,002
State and municipal obligations		97,084		616,631		108,799		391,848
Small Business Administration loan-backed securities		2,152		92,535		44,543		264,933
Corporate securities		2,209		28,374		736		4,264
	$	197,789	$	2,082,068	$	695,584	$	3,073,871

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 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 March 31, 2023 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 March 31, 2023, investment securities with a carrying value of $2.4 billion were pledged to secure public funds deposits and for other purposes required and permitted by law. The carrying value total of $2.4 billion investment securities pledged was comprised of $1.9 billion pledged to secure public funds deposits, $415.7 million pledged to secure FHLB advances, and $113.2 million pledged to secure interest rate swap positions with correspondents. At December 31, 2023, investment securities with a carrying value of $2.6 billion were pledged to secure public funds deposits and for other purposes required and permitted by law. The carrying value total of $2.6 billion investment securities pledged was comprised of $1.9 billion pledged to secure public funds deposits, $596.1 million pledged to secure FHLB advances, and $114.9 million pledged to secure interest rate swap positions with correspondents.

Trading Securities

At March 31, 2023 and December 31, 2022, trading securities, at estimated fair value, were as follows:

	March 31,		December 31,
(Dollars in thousands)	2023		2022
U.S. Government agencies	$	3,925	$	11,190
Residential mortgage pass-through securities issued or guaranteed by U.S.
government agencies or sponsored enterprises		3,439		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,304		4,589
State and municipal obligations		7,122		13,993
Other debt securities		249		1,491
	$	16,039	$	31,263

Net losses on trading securities for the three months ended March 31, 2023 and 2022 were as follows:

	Three Months Ended March 31,
(Dollars in thousands)	2023		2022
Net losses on sales transaction	$	(139)	$	(1,239)
Net mark to mark losses		(6)		(1,976)
Net losses on trading securities	$	(145)	$	(3,215)