Securities

9 Months Ended

Sep. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure

SECURITIES

Trading Securities

The Company had trading securities of $3.5 million and $3.7 million as of September 30, 2022 and December 31, 2021, respectively. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s non-qualified 401(k) Restoration Plan and Non-qualified Deferred Compensation Plan.

Equity Securities

The Company had equity securities of $20.4 million and $23.2 million as of September 30, 2022 and December 31, 2021, respectively. These securities consist primarily of mutual funds held in a rabbi trust and will be used for future payments associated with the Company’s supplemental executive retirement plans.

The following table represents a summary of the gains and losses recognized within non-interest income and non-interest expense within the consolidated statements of income that relate to equity securities for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2022		2021		2022		2021
	Dollars in thousands
Net gains (losses) recognized during the period on equity securities	$	(742)	$	(169)	(2,819)		695
Less: net gains recognized during the period on equity securities sold during the period	—		50		8		191
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(742)	$	(219)	$	(2,827)	$	504

Available for Sale Securities

The following table summarizes the amortized cost, allowance for credit losses, and fair value of available for sale securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:

	September 30, 2022										December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value
	(Dollars in thousands)
Available for sale securities
U.S. government agency securities	$	231,122	$	—	$	(31,180)	$	—	$	199,942	$	217,393	$	990	$	(2,901)	$	—	$	215,482
U.S. treasury securities	873,891		—		(89,433)		—		784,458		873,467		172		(12,191)		—		861,448
Agency mortgage-backed securities	393,296		50		(49,193)		—		344,153		364,955		4,512		(5,534)		—		363,933
Agency collateralized mortgage obligations	43,672		5		(2,890)		—		40,787		78,966		1,282		(571)		—		79,677
State, county, and municipal securities	193		—		(6)		—		187		192		11		—		—		203
Single issuer trust preferred securities issued by banks	489		—		—		—		489		489		2		—		—		491
Pooled trust preferred securities issued by banks and insurers	1,202		—		(203)		—		999		1,199		—		(199)		—		1,000
Small business administration pooled securities	62,048		—		(7,552)		—		54,496		47,075		1,839		—		—		48,914
Total available for sale securities	$	1,605,913	$	55	$	(180,457)	$	—	$	1,425,511	$	1,583,736	$	8,808	$	(21,396)	$	—	$	1,571,148

Excluded from the table above is accrued interest on available for sale securities of $3.3 million and $3.0 million as of September 30, 2022 and December 31, 2021, respectively, which is included within other assets on the consolidated balance sheets. Additionally, the Company did not record any write-offs of accrued interest income on available for sale securities during the three and nine months ended September 30, 2022 and 2021. Furthermore, no securities held by the Company were

delinquent on contractual payments nor were any securities placed on non-accrual status as of September 30, 2022 and December 31, 2021.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The Company had no sales of securities available for sale during the three and nine months ended September 30, 2022 and 2021, and therefore no gains or losses were realized during the periods presented.

The following tables show the gross unrealized losses and fair value of the Company’s available for sale securities in an unrealized loss position, and for which the Company has not recorded a provision for credit losses, as of the dates indicated. These available for sale securities are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position:

	September 30, 2022
		Less than 12 months				12 months or longer				Total
	# of  holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. government agency securities	9	$	80,353	$	(11,483)	$	119,589	$	(19,697)	$	199,942	$	(31,180)
U.S. treasury securities	18	86,592		(12,426)		697,866		(77,007)		784,458		(89,433)
Agency mortgage-backed securities	142	263,358		(29,512)		79,167		(19,681)		342,525		(49,193)
Agency collateralized mortgage obligations	11	39,291		(2,890)		—		—		39,291		(2,890)
State, county, and municipal securities	1	187		(6)		—		—		187		(6)
Pooled trust preferred securities issued by banks and insurers	1	—		—		999		(203)		999		(203)
Small business administration pooled securities	8	36,885		(3,768)		17,611		(3,784)		54,496		(7,552)
Total impaired available for sale securities	190	$	506,666	$	(60,085)	$	915,232	$	(120,372)	$	1,421,898	$	(180,457)
	December 31, 2021
		Less than 12 months				12 months or longer				Total
	# of  holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. government agency securities	6	$	160,913	$	(2,901)	$	—	$	—	$	160,913	$	(2,901)
U.S. treasury securities	17	811,993		(12,191)		—		—		811,993		(12,191)
Agency mortgage-backed securities	12	214,678		(5,534)		—		—		214,678		(5,534)
Agency collateralized mortgage obligations	1	22,960		(571)		—		—		22,960		(571)
Pooled trust preferred securities issued by banks and insurers	1	—		—		1,000		(199)		1,000		(199)
Total impaired available for sale securities	37	$	1,210,544	$	(21,197)	$	1,000	$	(199)	$	1,211,544	$	(21,396)

The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell each security before the recovery of its amortized cost basis. In addition, management does not believe that any of the securities are impaired due to reasons of credit quality. As a result, the Company did not recognize a provision for credit losses on these investments during the three and nine months ended September 30, 2022 and 2021, respectively. The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category were as follows at September 30, 2022:

•U.S. Government Agency Securities, U.S. Treasury Securities, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. Government or one of its agencies.

•State, County and Municipal Securities: This portfolio has contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality.

•Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.

Held to Maturity Securities

The following table summarizes the amortized cost, fair value and allowance for credit losses of held to maturity securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:

	September 30, 2022										December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value
	(Dollars in thousands)
U.S. government agency securities	$	31,696	$	—	$	(2,393)	$	—	$	29,303	$	32,987	$	—	$	(441)	$	—	$	32,546
U.S. treasury securities	100,615		—		(12,623)		—		87,992		102,560		6		(324)		—		102,242
Agency mortgage-backed securities	892,102		149		(90,158)		—		802,093		493,012		8,495		(4,271)		—		497,236
Agency collateralized mortgage obligations	553,995		—		(77,025)		—		476,970		415,736		3,232		(10,123)		—		408,845
Single issuer trust preferred securities issued by banks	1,500		8		—		—		1,508		1,500		8		—		—		1,508
Small business administration pooled securities	117,727		12		(5,620)		—		112,119		21,023		733		—		—		21,756
Total held to maturity securities	$	1,697,635	$	169	$	(187,819)	$	—	$	1,509,985	$	1,066,818	$	12,474	$	(15,159)	$	—	$	1,064,133

Substantially all held to maturity securities held by the Company are guaranteed by the U.S. federal government or other government sponsored agencies and have a long history of no credit losses. As a result, management has determined these securities to have a zero loss expectation and therefore the Company did not record a provision for estimated credit losses on any held to maturity securities during the three and nine months ended September 30, 2022 and 2021, respectively. Excluded from the table above is accrued interest on held to maturity securities of $4.3 million and $2.0 million as of September 30, 2022 and December 31, 2021, respectively, which is included within other assets on the consolidated balance sheets. Additionally, the Company did not record any write-offs of accrued interest income on held to maturity securities during the three and nine months ended September 30, 2022 and 2021. Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status as of September 30, 2022 and December 31, 2021.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The Company had no sales of held to maturity securities during the three and nine months ended September 30, 2022 and 2021, respectively, and therefore no gains or losses were realized during the periods presented.

The Company monitors the credit quality of held to maturity securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. As of September 30, 2022, all held to maturity securities held by the Company were rated investment grade or higher.

The actual maturities of certain available for sale or held to maturity securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of available for sale and held to maturity securities as of September 30, 2022 is presented below:

	Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale securities
U.S. government agency securities	$	—	$	—	$	68,007	$	60,786	$	163,115	$	139,156	$	—	$	—	$	231,122	$	199,942
U.S. treasury securities	—		—		691,691		627,786		182,200		156,672		—		—		873,891		784,458
Agency mortgage-backed securities	19,658		19,617		70,984		66,817		148,475		126,625		154,179		131,094		393,296		344,153
Agency collateralized mortgage obligations	—		—		—		—		—		—		43,672		40,787		43,672		40,787
State, county, and municipal securities	—		—		193		187		—		—		—		—		193		187
Single issuer trust preferred securities issued by banks	—		—		—		—		—		—		489		489		489		489
Pooled trust preferred securities issued by banks and insurers	—		—		—		—		—		—		1,202		999		1,202		999
Small business administration pooled securities	—		—		—		—		—		—		62,048		54,496		62,048		54,496
Total available for sale securities	$	19,658	$	19,617	$	830,875	$	755,576	$	493,790	$	422,453	$	261,590	$	227,865	$	1,605,913	$	1,425,511
Held to maturity securities
U.S. government agency securities	$	—	$	—	$	31,696	$	29,303	$	—	$	—	$	—	$	—	$	31,696	$	29,303
U.S. treasury securities	—		—		49,766		44,047		50,849		43,945		—		—		100,615		87,992
Agency mortgage-backed securities	228		226		190,333		182,141		478,115		415,833		223,426		203,893		892,102		802,093
Agency collateralized mortgage obligations	—		—		29,998		28,550		36,791		31,784		487,206		416,636		553,995		476,970
Single issuer trust preferred securities issued by banks	—		—		—		—		1,500		1,508		—		—		1,500		1,508
Small business administration pooled securities	—		—		—		—		—		—		117,727		112,119		117,727		112,119
Total held to maturity securities	$	228	$	226	$	301,793	$	284,041	$	567,255	$	493,070	$	828,359	$	732,648	$	1,697,635	$	1,509,985
Total	$	19,886	$	19,843	$	1,132,668	$	1,039,617	$	1,061,045	$	915,523	$	1,089,949	$	960,513	$	3,303,548	$	2,935,496

Included in the table above are $24.8 million of callable securities at September 30, 2022.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was $963.9 million and $740.6 million at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022 and December 31, 2021, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.