Investment Securities

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Investment securities are classified as AFS, HTM, or equity on the consolidated balance sheets at the time of purchase. The amortized cost and fair values of securities AFS and HTM at March 31, 2021 were as follows:

($ in Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Investment securities AFS
U. S. Treasury securities	$	54,237	$	—	$	(544)	$	53,693
Agency securities	15,000		—		(96)		14,904
Obligations of state and political subdivisions (municipal securities)	411,964		21,218		—		433,182
Residential mortgage-related securities
FNMA / FHLMC	1,910,644		5,956		(5,647)		1,910,954
GNMA	119,913		3,451		—		123,365
Commercial mortgage-related securities
FNMA / FHLMC	93,902		2,330		(1,883)		94,349
GNMA	381,158		8,254		—		389,411
Asset backed securities
FFELP	325,812		1,675		(1,554)		325,933
SBA	8,216		—		(57)		8,160
Other debt securities	3,000		—		—		3,000
Total investment securities AFS	$	3,323,846	$	42,885	$	(9,782)	$	3,356,949
Investment securities HTM
U. S. Treasury securities	$	1,000	$	20	$	—	$	1,019
Obligations of state and political subdivisions (municipal securities)	1,455,462		106,933		(994)		1,561,401
Residential mortgage-related securities
FNMA / FHLMC	47,480		2,471		—		49,951
GNMA	87,717		3,353		—		91,070
Commercial mortgage-related securities
FNMA/FHLMC	63,844		157		(2,138)		61,863
GNMA	201,648		5,611		(21)		207,238
Total investment securities HTM	$	1,857,150	$	118,544	$	(3,154)	$	1,972,541

The amortized cost and fair values of securities AFS and HTM at December 31, 2020 were as follows:

($ in Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value
Investment securities AFS
U. S. Treasury securities	$	26,436	$	95	$	—	$	26,531
Agency securities	24,985		53		—		25,038
Obligations of state and political subdivisions (municipal securities)	425,057		25,605		—		450,662
Residential mortgage-related securities
FNMA / FHLMC	1,448,806		12,935		(500)		1,461,241
GNMA	231,364		4,176		(3)		235,537
Commercial mortgage-related securities
FNMA / FHLMC	19,654		3,250		—		22,904
GNMA	511,429		13,327		—		524,756
Asset backed securities
FFELP	329,030		1,172		(3,013)		327,189
SBA	8,637		—		(53)		8,584
Other debt securities	3,000		—		—		3,000
Total investment securities AFS	$	3,028,399	$	60,612	$	(3,570)	$	3,085,441
Investment securities HTM
U. S. Treasury securities	$	999	$	25	$	—	$	1,024
Obligations of state and political subdivisions (municipal securities)	1,441,900		133,544		—		1,575,445
Residential mortgage-related securities
FNMA / FHLMC	54,599		2,891		—		57,490
GNMA	114,553		4,260		—		118,813
Commercial mortgage-related securities
FNMA / FHLMC	11,211		—		—		11,211
GNMA	255,742		9,218		—		264,960
Total investment securities HTM	$	1,879,005	$	149,938	$	—	$	2,028,943

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The expected maturities of investment securities AFS and HTM at March 31, 2021, are shown below:

	AFS					HTM
($ in Thousands)	Amortized Cost		Fair Value			Amortized Cost		Fair Value
Due in one year or less	$	9,575	$	9,588		$	35,299	$	35,587
Due after one year through five years	79,504		79,813			47,810		49,383
Due after five years through ten years	357,498		373,906			179,382		188,263
Due after ten years	37,624		41,472			1,193,970		1,289,186
Total debt securities	484,201		504,778			1,456,461		1,562,420
Residential mortgage-related securities
FNMA / FHLMC	1,910,644		1,910,954			47,480		49,951
GNMA	119,913		123,365			87,717		91,070
Commercial mortgage-related securities
FNMA / FHLMC	93,902		94,349			63,844		61,863
GNMA	381,158		389,411			201,648		207,238
Asset backed securities
FFELP	325,812		325,933			—		—
SBA	8,216		8,160			—		—
Total investment securities	$	3,323,846	$	3,356,949		$	1,857,150	$	1,972,541
Ratio of fair value to amortized cost			101.0		%			106.2		%

On a quarterly basis, the Corporation refreshes the credit quality of each HTM security. The following table summarizes the credit quality indicators of HTM securities at amortized cost at March 31, 2021:

($ in Thousands)	AAA		AA		A		Not Rated		Total
U. S. Treasury securities	$	1,000	$	—	$	—	$	—	$	1,000
Obligations of state and political subdivisions (municipal securities)	582,675		860,882		11,711		193		1,455,462
Residential mortgage-related securities
FNMA / FHLMC	47,480		—		—		—		47,480
GNMA	87,717		—		—		—		87,717
Commercial mortgage-related securities
FNMA / FHLMC	63,844		—		—		—		63,844
GNMA	201,648		—		—		—		201,648
Total HTM securities	$	984,363	$	860,882	$	11,711	$	193	$	1,857,150

The following table summarizes the credit quality indicators of HTM securities at amortized cost at December 31, 2020:

($ in Thousands)	AAA		AA		A		Total
U. S. Treasury securities	$	999	$	—	$	—	$	999
Obligations of state and political subdivisions (municipal securities)	567,252		860,607		14,041		1,441,900
Residential mortgage-related securities
FNMA / FHLMC	54,599		—		—		54,599
GNMA	114,553		—		—		114,553
Commercial mortgage-related securities
FNMA / FHLMC	11,211		—		—		11,211
GNMA	255,742		—		—		255,742
Total HTM securities	$	1,004,357	$	860,607	$	14,041	$	1,879,005

Investment securities gains (losses), net includes proceeds from the sale of investment securities as well as any applicable write-ups or write-downs of investment securities. The proceeds from the sale of investment securities for the three months ended March 31, 2021 and 2020, are shown below:

	Three Months Ended March 31,
($ in Thousands)	2021		2020
Gross gains on AFS securities	$	36	$	6,198
Gross (losses) on AFS securities	(75)		(80)
Investment securities gains (losses), net	$	(39)	$	6,118
Proceeds from sales of investment securities	$	51,295	$	365,239

During the first quarter of 2021, the Corporation sold $51 million of lower yielding U.S. Treasury and Agency securities at a slight loss to take advantage of the steeper yield curve by reinvesting the proceeds into similar but higher yielding, longer duration securities.

During the first quarter of 2020, the Corporation sold $281 million of primarily prepayment sensitive mortgage-related securities at a gain of $6 million. Additionally, in February 2020, the Corporation sold $84 million of certain securities acquired in the First Staunton acquisition that did not fit the parameters of the Corporation's current investment strategy.

Investment securities with a carrying value of approximately $1.5 billion and $1.6 billion at March 31, 2021 and December 31, 2020, respectively, were pledged to secure certain deposits or for other purposes as required or permitted by law.

Accrued interest receivable on HTM securities totaled $12 million and $14 million at March 31, 2021 and December 31, 2020, respectively. Accrued interest receivable on AFS securities totaled $8 million at both March 31, 2021 and December 31, 2020. Accrued interest receivable on both HTM and AFS securities is included in interest receivable on the consolidated balance sheets. There was no interest income reversed for investments going into nonaccrual at both March 31, 2021 and 2020.

A security is considered past due once it is 30 days past due under the terms of the agreement. At both March 31, 2021 and December 31, 2020, the Corporation had no past due HTM securities.

The allowance for credit losses on HTM securities was approximately $63,000 at March 31, 2021 and approximately $67,000 at December 31, 2020, attributable entirely to the Corporation's municipal securities, included in investment securities HTM, net, at amortized cost on the consolidated balance sheets. The Corporation also holds U.S. Treasury and mortgage-related securities

issued by the U.S. government or a GSE which are backed by the full faith and credit of the U.S. government and, as a result, no allowance for credit losses has been recorded related to these securities.

The following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at March 31, 2021:

	Less than 12 months					12 months or more					Total
($ in Thousands)	Number of Securities	Unrealized (Losses)		Fair Value		Number of Securities	Unrealized (Losses)		Fair Value		Unrealized (Losses)		Fair Value
Investment securities AFS
U.S. Treasury securities	5	$	(544)	$	53,693	—	$	—	$	—	$	(544)	$	53,693
Agency securities	1	(96)		14,904		—	—		—		(96)		14,904
Obligations of state and political subdivisions (municipal securities)	1	—		910		—	—		—		—		910
Residential mortgage-related securities
FNMA / FHLMC	24	(5,647)		756,359		—	—		—		(5,647)		756,359
GNMA	1	—		253		—	—		—		—		253
Commercial mortgage-related securities
FNMA / FHLMC	2	(1,883)		72,435		—	—		—		(1,883)		72,435
GNMA	1	—		78		—	—		—		—		78
Asset backed securities
FFELP	—	—		—		15	(1,554)		141,652		(1,554)		141,652
SBA	—	—		—		14	(57)		7,750		(57)		7,750
Total	35	$	(8,171)	$	898,632	29	$	(1,611)	$	149,402	$	(9,782)	$	1,048,033
Investment securities HTM
Obligations of state and political subdivisions (municipal securities)	33	$	(994)	$	62,908	—	$	—	$	—	$	(994)	$	62,908
Commercial mortgage-related securities
FNMA / FHLMC	6	(2,138)		41,105		—	—		—		(2,138)		41,105
GNMA	2	(21)		22,205		—	—		—		(21)		22,205
Total	41	$	(3,154)	$	126,218	—	$	—	$	—	$	(3,154)	$	126,218

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2020:

	Less than 12 months					12 months or more					Total
($ in Thousands)	Number of Securities	Unrealized (Losses)		Fair Value		Number of Securities	Unrealized (Losses)		Fair Value		Unrealized (Losses)		Fair Value
Investment securities AFS
Residential mortgage-related securities
FNMA / FHLMC	7	$	(500)	$	163,002	—	$	—	$	—	$	(500)	$	163,002
GNMA	2	(3)		9,784		—	—		—		(3)		9,784
GNMA commercial mortgage-related securities	1	—		287		—	—		—		—		287
Asset backed securities
FFELP	1	(129)		9,267		16	(2,885)		178,681		(3,013)		187,948
SBA	14	(53)		8,379		—	—		—		(53)		8,379
Other debt securities	2	—		2,000		—	—		—		—		2,000
Total	27	$	(685)	$	192,720	16	$	(2,885)	$	178,681	$	(3,570)	$	371,400
Investment securities HTM
GNMA residential mortgage-related securities	1	$	—	$	325	—	$	—	$	—	$	—	$	325
Total	1	$	—	$	325	—	$	—	$	—	$	—	$	325

The Corporation reviews the AFS investment securities portfolio on a quarterly basis to monitor its credit exposure. A determination as to whether a security’s decline in fair value is the result of credit risk takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the impairment analysis include the extent to which the security has been in an unrealized loss position, the change in security

rating, financial condition and near-term prospects of the issuer, as well as the security and industry specific economic conditions.

Based on the Corporation’s evaluation, management does not believe any unrealized losses at March 31, 2021 represent credit deterioration as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions. The U.S. Treasury 3 year and 5 year rates increased by 18 bp and 56 bp, respectively, from December 31, 2020. The Corporation does not intend to sell nor does it believe that it will be required to sell the securities in an unrealized loss position before recovery of their amortized cost basis.

FHLB and Federal Reserve Bank stocks: The Corporation is required to maintain Federal Reserve Bank stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation had FHLB stock of $82 million at both March 31, 2021 and December 31, 2020. The Corporation had Federal Reserve Bank stock of $87 million at both March 31, 2021 and December 31, 2020. Accrued interest receivable on FHLB stock totaled approximately $944,000 and approximately $972,000 at March 31, 2021 and December 31, 2020, respectively. There was approximately $370,000 of accrued interest receivable on Federal Reserve Bank stock at March 31, 2021 and none at December 31, 2020. Accrued interest receivable on both FHLB stock and Federal Reserve Bank stock is included in interest receivable on the consolidated balance sheets.

Equity Securities

Equity securities with readily determinable fair values: The Corporation's portfolio of equity securities with readily determinable fair values is primarily comprised of CRA Qualified Investment mutual funds. At both March 31, 2021 and December 31, 2020, the Corporation had equity securities with readily determinable fair values of $2 million.

Equity securities without readily determinable fair values: The Corporation's portfolio of equity securities without readily determinable fair values primarily consists of 77,996 Visa Class B restricted shares, 77,000 of which the Corporation received in 2008 as part of Visa's initial public offering and carried at fair value after the Corporation donated 42,039 Visa Class B restricted shares to the Corporation's Charitable Remainder Trust during the second quarter of 2019, with the subsequent sale of those shares resulting in an observable market price after the shares were previously carried at a zero cost basis. During the first quarter of 2020, the Corporation acquired 996 Visa Class B restricted shares from the acquisition of First Staunton, and those shares are carried at a zero cost basis due to the lack of an observable market price since the time of acquisition. The Corporation had equity securities without readily determinable fair values of $14 million at March 31, 2021 and $13 million at December 31, 2020