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Investment Securities

9 Months Ended

Sep. 30, 2021

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, 2021:
U.S. Government agencies		$	87,912		$	—		$	(2,162)		$	85,750
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			1,028,847			—			(19,505)			1,009,342
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			144,540			—			(4,029)			140,511
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			316,330			83			(6,586)			309,827
Small Business Administration loan-backed securities			63,856			—			(2,102)			61,754
		$	1,641,485		$	83		$	(34,384)		$	1,607,184
December 31, 2020:
U.S. Government agencies		$	25,000		$	1		$	—		$	25,001
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			632,269			1,827			(1,032)			633,064
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			75,767			405			—			76,172
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			174,506			300			(91)			174,715
Small Business Administration loan-backed securities			48,000			231			—			48,231
		$	955,542		$	2,764		$	(1,123)		$	957,183

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, 2021:
U.S. Government agencies		$	74,336		$	—		$	(1,493)		$	72,843
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			1,639,495			8,307			(17,354)			1,630,448
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			703,245			9,924			(5,041)			708,128
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			1,003,259			7,294			(11,265)			999,288
State and municipal obligations			720,417			13,218			(4,033)			729,602
Small Business Administration loan-backed securities			477,765			3,700			(4,065)			477,400
Corporate securities			13,522			323			—			13,845
		$	4,632,039		$	42,766		$	(43,251)		$	4,631,554
December 31, 2020:
U.S. Government agencies		$	29,882		$	16		$	(642)		$	29,256
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			1,351,506			16,657			(1,031)			1,367,132
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			739,797			16,579			(825)			755,551
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			229,219			10,939			(50)			240,108
State and municipal obligations			502,575			17,491			(27)			520,039
Small Business Administration loan-backed securities			401,496			4,978			(1,590)			404,884
Corporate securities			13,562			140			—			13,702
		$	3,268,037		$	66,800		$	(4,165)		$	3,330,672

During the three months ended September 30, 2021, the Company recognized gains of $680,000 and losses of $615,000 (a net gain of $65,000) from the sale of available for sale securities. During the nine months ended September 30, 2021, the Company recognized gains of $748,000 and losses of $648,000 (a net gain of $100,000) from the sale of available for sale securities. During the three and nine months ended September 30, 2020, there were gains of $469,000 and losses of $454,000 (a net gain of $15,000) 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
September 30, 2021:
Federal Home Loan Bank stock		$	16,283
Federal Reserve Bank stock			129,716
Investment in unconsolidated subsidiaries			3,563
Other nonmarketable investment securities			11,030
		$	160,592
December 31, 2020:
Federal Home Loan Bank stock		$	15,083
Federal Reserve Bank stock			129,871
Investment in unconsolidated subsidiaries			4,941
Other nonmarketable investment securities			10,548
		$	160,443

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, 2021, we determined that there was no impairment on other investment securities.

The amortized cost and fair value of debt securities at September 30, 2021, 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		$	—		$	—		$	10,948		$	10,998
Due after one year through five years			—			—			102,771			105,345
Due after five years through ten years			141,285			137,970			752,981			757,174
Due after ten years			1,500,200			1,469,214			3,765,339			3,758,037
		$	1,641,485		$	1,607,184		$	4,632,039		$	4,631,554

Information pertaining to our securities with gross unrealized losses at September 30, 2021 and December 31, 2020, 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						Gross
		Unrealized			Fair			Unrealized			Fair
(Dollars in thousands)		Losses			Value			Losses			Value
September 30, 2021:
Securities Held-to-Maturity
U.S. Government agencies		$	2,162		$	85,750		$	—		$	—
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			19,505			1,009,342			—			—
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			4,029			140,511			—			—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			6,586			232,991			—			—
Small Business Administration loan-backed securities			2,102			61,754			—			—
		$	34,384		$	1,530,348		$	—		$	—
Securities Available for Sale
U.S. Government agencies		$	245		$	49,092		$	1,248		$	23,752
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			14,125			1,000,634			3,229			92,550
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			5,041			157,770			—			—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			7,684			617,854			3,581			79,540
State and municipal obligations			3,956			238,688			77			4,025
Small Business Administration loan-backed securities			2,417			134,438			1,648			116,233
		$	33,468		$	2,198,476		$	9,783		$	316,100
December 31, 2020:
Securities Held-to-Maturity
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		$	1,032		$	213,146		$	—		$	—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			91			27,445			—			—
		$	1,123		$	240,591		$	—		$	—
Securities Available for Sale
U.S. Government agencies		$	642		$	24,358		$	—		$	—
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			1,031			260,411			—			—
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises			825			140,333			—			—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises			46			13,594			4			871
State and municipal obligations			27			8,620			—			—
Small Business Administration loan-backed securities			573			94,981			1,017			104,254
		$	3,144		$	542,297		$	1,021		$	105,125

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 GNMA, FNMA, 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, 2021 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 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.