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Investment Securities | 3 Months Ended
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Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | INVESTMENT SECURITIES Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity. Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity, further discussed below. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity. The amortized cost, fair value and allowance for credit losses of investment securities that are classified as HTM are as follows:
(In thousands) | Amortized Cost |  | Allowance for Credit Losses |  | Net Carrying Amount |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) |  | Estimated Fair Value
Held-to-Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities | $ | 27,121 |  |  | $ | — |  |  | $ | 27,121 |  |  | $ | 668 |  |  | $ | (1 | ) |  | $ | 27,788 |
State and political subdivisions | 26,082 |  |  | (97 | ) |  | 25,985 |  |  | 981 |  |  | (12 | ) |  | 26,954 |
Other securities | 1,174 |  |  | (312 | ) |  | 862 |  |  | 110 |  |  | — |  |  | 972 |
Total HTM | $ | 54,377 |  |  | $ | (409 | ) |  | $ | 53,968 |  |  | $ | 1,759 |  |  | $ | (13 | ) |  | $ | 55,714 |
(In thousands) | Amortized Cost |  | Allowance for Credit Losses |  | Net Carrying Amount |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) |  | Estimated Fair Value
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities | $ | 10,796 |  |  | $ | — |  |  | $ | 10,796 |  |  | $ | 71 |  |  | $ | (59 | ) |  | $ | 10,808 |
State and political subdivisions | 27,082 |  |  | — |  |  | 27,082 |  |  | 849 |  |  | — |  |  | 27,931 |
Other securities | 3,049 |  |  | — |  |  | 3,049 |  |  | 67 |  |  | — |  |  | 3,116 |
Total HTM | $ | 40,927 |  |  | $ | — |  |  | $ | 40,927 |  |  | $ | 987 |  |  | $ | (59 | ) |  | $ | 41,855 |
The amortized cost, fair value and allowance for credit losses of investment securities that are classified as AFS are as follows:
(In thousands) | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) |  | Estimated Fair Value
Available-for-sale |  |  |  |  |  |  |  |  |
March 31, 2020 |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 425,032 |  |  | $ | — |  |  | $ | — |  |  | $ | (43 | ) |  | $ | 424,989 |
U.S. Government agencies | 161,473 |  |  | — |  |  | 707 |  |  | (891 | ) |  | 161,289 |
Mortgage-backed securities | 1,150,878 |  |  | — |  |  | 32,068 |  |  | (3,109 | ) |  | 1,179,837 |
State and political subdivisions | 659,350 |  |  | (95 | ) |  | 20,243 |  |  | (1,255 | ) |  | 678,243 |
Other securities | 21,765 |  |  | (174 | ) |  | 866 |  |  | (175 | ) |  | 22,282 |
Total AFS | $ | 2,418,498 |  |  | $ | (269 | ) |  | $ | 53,884 |  |  | $ | (5,473 | ) |  | $ | 2,466,640 |
December 31, 2019 |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 449,729 |  |  | $ | — |  |  | $ | 112 |  |  | $ | (112 | ) |  | $ | 449,729 |
U.S. Government agencies | 194,207 |  |  | — |  |  | 1,313 |  |  | (1,271 | ) |  | 194,249 |
Mortgage-backed securities | 1,738,584 |  |  | — |  |  | 8,510 |  |  | (4,149 | ) |  | 1,742,945 |
State and political subdivisions | 860,539 |  |  | — |  |  | 20,983 |  |  | (998 | ) |  | 880,524 |
Other securities | 20,092 |  |  | — |  |  | 822 |  |  | (18 | ) |  | 20,896 |
Total AFS | $ | 3,263,151 |  |  | $ | — |  |  | $ | 31,740 |  |  | $ | (6,548 | ) |  | $ | 3,288,343 |
Accrued interest receivable on HTM and AFS securities at March 31, 2020 was $334,000 and $9.7 million, respectively, and is included in interest receivable on the consolidated balance sheets. The Company has made the election to exclude all accrued interest receivable from securities from the estimate of credit losses. The following table summarizes the Company’s AFS investments in an unrealized loss position for which an allowance for credit loss has not been recorded as of March 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
| Less Than 12 Months |  | 12 Months or More |  | Total
(In thousands) | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
Available-for-sale |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 424,989 |  |  | $ | (43 | ) |  | $ | — |  |  | $ | — |  |  | $ | 424,989 |  |  | $ | (43 | )
U.S. Government agencies | — |  |  | — |  |  | 58,056 |  |  | (891 | ) |  | 58,056 |  |  | (891 | )
Mortgage-backed securities | 57,718 |  |  | (1,318 | ) |  | 74,523 |  |  | (1,791 | ) |  | 132,241 |  |  | (3,109 | )
State and political subdivisions | 24,813 |  |  | (1,157 | ) |  | 425 |  |  | (4 | ) |  | 25,238 |  |  | (1,161 | )
Total AFS | $ | 507,520 |  |  | $ | (2,518 | ) |  | $ | 133,004 |  |  | $ | (2,686 | ) |  | $ | 640,524 |  |  | $ | (5,204 | )
As of March 31, 2020, the Company’s investment portfolio included $2.5 billion of AFS securities, of which $640.5 million, or 26.0% were in an unrealized loss position that are not deemed to have credit losses. The majority of these unrealized losses were related to the Company’s mortgage-backed securities, which are issued and guaranteed by U.S. government-sponsored entities and agencies, and the Company’s state and political securities, specifically investments in insured fixed rate municipal bonds meaning issuers continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, the decline in fair value for each of the above AFS securities is attributable to the rates for those investments yielding less than current market rates. Management does not believe any of the securities are impaired due to reasons of credit quality. Management believes the declines in fair value for the securities are temporary. Management does not have the intent to sell the securities, and management believes it is more likely than not the Company will not have to sell the securities before recovery of their amortized cost basis. Allowance for Credit Losses All of the mortgage-backed securities held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Accordingly, no allowance for credit losses has been recorded for these securities. Regarding securities issued by state and political subdivisions and other HTM securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts, (v) whether or not such securities provide insurance or other credit enhancement or pre-refunded by the issuers. The following table details activity in the allowance for credit losses by investment security type for the three months ended March 31, 2020 on the Company’s HTM and AFS securities held.
(In thousands) | State and Political Subdivisions |  | Other Securities |  | Total
Held-to-Maturity |  |  |  |  |
Balance, January 1, 2020 | $ | — |  |  | $ | — |  |  | $ | — |
Impact of ASU 2016-13 adoption | 58 |  |  | 311 |  |  | 369 |
Provision for credit loss expense | 39 |  |  | 1 |  |  | 40 |
Balance, March 31, 2020 | $ | 97 |  |  | $ | 312 |  |  | $ | 409 |
Available-for-sale |  |  |  |  |
Balance, January 1, 2020 | $ | — |  |  | $ | — |  |  | $ | — |
Impact of ASU 2016-13 adoption | 373 |  |  | — |  |  | 373 |
Credit losses on securities not previously recorded | 44 |  |  | 174 |  |  | 218 |
Net increase (decrease) in allowance on previously impaired securities | (322 | ) |  | — |  |  | (322 | )
Balance, March 31, 2020 | $ | 95 |  |  | $ | 174 |  |  | $ | 269 |
During the three months ended March 31, 2020, the provision for credit losses was reduced by $104,000 related to AFS securities. The following table summarizes bond ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of March 31, 2020:
| State and Political Subdivisions |  |
(In thousands) | Not Guaranteed or Pre-Refunded |  | Other Credit Enhancement or Insurance |  | Pre-Refunded |  | Total |  | Other Securities
Aaa/AAA | $ | 2,111 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,111 |  |  | $ | — |
Aa/AA | 12,596 |  |  | 6,203 |  |  | 285 |  |  | 19,084 |  |  | — |
A | 766 |  |  | 929 |  |  | — |  |  | 1,695 |  |  | — |
Not Rated | 2,323 |  |  | 370 |  |  | 499 |  |  | 3,192 |  |  | 1,174 |
Total | $ | 17,796 |  |  | $ | 7,502 |  |  | $ | 784 |  |  | $ | 26,082 |  |  | $ | 1,174 |
Historical loss rates associated with securities having similar grades as those in the Company’s portfolio have generally not been significant. Pre-refunded securities have been defeased by the issuer and are fully secured by cash and/or U.S. Treasury securities held in escrow for payment to holders when the underlying call dates of the securities are reached. Securities with other credit enhancement or insurance continue to make timely principal and interest payments under the contractual terms of the securities. Accordingly, no allowance for credit losses has been recorded for these securities as there is no current expectation of credit losses related to these securities. Income earned on securities for the three months ended March 31, 2020 and 2019, is as follows:
|  |  | Three Months Ended March 31,
(In thousands) |  |  |  |  | 2020 |  | 2019
Taxable: |  |  |  |  |  |  |  |  |
Held-to-maturity |  |  |  |  | $ | 171 |  |  | $ | 438 |
Available-for-sale |  |  |  |  | 12,581 |  |  | 11,520 |
Non-taxable: |  |  |  |  |  |  |
Held-to-maturity |  |  |  |  | 72 |  |  | 1,162 |
Available-for-sale |  |  |  |  | 6,119 |  |  | 3,161 |
Total |  |  |  |  | $ | 18,943 |  |  | $ | 16,281 |
The amortized cost and estimated fair value by maturity of securities are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities.
| Held-to-Maturity |  | Available-for-Sale
(In thousands) | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
One year or less | $ | 4,543 |  |  | $ | 4,563 |  |  | $ | 437,199 |  |  | $ | 437,187 |
After one through five years | 15,414 |  |  | 15,769 |  |  | 34,541 |  |  | 34,889 |
After five through ten years | 7,299 |  |  | 7,594 |  |  | 108,605 |  |  | 109,611 |
After ten years | — |  |  | — |  |  | 686,714 |  |  | 703,839 |
Securities not due on a single maturity date | 27,121 |  |  | 27,788 |  |  | 1,150,878 |  |  | 1,179,837 |
Other securities (no maturity) | — |  |  | — |  |  | 561 |  |  | 1,277 |
Total | $ | 54,377 |  |  | $ | 55,714 |  |  | $ | 2,418,498 |  |  | $ | 2,466,640 |
The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $1.74 billion at March 31, 2020 and $1.73 billion at December 31, 2019. There were approximately $32.1 million of gross realized gains and $2,080 of gross realized losses from the sale of securities during the three months ended March 31, 2020. During the first quarter of 2020, the Company sold approximately $1.1 billion of investment securities to create additional liquidity. There were approximately $2.7 million of gross realized gains and no gross realized losses from the sale of securities during the three months ended March 31, 2019. The income tax expense/benefit related to security gain/losses was 26.135% of the gross amounts in 2020 and 2019.

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