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Investment Securities | 9 Months Ended
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Sep. 30, 2021
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | INVESTMENT SECURITIES Held-to-maturity securities (“HTM”), which include any security for which the Company has both 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 effective yield method over the security’s estimated life. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date. Available-for-sale securities (“AFS”), 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 effective yield method over the estimated life of the security. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date. During the third quarter of 2021, the Company transferred, at fair value, $500.8 million of securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related net unrealized gains of $1.1 million remained in accumulated other comprehensive income (loss) and will be amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer. 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 |  |  |  |  |  |  |  |  |  |  |
September 30, 2021 |  |  |  |  |  |  |  |  |  |  |
U.S. Government agencies | $ | 232,549 |  |  | $ | — |  |  | $ | 232,549 |  |  | $ | — |  |  | $ | (5,179) |  |  | $ | 227,370 |
Mortgage-backed securities | 57,930 |  |  | — |  |  | 57,930 |  |  | 417 |  |  | (1,024) |  |  | 57,323 |
State and political subdivisions | 1,210,287 |  |  | (1,196) |  |  | 1,209,091 |  |  | 2,206 |  |  | (24,962) |  |  | 1,186,335 |
Other securities | 17,310 |  |  | (83) |  |  | 17,227 |  |  | — |  |  | (339) |  |  | 16,888 |
Total HTM | $ | 1,518,076 |  |  | $ | (1,279) |  |  | $ | 1,516,797 |  |  | $ | 2,623 |  |  | $ | (31,504) |  |  | $ | 1,487,916 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities | $ | 22,354 |  |  | $ | — |  |  | $ | 22,354 |  |  | $ | 683 |  |  | $ | — |  |  | $ | 23,037 |
State and political subdivisions | 312,416 |  |  | (2,307) |  |  | 310,109 |  |  | 8,148 |  |  | (30) |  |  | 318,227 |
Other securities | 1,176 |  |  | (608) |  |  | 568 |  |  | 93 |  |  | — |  |  | 661 |
Total HTM | $ | 335,946 |  |  | $ | (2,915) |  |  | $ | 333,031 |  |  | $ | 8,924 |  |  | $ | (30) |  |  | $ | 341,925 |
Mortgage-backed securities (“MBS”) are commercial MBS, secured by commercial properties, and residential MBS, generally secured by single-family residential properties. As of September 30, 2021, HTM MBS consists of $5.4 million and $52.5 million of commercial MBS and residential MBS, respectively. As of December 31, 2020, HTM MBS consists of $7.7 million and $14.7 million of commercial MBS and residential MBS, respectively. 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 |  |  |  |  |  |  |  |  |
September 30, 2021 |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 300 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 300 |
U.S. Government agencies | 361,452 |  |  | — |  |  | 635 |  |  | (7,705) |  |  | 354,382 |
Mortgage-backed securities | 4,434,981 |  |  | — |  |  | 14,741 |  |  | (28,102) |  |  | 4,421,620 |
State and political subdivisions | 1,574,674 |  |  | — |  |  | 17,877 |  |  | (17,343) |  |  | 1,575,208 |
Other securities | 467,336 |  |  | — |  |  | 7,328 |  |  | (3,971) |  |  | 470,693 |
Total AFS | $ | 6,838,743 |  |  | $ | — |  |  | $ | 40,581 |  |  | $ | (57,121) |  |  | $ | 6,822,203 |
December 31, 2020 |  |  |  |  |  |  |  |  |
U.S. Government agencies | $ | 477,693 |  |  | $ | — |  |  | $ | 844 |  |  | $ | (1,300) |  |  | $ | 477,237 |
Mortgage-backed securities | 1,374,769 |  |  | — |  |  | 21,261 |  |  | (1,094) |  |  | 1,394,936 |
State and political subdivisions | 1,416,136 |  |  | (217) |  |  | 55,111 |  |  | (307) |  |  | 1,470,723 |
Other securities | 128,445 |  |  | (95) |  |  | 2,447 |  |  | (95) |  |  | 130,702 |
Total AFS | $ | 3,397,043 |  |  | $ | (312) |  |  | $ | 79,663 |  |  | $ | (2,796) |  |  | $ | 3,473,598 |
As of September 30, 2021, AFS MBS consists of $1.56 billion and $2.86 billion of commercial MBS and residential MBS, respectively. As of December 31, 2020, AFS MBS consists of $406.1 million and $988.8 million of commercial MBS and residential MBS, respectively. Accrued interest receivable on HTM and AFS securities at September 30, 2021 was $8.3 million and $20.9 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 September 30, 2021, 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. Government agencies | $ | 190,275 |  |  | $ | (3,759) |  |  | $ | 111,662 |  |  | $ | (3,946) |  |  | $ | 301,937 |  |  | $ | (7,705) |
Mortgage-backed securities | 2,342,244 |  |  | (27,380) |  |  | 46,253 |  |  | (722) |  |  | 2,388,497 |  |  | (28,102) |
State and political subdivisions | 969,120 |  |  | (16,056) |  |  | 23,372 |  |  | (1,287) |  |  | 992,492 |  |  | (17,343) |
Other securities | 157,974 |  |  | (3,971) |  |  | — |  |  | — |  |  | 157,974 |  |  | (3,971) |
Total AFS | $ | 3,659,613 |  |  | $ | (51,166) |  |  | $ | 181,287 |  |  | $ | (5,955) |  |  | $ | 3,840,900 |  |  | $ | (57,121) |
As of September 30, 2021, the Company’s investment portfolio included $6.8 billion of AFS securities, of which $3.8 billion, or 56.3%, were in an unrealized loss position that were not deemed to have credit losses. A portion of the unrealized losses were related to the Company’s MBS, which are issued and guaranteed by U.S. government-sponsored entities and agencies, and the Company’s state and political subdivision securities, specifically investments in insured fixed rate municipal bonds for which the 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 MBS 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, 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, and (v) whether or not such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. The following table details activity in the allowance for credit losses by investment security type for the three and nine months ended September 30, 2021 on the Company’s HTM and AFS securities portfolios.
(In thousands) | State and Political Subdivisions |  | Other Securities |  | Total
Three Months Ended September 30, 2021 |  |  |  |  |
Held-to-maturity |  |  |  |  |
Beginning balance, July 1, 2021 | $ | 871 |  |  | $ | 261 |  |  | $ | 1,132 |
Provision for credit loss expense | 325 |  |  | (325) |  |  | — |
Recoveries | — |  |  | 147 |  |  | 147 |
Ending balance, September 30, 2021 | $ | 1,196 |  |  | $ | 83 |  |  | $ | 1,279 |
Available-for-sale |  |  |  |  |
Beginning balance, July 1, 2021 | $ | — |  |  | $ | — |  |  | $ | — |
Net decrease in allowance on previously impaired securities | — |  |  | — |  |  | — |
Ending balance, September 30, 2021 | $ | — |  |  | $ | — |  |  | $ | — |
Nine Months Ended September 30, 2021 |  |  |  |  |
Held-to-maturity |  |  |  |  |
Beginning balance, January 1, 2021 | $ | 2,307 |  |  | $ | 608 |  |  | $ | 2,915 |
Provision for credit loss expense | (1,111) |  |  | (72) |  |  | (1,183) |
Securities charged-off | — |  |  | (600) |  |  | (600) |
Recoveries | — |  |  | 147 |  |  | 147 |
Ending balance, September 30, 2021 | $ | 1,196 |  |  | $ | 83 |  |  | $ | 1,279 |
Available-for-sale |  |  |  |  |
Beginning balance, January 1, 2021 | $ | 217 |  |  | $ | 95 |  |  | $ | 312 |
Reduction due to sales | — |  |  | (11) |  |  | (11) |
Net decrease in allowance on previously impaired securities | (217) |  |  | (84) |  |  | (301) |
Ending balance, September 30, 2021 | $ | — |  |  | $ | — |  |  | $ | — |
Activity in the allowance for credit losses by investment security type for the three and nine months ended September 30, 2020 on the Company’s HTM and AFS securities portfolio was as follows:
(In thousands) | State and Political Subdivisions |  | Other Securities |  | Total
Three Months Ended September 30, 2020 |  |  |  |  |
Held-to-maturity |  |  |  |  |
Beginning balance, July 1, 2020 | $ | 95 |  |  | $ | 212 |  |  | $ | 307 |
Provision for credit loss expense | (22) |  |  | 88 |  |  | 66 |
Ending balance, September 30, 2020 | $ | 73 |  |  | $ | 300 |  |  | $ | 373 |
Available-for-sale |  |  |  |  |
Beginning balance, July 1, 2020 | $ | 371 |  |  | $ | 238 |  |  | $ | 609 |
Credit losses on securities not previously recorded | 1,137 |  |  | 23 |  |  | 1,160 |
Reduction due to sales | $ | (294) |  |  | $ | — |  |  | $ | (294) |
Net decrease in allowance on previously impaired securities | (66) |  |  | (201) |  |  | (267) |
Ending balance, September 30, 2020 | $ | 1,148 |  |  | $ | 60 |  |  | $ | 1,208 |
Nine Months Ended September 30, 2020 |  |  |  |  |
Held-to-maturity |  |  |  |  |
Beginning balance, January 1, 2020 | $ | — |  |  | $ | — |  |  | $ | — |
Impact of ASU 2016-13 adoption | 58 |  |  | 311 |  |  | 369 |
Provision for credit loss expense | 15 |  |  | (11) |  |  | 4 |
Ending balance, September 30, 2020 | $ | 73 |  |  | $ | 300 |  |  | $ | 373 |
Available-for-sale |  |  |  |  |
Beginning balance, January 1, 2020 | $ | — |  |  | $ | — |  |  | $ | — |
Impact of ASU 2016-13 adoption | 373 |  |  | — |  |  | 373 |
Credit losses on securities not previously recorded | 1,130 |  |  | 78 |  |  | 1,208 |
Reduction due to sales | (244) |  |  | — |  |  | (244) |
Net increase in allowance on previously impaired securities | (111) |  |  | (18) |  |  | (129) |
Ending balance, September 30, 2020 | $ | 1,148 |  |  | $ | 60 |  |  | $ | 1,208 |
Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, there was no provision for credit losses related to AFS securities recorded in the third quarter of 2021 and it was reduced by $312,000 during the nine months ended September 30, 2021. During the three and nine months ended September 30, 2020, the provision for credit losses was $599,000 and $835,000, respectively, related to AFS securities. The following table summarizes bond ratings for the Company’s HTM portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of September 30, 2021:
| State and Political Subdivisions |  |
(In thousands) | Not Guaranteed or Pre-Refunded |  | Other Credit Enhancement or Insurance |  | Pre-Refunded |  | Total |  | Other Securities
Aaa/AAA | $ | 130,326 |  |  | $ | 114,831 |  |  | $ | — |  |  | $ | 245,157 |  |  | $ | — |
Aa/AA | 495,498 |  |  | 308,656 |  |  | — |  |  | 804,154 |  |  | — |
A | 45,229 |  |  | 82,432 |  |  | — |  |  | 127,661 |  |  | — |
Baa/BBB | 1,049 |  |  | 10,302 |  |  | — |  |  | 11,351 |  |  | — |
Not Rated | 6,322 |  |  | 15,642 |  |  | — |  |  | 21,964 |  |  | 17,310 |
Total | $ | 678,424 |  |  | $ | 531,863 |  |  | $ | — |  |  | $ | 1,210,287 |  |  | $ | 17,310 |
Historical loss rates associated with securities having similar grades as those in the Company’s portfolio have generally not been significant. Pre-refunded securities, if any, 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 and nine months ended September 30, 2021 and 2020, is as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) | 2021 |  | 2020 |  | 2021 |  | 2020
Taxable: |  |  |  |  |  |  |
Held-to-maturity | $ | 1,127 |  |  | $ | 256 |  |  | $ | 2,477 |  |  | $ | 715 |
Available-for-sale | 15,949 |  |  | 6,937 |  |  | 39,313 |  |  | 26,604 |
Non-taxable: |  |  |  |  |  |  |
Held-to-maturity | 4,853 |  |  | 65 |  |  | 9,887 |  |  | 205 |
Available-for-sale | 8,788 |  |  | 7,652 |  |  | 27,741 |  |  | 19,802 |
Total | $ | 30,717 |  |  | $ | 14,910 |  |  | $ | 79,418 |  |  | $ | 47,326 |
The amortized cost and estimated fair value by maturity of securities as of September 30, 2021 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 | $ | 5,644 |  |  | $ | 5,678 |  |  | $ | 8,385 |  |  | $ | 8,423 |
After one through five years | 7,676 |  |  | 7,993 |  |  | 53,515 |  |  | 54,008 |
After five through ten years | 27,094 |  |  | 26,019 |  |  | 487,966 |  |  | 492,654 |
After ten years | 1,419,732 |  |  | 1,390,903 |  |  | 1,853,165 |  |  | 1,844,768 |
Securities not due on a single maturity date | 57,930 |  |  | 57,323 |  |  | 4,434,981 |  |  | 4,421,620 |
Other securities (no maturity) | — |  |  | — |  |  | 731 |  |  | 730 |
Total | $ | 1,518,076 |  |  | $ | 1,487,916 |  |  | $ | 6,838,743 |  |  | $ | 6,822,203 |
The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $3.69 billion at September 30, 2021 and $2.01 billion at December 31, 2020. There were approximately $5.3 million of gross realized gains and $24,500 of gross realized losses from the sale of securities during the three months ended September 30, 2021, and approximately $15.9 million of gross realized gains and $63,600 of gross realized losses from the sale of securities during the nine months ended September 30, 2021. The Company sold approximately $342.6 million of investment securities during the nine months ended September 30, 2021. There were approximately $22.3 of gross realized gains and $1,700 of gross realized losses from the sale of securities during the three months ended September 30, 2020, and approximately $54.8 million of gross realized gains and $4,400 of gross realized losses from the sale of securities during the nine months ended September 30, 2020. During the first half of 2020, the Company sold approximately $1.7 billion of investment securities to create additional liquidity. The income tax expense/benefit related to security gains/losses was 26.135% of the gross amounts in 2021 and 2020. The Company has entered into various fair value hedging transactions to mitigate the impact of changing interest rates on the fair value of AFS securities. See Note 23: Derivative Instruments for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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