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Investment Securities | 9 Months Ended
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Sep. 30, 2020
Investments, Debt and Equity Securities [Abstract] |
Investment Securities |
4. | INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities are summarized below. The majority of securities held are available-for-sale securities with fair value based on quoted prices for similar assets in active markets or quoted prices for identical assets in markets that are not active. Estimated fair values were obtained from an independent pricing service based upon market quotes.
|  | September 30, 2020
|  | Amortized Cost |  | Gross Unrealized Holding Gain |  | Gross Unrealized Holding Loss |  | Fair Value |  | Total Percent
|  | (Dollars in thousands)
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 1,710,160 |  |  | $ | 46,713 |  |  | $ | (2) |  |  | $ | 1,756,871 |  |  |  | 79.65% |
CMO/REMIC |  |  | 404,380 |  |  |  | 7,326 |  |  |  | (212) |  |  |  | 411,494 |  |  |  | 18.66% |
Municipal bonds |  |  | 35,011 |  |  |  | 1,457 |  |  |  | - |  |  |  | 36,468 |  |  |  | 1.65% |
Other securities |  |  | 813 |  |  |  | - |  |  |  | - |  |  |  | 813 |  |  |  | 0.04% |
Total available-for-sale securities |  | $ | 2,150,364 |  |  | $ | 55,496 |  |  | $ | (214) |  |  | $ | 2,205,646 |  |  |  | 100.00% |
Investment securities held-to-maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency/GSE |  | $ | 103,317 |  |  | $ | 6,627 |  |  | $ | - |  |  | $ | 109,944 |  |  |  | 17.88% |
Mortgage-backed securities |  |  | 152,285 |  |  |  | 7,837 |  |  |  | - |  |  |  | 160,122 |  |  |  | 26.36% |
CMO/REMIC |  |  | 159,676 |  |  |  | 5,315 |  |  |  | - |  |  |  | 164,991 |  |  |  | 27.64% |
Municipal bonds |  |  | 162,416 |  |  |  | 6,387 |  |  |  | (338) |  |  |  | 168,465 |  |  |  | 28.12% |
Total held-to-maturity securities |  | $ | 577,694 |  |  | $ | 26,166 |  |  | $ | (338) |  |  | $ | 603,522 |  |  |  | 100.00% |
|  | December 31, 2019
|  | Amortized Cost |  | Gross Unrealized Holding Gain |  | Gross Unrealized Holding Loss |  | Fair Value |  | Total Percent
|  | (Dollars in thousands)
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 1,185,757 |  |  | $ | 21,306 |  |  | $ | (750) |  |  | $ | 1,206,313 |  |  |  | 69.32% |
CMO/REMIC |  |  | 493,214 |  |  |  | 1,392 |  |  |  | (896) |  |  |  | 493,710 |  |  |  | 28.37% |
Municipal bonds |  |  | 38,506 |  |  |  | 850 |  |  |  | (2) |  |  |  | 39,354 |  |  |  | 2.26% |
Other securities |  |  | 880 |  |  |  | - |  |  |  | - |  |  |  | 880 |  |  |  | 0.05% |
Total available-for-sale securities |  | $ | 1,718,357 |  |  | $ | 23,548 |  |  | $ | (1,648) |  |  | $ | 1,740,257 |  |  |  | 100.00% |
Investment securities held-to-maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency/GSE |  | $ | 117,366 |  |  | $ | 2,280 |  |  | $ | (657) |  |  | $ | 118,989 |  |  |  | 17.40% |
Mortgage-backed securities |  |  | 168,479 |  |  |  | 2,083 |  |  |  | (54) |  |  |  | 170,508 |  |  |  | 24.98% |
CMO/REMIC |  |  | 192,548 |  |  |  | - |  |  |  | (2,458) |  |  |  | 190,090 |  |  |  | 28.55% |
Municipal bonds |  |  | 196,059 |  |  |  | 3,867 |  |  |  | (565) |  |  |  | 199,361 |  |  |  | 29.07% |
Total held-to-maturity securities |  | $ | 674,452 |  |  | $ | 8,230 |  |  | $ | (3,734) |  |  | $ | 678,948 |  |  |  | 100.00% |
The following table provides information about the amount of interest income earned on investment securities which is fully taxable and which is exempt from regular federal income tax.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (Dollars in thousands)
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | $ | 8,244 |  |  | $ | 8,949 |  |  | $ | 26,313 |  |  | $ | 29,079 |
Tax-advantaged |  |  | 203 |  |  |  | 273 |  |  |  | 632 |  |  |  | 906 |
Total interest income from available-for-sale securities |  |  | 8,447 |  |  |  | 9,222 |  |  |  | 26,945 |  |  |  | 29,985 |
Investment securities held-to-maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 2,265 |  |  |  | 2,883 |  |  |  | 7,410 |  |  |  | 8,725 |
Tax-advantaged |  |  | 1,110 |  |  |  | 1,415 |  |  |  | 3,623 |  |  |  | 4,524 |
Total interest income from held-to-maturity securities |  |  | 3,375 |  |  |  | 4,298 |  |  |  | 11,033 |  |  |  | 13,249 |
Total interest income from investment securities |  | $ | 11,822 |  |  | $ | 13,520 |  |  | $ | 37,978 |  |  | $ | 43,234 |
The adoption of CECL did not have a material impact on the accounting for investment securities, as approximately 93% of the total investment securities portfolio at September 30, 2020 represents securities issued by the U.S. government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. The remaining securities are predominately AA- or better general-obligation municipal bonds. The allowance for credit losses for held-to-maturity investment securities under the new CECL model was zero at September 30, 2020. We adopted ASU 2016-13 on January 1, 2020, on a prospective basis. Under the new guidance, once it is determined that a credit loss has occurred, an allowance for credit losses is established on our available-for-sale and held-to-maturity securities. Prior to adoption of this standard, when a decline in fair value of a debt security was determined to be other than temporary, an impairment charge for the credit component was recorded, and a new cost basis in the investment was established. During the third quarter of 2020, management determined that credit losses did not exist for securities in an unrealized loss position. The following table presents the Company’s available-for-sale investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of September 30, 2020.
|  | September 30, 2020
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
|  | Fair Value |  | Gross Unrealized Holding Losses |  | Fair Value |  | Gross Unrealized Holding Losses |  | Fair Value |  | Gross Unrealized Holding Losses
|  | (Dollars in thousands)
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 30,851 |  |  | $ | (2) |  |  | $ | - |  |  | $ | - |  |  | $ | 30,851 |  |  | $ | (2) |
CMO/REMIC |  |  | 71,781 |  |  |  | (212) |  |  |  | - |  |  |  | - |  |  |  | 71,781 |  |  |  | (212) |
Municipal bonds |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total available-for-sale securities |  | $ | 102,632 |  |  | $ | (214) |  |  | $ | - |  |  | $ | - |  |  | $ | 102,632 |  |  | $ | (214) |
The table below presents the Company’s investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2019, prior to adoption of ASU 2016-13. Management previously reviewed individual securities to determine whether a decline in fair value below the amortized cost basis is other-than-temporary. The unrealized losses on these securities were primarily attributed to changes in interest rates. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or maturity. As such, management does not deem these securities to be other-than-temporarily-impaired.
|  | December 31, 2019
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
|  | Fair Value |  | Gross Unrealized Holding Losses |  | Fair Value |  | Gross Unrealized Holding Losses |  | Fair Value |  | Gross Unrealized Holding Losses
|  | (Dollars in thousands)
Investment securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 20,289 |  |  | $ | (6) |  |  | $ | 97,964 |  |  | $ | (744) |  |  | $ | 118,253 |  |  | $ | (750) |
CMO/REMIC |  |  | 177,517 |  |  |  | (705) |  |  |  | 34,565 |  |  |  | (191) |  |  |  | 212,082 |  |  |  | (896) |
Municipal bonds |  |  | - |  |  |  | - |  |  |  | 563 |  |  |  | (2) |  |  |  | 563 |  |  |  | (2) |
Total available-for-sale securities |  | $ | 197,806 |  |  | $ | (711) |  |  | $ | 133,092 |  |  | $ | (937) |  |  | $ | 330,898 |  |  | $ | (1,648) |
Investment securities held-to-maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency/GSE |  | $ | 28,359 |  |  | $ | (252) |  |  | $ | 19,405 |  |  | $ | (405) |  |  | $ | 47,764 |  |  | $ | (657) |
Mortgage-backed securities |  |  | 10,411 |  |  |  | (54) |  |  |  | - |  |  |  | - |  |  |  | 10,411 |  |  |  | (54) |
CMO/REMIC |  |  | 23,897 |  |  |  | (104) |  |  |  | 166,193 |  |  |  | (2,354) |  |  |  | 190,090 |  |  |  | (2,458) |
Municipal bonds |  |  | 7,583 |  |  |  | (32) |  |  |  | 29,981 |  |  |  | (533) |  |  |  | 37,564 |  |  |  | (565) |
Total held-to-maturity securities |  | $ | 70,250 |  |  | $ | (442) |  |  | $ | 215,579 |  |  | $ | (3,292) |  |  | $ | 285,829 |  |  | $ | (3,734) |
At September 30, 2020 and December 31, 2019, investment securities having a carrying value of approximately $1.86 billion and $1.64 billion, respectively, were pledged to secure public deposits, short and long-term borrowings, and for other purposes as required or permitted by law. The amortized cost and fair value of debt securities at September 30, 2020, by contractual maturity, are shown in the table below. Although mortgage-backed and CMO/REMIC securities have weighted average remaining contractual maturities of approximately 17 years, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty . Mortgage-backed and CMO/REMIC securities are included in maturity categories based upon estimated average lives, which incorporate estimated prepayment speeds.
|  | September 30, 2020
|  | Available-for-sale |  | Held-to-maturity
|  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
|  | (Dollars in thousands)
Due in one year or less |  | $ | 27,816 |  |  | $ | 27,968 |  |  | $ | 2,730 |  |  | $ | 2,764 |
Due after one year through five years |  |  | 1,960,912 |  |  |  | 2,012,028 |  |  |  | 327,785 |  |  |  | 341,060 |
Due after five years through ten years |  |  | 119,315 |  |  |  | 121,652 |  |  |  | 81,246 |  |  |  | 84,329 |
Due after ten years |  |  | 42,321 |  |  |  | 43,998 |  |  |  | 165,933 |  |  |  | 175,369 |
Total investment securities |  | $ | 2,150,364 |  |  | $ | 2,205,646 |  |  | $ | 577,694 |  |  | $ | 603,522 |
The investment in FHLB stock is periodically evaluated for impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded as of September 30, 2020.

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