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Investment Securities

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

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.