Investment Securities

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

5. INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are summarized below. The fair value of the majority of securities are 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.


	June 30, 2023
	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	$	3,018,260	$	24	$	(385,263	)	$	2,633,021		85.82	%
CMO/REMIC		519,646		—		(111,187	)		408,459		13.30	%
Municipal bonds		26,797		52		(1,283	)		25,566		0.83	%
Other securities		1,105		—		—			1,105		0.05	%
Unallocated portfolio layer fair value basis adjustments (1)		11,129		—		(11,129	)	N/A		N/A
Total available-for-sale securities	$	3,576,937	$	76	$	(508,862	)	$	3,068,151		100.00	%
Investment securities held-to-maturity:
Government agency/GSE	$	538,923	$	—	$	(105,252	)	$	433,671		21.45	%
Mortgage-backed securities		684,917		—		(103,649	)		581,268		27.26	%
CMO/REMIC		817,801		—		(155,611	)		662,190		32.55	%
Municipal bonds		471,066		1,654		(41,196	)		431,524		18.74	%
Total held-to-maturity securities	$	2,512,707	$	1,654	$	(405,708	)	$	2,108,653		100.00	%

(1)

Represents the amount of portfolio layer method basis adjustments related to AFS MBS securities hedged in a closed portfolio. Under U.S. GAAP, portfolio layer method basis adjustments are not allocated to individual securities, however the amounts impact the unrealized gains or losses for the individual securities being hedged. Refer to Note 3 and Note 10 for additional information.


	December 31, 2022
	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	$	3,192,151	$	39	$	(403,049	)	$	2,789,141		85.68	%
CMO/REMIC		535,269		—		(95,966	)		439,303		13.50	%
Municipal bonds		26,797		67		(1,177	)		25,687		0.79	%
Other securities		1,080		—		—			1,080		0.03	%
Total available-for-sale securities	$	3,755,297	$	106	$	(500,192	)	$	3,255,211		100.00	%
Investment securities held-to-maturity:
Government agency/GSE	$	548,771	$	—	$	(114,343	)	$	434,428		21.48	%
Mortgage-backed securities		706,796		—		(105,867	)		600,929		27.67	%
CMO/REMIC		827,346		—		(131,730	)		695,616		32.39	%
Municipal bonds		471,388		913		(47,687	)		424,614		18.46	%
Total held-to-maturity securities	$	2,554,301	$	913	$	(399,627	)	$	2,155,587		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				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(Dollars in thousands)
Investment securities available-for-sale:
Taxable	$	19,187	$	16,863	$	38,615	$	29,512
Tax-advantaged		169		179		337		362
Total interest income from available-for-sale securities		19,356		17,042		38,952		29,874
Investment securities held-to-maturity:
Taxable		11,293		9,978		22,800		19,082
Tax-advantaged		2,447		1,736		4,896		3,295
Total interest income from held-to-maturity securities		13,740		11,714		27,696		22,377
Total interest income from investment securities	$	33,096	$	28,756	$	66,648	$	52,251

Approximately 91% of the total investment securities portfolio at June 30, 2023 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 higher rated general-obligation municipal bonds. The allowance for credit losses for held-to-maturity investment securities under the CECL model was zero at June 30, 2023 and December 31, 2022.

The following table presents the Company’s available-for-sale and held-to-maturity investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of June 30, 2023 and December 31, 2022.


	June 30, 2023
	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	$	80,414	$	(3,322	)	$	2,551,205	$	(381,941	)	$	2,631,619	$	(385,263	)
CMO/REMIC		745		(17	)		407,711		(111,170	)		408,456		(111,187	)
Municipal bonds		6,442		(47	)		17,940		(1,236	)		24,382		(1,283	)
Total available-for-sale securities	$	87,601	$	(3,386	)	$	2,976,856	$	(494,347	)	$	3,064,457	$	(497,733	)
Investment securities held-to-maturity:
Government agency/GSE	$	14,155	$	(619	)	$	419,516	$	(104,633	)	$	433,671	$	(105,252	)
Mortgage-backed securities		91,805		(3,138	)		489,463		(100,511	)		581,268		(103,649	)
CMO/REMIC		47,110		(2,884	)		615,080		(152,727	)		662,190		(155,611	)
Municipal bonds		92,899		(2,499	)		253,674		(38,697	)		346,573		(41,196	)
Total held-to-maturity securities	$	245,969	$	(9,140	)	$	1,777,733	$	(396,568	)	$	2,023,702	$	(405,708	)


	December 31, 2022
	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	$	1,658,331	$	(187,842	)	$	1,129,257	$	(215,207	)	$	2,787,588	$	(403,049	)
CMO/REMIC		54,005		(4,796	)		385,295		(91,170	)		439,300		(95,966	)
Municipal bonds		24,507		(1,177	)		—		—			24,507		(1,177	)
Total available-for-sale securities	$	1,736,843	$	(193,815	)	$	1,514,552	$	(306,377	)	$	3,251,395	$	(500,192	)

Investment securities held-to-maturity:
Government agency/GSE		179,348		(39,866	)		255,080		(74,477	)		434,428		(114,343	)
Mortgage-backed securities		188,480		(9,042	)		412,449		(96,825	)		600,929		(105,867	)
CMO/REMIC		376,540		(60,598	)		319,076		(71,132	)		695,616		(131,730	)
Municipal bonds		312,702		(35,656	)		53,350		(12,031	)		366,052		(47,687	)
Total held-to-maturity securities	$	1,057,070	$	(145,162	)	$	1,039,955	$	(254,465	)	$	2,097,025	$	(399,627	)

At June 30, 2023, investment securities, with the following carrying values, were pledged to secure $1.87 billion of total deposits which includes $1.25 billion to secure public funds, $551.2 million of repurchase agreements, approximately $695 million of outstanding borrowings, and approximately $20 million for other purposes as required or permitted by law. In addition, investment securities having a carrying value of $1.9 billion were pledged to secure unused borrowing capacity as of June 30, 2023.

At December 31, 2022, investment securities, with the following carrying values, were pledged to secure $1.56 billion of total deposits which includes $1.13 billion to secure public funds, $652.0 million of repurchase agreements, approximately $550 million of outstanding borrowings, and approximately $27 million for other purposes as required or permitted by law. In addition, investment securities having a carrying value of approximately $105 million were pledged to secure unused borrowing capacity as of December 31, 2022.

The amortized cost and fair value of debt securities at June 30, 2023, by contractual maturity, are shown in the table below. Although mortgage-backed and CMO/REMIC securities have weighted average remaining contractual maturities of approximately 23 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.


	June 30, 2023
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
			(Dollars in thousands)
Due in one year or less	$	1,672	$	1,671	$	12,503	$	11,943
Due after one year through five years		326,240		298,804		35,475		34,143
Due after five years through ten years		2,195,487		1,881,242		304,156		270,028
Due after ten years		1,053,538		886,434		2,160,573		1,792,539
Total investment securities	$	3,576,937	$	3,068,151	$	2,512,707	$	2,108,653

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 through June 30, 2023.