Investment Securities

9 Months Ended

Sep. 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.


	September 30, 2023
	Amortized Cost		Gross Unrealized Holding Gain		Gross Unrealized Holding Loss			Fair Value		Total Percent
	(Dollars in thousands)
Investment securities available-for-sale:
Government agency/GSE	$	34,126	$	—	$	(17	)	$	34,109		1.19	%
Mortgage-backed securities		2,925,382		1		(488,759	)		2,436,624		84.81	%
CMO/REMIC		514,161		—		(136,663	)		377,498		13.13	%
Municipal bonds		26,799		23		(3,009	)		23,813		0.83	%
Other securities		1,119		—		—			1,119		0.04	%
Unallocated portfolio layer fair value basis adjustments (1)		24,868		—		(24,868	)		—		0.00	%
Total available-for-sale securities	$	3,526,455	$	24	$	(653,316	)	$	2,873,163		100.00	%
Investment securities held-to-maturity:
Government agency/GSE	$	534,814	$	—	$	(123,981	)	$	410,833		21.48	%
Mortgage-backed securities		673,413		—		(134,290	)		539,123		27.05	%
CMO/REMIC		812,006		—		(194,237	)		617,769		32.62	%
Municipal bonds		469,208		4		(67,619	)		401,593		18.85	%
Total held-to-maturity securities	$	2,489,441	$	4	$	(520,127	)	$	1,969,318		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 federal income tax.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
	(Dollars in thousands)
Investment securities available-for-sale:
Taxable	$	22,272	$	18,371	$	60,887	$	47,883
Tax-advantaged		169		172		506		534
Total interest income from available-for-sale securities		22,441		18,543		61,393		48,417
Investment securities held-to-maturity:
Taxable		11,139		10,845		33,939		29,927
Tax-advantaged		2,437		1,989		7,333		5,284
Total interest income from held-to-maturity securities		13,576		12,834		41,272		35,211
Total interest income from investment securities	$	36,017	$	31,377	$	102,665	$	83,628

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


	September 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:
Government agency/GSE	$	34,109	$	(17	)	$	—	$	—		$	34,109	$	(17	)
Mortgage-backed securities		825		(16	)		2,435,125		(488,743	)		2,435,950		(488,759	)
CMO/REMIC		3		—			377,495		(136,663	)		377,498		(136,663	)
Municipal bonds		5,699		(451	)		16,948		(2,558	)		22,647		(3,009	)
Total available-for-sale securities	$	40,636	$	(484	)	$	2,829,568	$	(627,964	)	$	2,870,204	$	(628,448	)
Investment securities held-to-maturity:
Government agency/GSE	$	—	$	—		$	410,833	$	(123,981	)	$	410,833	$	(123,981	)
Mortgage-backed securities		—		—			539,123		(134,290	)		539,123		(134,290	)
CMO/REMIC		—		—			617,769		(194,237	)		617,769		(194,237	)
Municipal bonds		109,966		(7,127	)		288,267		(60,492	)		398,233		(67,619	)
Total held-to-maturity securities	$	109,966	$	(7,127	)	$	1,855,992	$	(513,000	)	$	1,965,958	$	(520,127	)


	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 September 30, 2023, investment securities with carrying values of $2.16 billion were pledged to secure various types of deposits, including $1.34 billion of public funds. In addition, investment securities with carrying values of $2.94 billion were pledged to secure $433.5 million for repurchase agreements, $870 million for outstanding borrowings, $1.58 billion for unused borrowing capacity and approximately $52 million for other purposes as required or permitted by law.

At December 31, 2022, investment securities with carrying values of $1.56 billion were pledged to secure various types of deposits, including $1.13 billion of public funds. In addition, investment securities, with carrying values of $3.15 billion were pledged to secure $652.0 million for repurchase agreements, $550 million for outstanding borrowings, $105 million for unused borrowing capacity and approximately $27 million for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at September 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.


	September 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	$	35,816	$	35,794	$	12,414	$	11,874
Due after one year through five years		321,428		278,310		34,306		32,206
Due after five years through ten years		2,403,432		1,964,310		323,267		273,094
Due after ten years		765,779		594,749		2,119,454		1,652,144
Total investment securities	$	3,526,455	$	2,873,163	$	2,489,441	$	1,969,318

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 September 30, 2023.