Investment Securities

9 Months Ended

Sep. 30, 2024

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, 2024
	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	$	33,921		$	208	$	—		$	34,129		1.38	%
Mortgage-backed securities		2,295,381			43		(261,825	)		2,033,599		82.48	%
CMO/REMIC		476,051			—		(105,044	)		371,007		15.05	%
Municipal bonds		26,489			46		(1,115	)		25,420		1.03	%
Other securities		1,430			—		—			1,430		0.06	%
Unallocated portfolio layer fair value basis adjustments (1)		(14,959	)		14,959		—			—		0.00	%
Total available-for-sale securities	$	2,818,313		$	15,256	$	(367,984	)	$	2,465,585		100.00	%
Investment securities held-to-maturity:
Government agency/GSE	$	518,446		$	—	$	(84,898	)	$	433,548		21.55	%
Mortgage-backed securities		626,474			5		(85,320	)		541,159		26.05	%
CMO/REMIC		788,622			—		(144,801	)		643,821		32.79	%
Municipal bonds		460,257			2,994		(29,540	)		433,711		19.14	%
Other securities (2)		11,455			—		—			11,455		0.47	%
Total held-to-maturity securities	$	2,405,254		$	2,999	$	(344,559	)	$	2,063,694		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.

(2)

Represents Commercial Property Assessed Clean Energy ("C-PACE") bonds.

During the third quarter of 2024, the Bank sold AFS securities with a book value of $312 million, resulting in a net pre-tax loss of $11.6 million.


	December 31, 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	$	32,229		$	24	$	—		$	32,253		1.09	%
Mortgage-backed securities		2,843,744			42		(336,107	)		2,507,679		84.83	%
CMO/REMIC		502,234			—		(112,872	)		389,362		13.17	%
Municipal bonds		26,477			46		(888	)		25,635		0.87	%
Other securities		1,196			—		—			1,196		0.04	%
Unallocated portfolio layer fair value basis adjustments (1)		(6,938	)		6,938		—			—		0.00	%
Total available-for-sale securities	$	3,398,942		$	7,050	$	(449,867	)	$	2,956,125		100.00	%
Investment securities held-to-maturity:
Government agency/GSE	$	530,656		$	—	$	(97,972	)	$	432,684		21.53	%
Mortgage-backed securities		663,090			—		(97,436	)		565,654		26.90	%
CMO/REMIC		802,892			—		(156,155	)		646,737		32.58	%
Municipal bonds		467,972			3,438		(33,604	)		437,806		18.99	%
Total held-to-maturity securities	$	2,464,610		$	3,438	$	(385,167	)	$	2,082,881		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				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(Dollars in thousands)
Investment securities available-for-sale:
Taxable	$	20,010	$	22,272	$	62,347	$	60,887
Tax-advantaged		168		169		502		506
Total interest income from available-for-sale securities		20,178		22,441		62,849		61,393
Investment securities held-to-maturity:
Taxable		10,896		11,139		32,930		33,939
Tax-advantaged		2,388		2,437		7,201		7,333
Total interest income from held-to-maturity securities		13,284		13,576		40,131		41,272
Total interest income from investment securities	$	33,462	$	36,017	$	102,980	$	102,665

Approximately 90% of the total investment securities portfolio at September 30, 2024 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, 2024 and December 31, 2023.

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, 2024 and December 31, 2023.


	September 30, 2024
	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	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities		9		—			2,032,214		(261,824	)		2,032,223		(261,825	)
CMO/REMIC		—		—			371,006		(105,044	)		371,006		(105,044	)
Municipal bonds		3,323		(48	)		21,190		(1,068	)		24,513		(1,115	)
Total available-for-sale securities	$	3,332	$	(48	)	$	2,424,410	$	(367,936	)	$	2,427,742	$	(367,984	)
Investment securities held-to-maturity:
Government agency/GSE	$	—	$	—		$	433,548	$	(84,898	)	$	433,548	$	(84,898	)
Mortgage-backed securities		—		—			538,947		(85,320	)		538,947		(85,320	)
CMO/REMIC		—		—			643,821		(144,801	)		643,821		(144,801	)
Municipal bonds		12,760		(101	)		301,057		(29,439	)		313,817		(29,539	)
Total held-to-maturity securities	$	12,760	$	(101	)	$	1,917,373	$	(344,458	)	$	1,930,134	$	(344,558	)


	December 31, 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	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities		48		—			2,506,162		(336,107	)		2,506,210		(336,107	)
CMO/REMIC		—		—			389,359		(112,872	)		389,359		(112,872	)
Municipal bonds		3,286		(17	)		18,105		(871	)		21,391		(888	)
Total available-for-sale securities	$	3,334	$	(17	)	$	2,913,626	$	(449,850	)	$	2,916,960	$	(449,867	)

Investment securities held-to-maturity:
Government agency/GSE	$	—	$	—		$	432,684	$	(97,972	)	$	432,684	$	(97,972	)
Mortgage-backed securities		—		—			565,655		(97,436	)		565,655		(97,436	)
CMO/REMIC		—		—			646,737		(156,155	)		646,737		(156,155	)
Municipal bonds		20,609		(200	)		293,467		(33,404	)		314,076		(33,604	)
Total held-to-maturity securities	$	20,609	$	(200	)	$	1,938,543	$	(384,967	)	$	1,959,152	$	(385,167	)

At September 30, 2024, investment securities with carrying values of $2.74 billion were pledged to secure various types of deposits, including $1.34 billion of public funds. In addition, investment securities with carrying values of $1.88 billion were pledged to secure $469 million for repurchase agreements, $1.35 billion for unused borrowing capacity and approximately $58 million for other purposes as required or permitted by law.

At December 31, 2023, investment securities with carrying values of $2.26 billion were pledged to secure various types of deposits, including $1.38 billion of public funds. In addition, investment securities, with carrying values of $3.02 billion were pledged to secure $372.5 million for repurchase agreements, $1.8 billion for outstanding borrowings, $796 million for unused borrowing capacity and approximately $51 million for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at September 30, 2024, 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, 2024
	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
			(Dollars in thousands)
Due in one year or less	$	43,249	$	43,327	$	10,211	$	10,049
Due after one year through five years		110,874		116,476		48,525		47,616
Due after five years through ten years		2,180,665		1,928,902		322,507		291,783
Due after ten years		483,525		376,880		2,024,011		1,714,246
Total investment securities	$	2,818,313	$	2,465,585	$	2,405,254	$	2,063,694

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, 2024.