Investment Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Note 3. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities as of September 30, 2023, and December 31, 2022, were as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2023
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	228,181	$	408	$	(15,133	)	$	213,456
Debt Securities Issued by States and Political Subdivisions		73,722		—		(13,120	)		60,602
Debt Securities Issued by U.S. Government-Sponsored Enterprises		1,757		—		(117	)		1,640
Debt Securities Issued by Corporations		706,693		7		(57,560	)		649,140
Mortgage-Backed Securities:
Residential - Government Agencies		740,652		101		(108,806	)		631,947
Residential - U.S. Government-Sponsored Enterprises		841,441		—		(142,092	)		699,349
Commercial - Government Agencies or Sponsored Agencies		159,647		—		(28,457	)		131,190
Total Mortgage-Backed Securities		1,741,740		101		(279,355	)		1,462,486
Total	$	2,752,093	$	516	$	(365,285	)	$	2,387,324
Held-to-Maturity:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	131,710	$	—	$	(20,301	)	$	111,409
Debt Securities Issued by Corporations		11,788		—		(2,582	)		9,206
Mortgage-Backed Securities:
Residential - Government Agencies		1,712,317		—		(330,120	)		1,382,197
Residential - U.S. Government-Sponsored Enterprises		2,794,307		5		(519,138	)		2,275,174
Commercial - Government Agencies or Sponsored Agencies		437,891		—		(111,408	)		326,483
Total Mortgage-Backed Securities		4,944,515		5		(960,666	)		3,983,854
Total	$	5,088,013	$	5	$	(983,549	)	$	4,104,469
December 31, 2022
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	248,335	$	638	$	(15,067	)	$	233,906
Debt Securities Issued by States and Political Subdivisions		107,689		158		(12,582	)		95,265
Debt Securities Issued by U.S. Government-Sponsored Enterprises		48,807		—		(179	)		48,628
Debt Securities Issued by Corporations		850,585		809		(56,736	)		794,658
Mortgage-Backed Securities:
Residential - Government Agencies		828,798		245		(96,215	)		732,828
Residential - U.S. Government-Sponsored Enterprises		919,980		1		(126,110	)		793,871
Commercial - Government Agencies or Sponsored Agencies		168,242		—		(22,575	)		145,667
Total Mortgage-Backed Securities		1,917,020		246		(244,900	)		1,672,366
Total	$	3,172,436	$	1,851	$	(329,464	)	$	2,844,823
Held-to-Maturity:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	131,619	$	—	$	(18,202	)	$	113,417
Debt Securities Issued by Corporations		17,014		—		(2,534	)		14,480
Mortgage-Backed Securities:
Residential - Government Agencies		1,848,239		35		(294,047	)		1,554,227
Residential - U.S. Government-Sponsored Enterprises		2,968,322		8		(397,055	)		2,571,275
Commercial - Government Agencies or Sponsored Agencies		448,945		—		(86,951	)		361,994
Total Mortgage-Backed Securities		5,265,506		43		(778,053	)		4,487,496
Total	$	5,414,139	$	43	$	(798,789	)	$	4,615,393

The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities disclosed throughout this footnote. For available-for-sale (“AFS”) debt securities, AIR totaled $9.9 million and $11.7 million as of September 30, 2023, and December 31, 2022, respectively. For held-to-maturity (“HTM”) debt securities, AIR totaled $10.1 million and $9.2 million as of September 30, 2023, and December 31, 2022, respectively. AIR is included in the Accrued Interest Receivable line item on the Company’s consolidated statements of condition.

The table below presents an analysis of the contractual maturities of the Company’s investment securities as of September 30, 2023. Debt securities issued by government agencies (Small Business Administration securities) and mortgage-backed securities are disclosed separately in the table below as these investment securities may prepay prior to their scheduled contractual maturity dates.


(dollars in thousands)	Amortized Cost		Fair Value
Available-for-Sale:
Due in One Year or Less	$	1,798	$	1,768
Due After One Year Through Five Years		332,832		309,375
Due After Five Years Through Ten Years		598,290		537,433
Due After Ten Years		6,380		4,866
		939,300		853,442
Debt Securities Issued by Government Agencies		71,053		71,396
Mortgage-Backed Securities:
Residential - Government Agencies		740,652		631,947
Residential - U.S. Government-Sponsored Enterprises		841,441		699,349
Commercial - Government Agencies or Sponsored Agencies		159,647		131,190
Total Mortgage-Backed Securities		1,741,740		1,462,486
Total	$	2,752,093	$	2,387,324
Held-to-Maturity:
Due in One Year or Less		966		943
Due After One Year Through Five Years		82,244		71,390
Due After Five Year Through Ten Years		60,288		48,282
		143,498		120,615
Mortgage-Backed Securities:
Residential - Government Agencies		1,712,317		1,382,197
Residential - U.S. Government-Sponsored Enterprises		2,794,307		2,275,174
Commercial - Government Agencies or Sponsored Agencies		437,891		326,483
Total Mortgage-Backed Securities		4,944,515		3,983,854
Total	$	5,088,013	$	4,104,469

Investment securities with carrying values of $7.2 billion and $4.1 billion as of September 30, 2023, and December 31, 2022, respectively, were pledged to secure deposits of governmental entities, securities sold under agreements to repurchase, and FRB discount window borrowing.

The table below presents the losses from the sales of investment securities for the three and nine months ended September 30, 2023, and September 30, 2022:


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2023			2022			2023			2022
Gross Gains on Sales of Investment Securities	$	145		$	—		$	145		$	—
Gross Losses on Sales of Investment Securities		(6,879	)		(2,147	)		(9,981	)		(4,987	)
Total Losses on Sales of Investment Securities	$	(6,734	)	$	(2,147	)	$	(9,836	)	$	(4,987	)

Although the Company had the ability to hold its investment securities until maturity, during the three months ended September 30, 2023, it made the strategic decision to reduce the size of its AFS portfolio by selling various corporate and municipal bonds which resulted in a realized loss of $4.6 million.

The following table summarizes the Company’s AFS debt securities in an unrealized loss position for which an allowance for credit losses was not deemed necessary, aggregated by major security type and length of time in a continuous unrealized loss position:


	Less Than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
September 30, 2023
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	8,272	$	(24	)	$	150,513	$	(15,109	)	$	158,785	$	(15,133	)
Debt Securities Issued by States and Political Subdivisions		236		(8	)		60,152		(13,112	)		60,388		(13,120	)
Debt Securities Issued by U.S. Government- Sponsored Enterprises		—		—			1,639		(117	)		1,639		(117	)
Debt Securities Issued by Corporations		322,435		(2,565	)		301,697		(54,995	)		624,132		(57,560	)
Mortgage-Backed Securities:
Residential - Government Agencies		11,455		(70	)		616,352		(108,736	)		627,807		(108,806	)
Residential - U.S. Government-Sponsored Enterprises		330		(7	)		699,020		(142,085	)		699,350		(142,092	)
Commercial - Government Agencies or Sponsored Agencies		—		—			131,189		(28,457	)		131,189		(28,457	)
Total Mortgage-Backed Securities		11,785		(77	)		1,446,561		(279,278	)		1,458,346		(279,355	)
Total	$	342,728	$	(2,674	)	$	1,960,562	$	(362,611	)	$	2,303,290	$	(365,285	)

December 31, 2022
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	28,574	$	(1,118	)	$	127,841	$	(13,949	)	$	156,415	$	(15,067	)
Debt Securities Issued by States and Political Subdivisions		11,341		(1,240	)		49,985		(11,342	)		61,326		(12,582	)
Debt Securities Issued by U.S. Government- Sponsored Enterprises		47,825		(108	)		803		(71	)		48,628		(179	)
Debt Securities Issued by Corporations		438,225		(7,995	)		284,350		(48,741	)		722,575		(56,736	)
Mortgage-Backed Securities:
Residential - Government Agencies		386,809		(30,492	)		340,824		(65,723	)		727,633		(96,215	)
Residential - U.S. Government-Sponsored Enterprises		194,684		(22,294	)		598,986		(103,816	)		793,670		(126,110	)
Commercial - Government Agencies or Sponsored Agencies		98,694		(13,247	)		46,973		(9,328	)		145,667		(22,575	)
Total Mortgage-Backed Securities		680,187		(66,033	)		986,783		(178,867	)		1,666,970		(244,900	)
Total	$	1,206,152	$	(76,494	)	$	1,449,762	$	(252,970	)	$	2,655,914	$	(329,464	)

The Company does not believe that the AFS debt securities that were in an unrealized loss position as of September 30, 2023, which were comprised of 399 individual securities, represent a credit loss impairment. As of September 30, 2023, and December 31, 2022, the gross unrealized loss positions were primarily related to mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Total gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Therefore, an allowance for credit losses for these securities was not deemed necessary as of September 30, 2023.

Interest income from taxable and non-taxable investment securities for the three and nine months ended September 30, 2023, and September 30, 2022, were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2023		2022		2023		2022
Taxable	$	46,367	$	37,231	$	140,718	$	109,830
Non-Taxable		23		7		189		31
Total Interest Income from Investment Securities	$	46,390	$	37,238	$	140,907	$	109,861

As of September 30, 2023, and December 31, 2022, the carrying value of the Company’s Federal Home Loan Bank of Des Moines stock and Federal Reserve Bank stock was as follows:


(dollars in thousands)	September 30, 2023		December 31, 2022
Federal Home Loan Bank of Des Moines Stock	$	32,000	$	26,000
Federal Reserve Bank Stock		27,400		27,065
Total	$	59,400	$	53,065

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.