Investment Securities

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

The amortized cost, estimated fair values and allowance for credit losses of investments in debt securities are summarized in the following tables:


	September 30, 2020
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	556,295	$	17,821	$	(228)	$	—	$	573,888
Obligations of states and political subdivisions	107,840		4,898		(13)		—		112,725
Corporate bonds	2,451		101		—		—		2,552
Asset backed securities	462,948		450		(9,606)		—		453,792
Total debt securities available for sale	$	1,129,534	$	23,270	$	(9,847)	$	—	$	1,142,957




Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	299,797	$	14,363	$	—	$	314,160	$	—
Obligations of states and political subdivisions	10,899		399		—		11,298		—
Total debt securities held to maturity	$	310,696	$	14,762	$	—	$	325,458	$	—


	December 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	466,139	$	7,261	$	(420)	$	472,980
Obligations of states and political subdivisions	106,373		3,229		(1)		109,601
Corporate bonds	2,430		102		—		2,532
Asset backed securities	371,809		129		(6,913)		365,025
Total debt securities available for sale	$	946,751	$	10,721	$	(7,334)	$	950,138
Debt Securities Held to Maturity
Obligations of U.S. government agencies	361,785		6,072		(480)		367,377
Obligations of states and political subdivisions	13,821		327		—		14,148
Total debt securities held to maturity	$	375,606	$	6,399	$	(480)	$	381,525

Proceeds from the sale of investment securities totaled $229,000 and $125,247,000 during the nine month periods ended September 30, 2020 and 2019, respectively. Gross realized gains from the sale of investment securities totaled $7,000 during the three and nine months ended September 30, 2020, respectively. There were no gross realized losses on the sale of securities during 2020. Gross realized gains from the sale of investment securities totaled $335,000 during the three and nine months ended September 30, 2019, respectively. Gross realized losses from the sale of investment securities during the three and nine months ended September 30, 2019 totaled $228,000. Investment securities with an aggregate carrying value of $460,317,000 and $466,321,000 at September 30, 2020 and December 31, 2019, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at September 30, 2020 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2020, obligations of U.S. government corporations and agencies with a cost basis totaling $856,092,000 consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At September 30, 2020, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 2.76 years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.

As of September 30, 2020, the contractual final maturity for available for sale and held to maturity investment securities is as follows:


Debt Securities	Available for Sale				Held to Maturity
(in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value

Due in one year	$	—	$	—	$	—	$	—
Due after one year through five years	138,993		139,469		—		—
Due after five years through ten years	142,939		143,492		20,439		21,485
Due after ten years	847,602		859,996		290,257		303,973
Totals	$	1,129,534	$	1,142,957	$	310,696	$	325,458

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:


September 30, 2020:	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	152,656	$	(228)	$	—	$	—	$	152,656	$	(228)
Obligations of states and political subdivisions	963		(13)		—		—		963		(13)

Asset backed securities	92,463		(1,495)		296,841		(8,111)		389,304		(9,606)
Total debt securities available for sale	$	246,082	$	(1,736)	$	296,841	$	(8,111)	$	542,923	$	(9,847)


December 31, 2019:	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Debt Securities Available for Sale
Obligations of U.S. government agencies	$	36,709	$	(309)	$	23,852	$	(111)	$	60,561	$	(420)
Obligations of states and political subdivisions	778		(1)		—		—		778		(1)
Asset backed securities	237,463		(4,535)		99,981		(2,378)		337,444		(6,913)
Total debt securities available for sale	$	274,950	$	(4,845)	$	123,833	$	(2,489)	$	398,783	$	(7,334)
Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	18,813	(142)		$	62,952	$	(338)	$	81,765	$	(480)

Obligations of U.S. government agencies: The unrealized losses on investments in obligations of U.S. government agencies are caused by interest rate increases and illiquidity. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the securities would not be settled at a price less than the amortized cost of the investment.Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded. At September 30, 2020, 13 debt securities representing obligations of U.S. government agencies had unrealized losses with aggregate depreciation of 0.15% from the Company’s amortized cost basis.

Obligations of states and political subdivisions: The unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded as of September 30, 2020. At September 30, 2020, one (1) debt security representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 1.33% from the Company’s amortized cost basis.

Asset backed securities: The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors for these types of securities. At the time of purchase, each of these securities was rated AA or AAA and through September 30, 2020 has not experienced any deterioration in credit rating. At September 30, 2020, 9 asset backed securities had unrealized losses with aggregate depreciation of 2.41% from the Company’s amortized cost basis. The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration. Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded as of September 30, 2020.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit rating. The Company monitors the credit rating on a monthly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator:


	September 30, 2020				December 31, 2019
	AAA/AA/A		BBB/BB/B		AAA/AA/A		BBB/BB/B
	(In thousands)				(In thousands)
Debt Securities Held to Maturity
Obligations of U.S. government agencies	$	299,797	$	—	$	361,785	$	—
Obligations of states and political subdivisions	10,899		—		13,136		685
Total debt securities held to maturity	$	310,696	$	—	$	374,921	$	685