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Securities | 6 Months Ended
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Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract] |
Securities | SECURITIES Equity Securities With Readily Determinable Fair Values The Company held equity securities with readily determinable fair values of $4,426,000 and $5,191,000 at June 30, 2023 and December 31, 2022, respectively. The gross realized and unrealized gains and losses recognized on equity securities with readily determinable fair values in noninterest income in the Company’s consolidated statements of income were as follows:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Unrealized gains (losses) on equity securities held at the reporting date |  | $ | (72) |  |  | $ | (35) |  |  | $ | — |  |  | $ | (454) |
Realized gains (losses) on equity securities sold during the period |  | — |  |  | — |  |  | 18 |  |  | — |
|  | $ | (72) |  |  | $ | (35) |  |  | $ | 18 |  |  | $ | (454) |
Equity Securities Without Readily Determinable Fair Values The following table summarizes the Company's investments in equity securities without readily determinable fair values:
(Dollars in thousands) | June 30, 2023 |  | December 31, 2022
Equity Securities without readily determinable fair value, at cost | $ | 64,282 |  |  | $ | 39,019 |
Upward adjustments based on observable price changes, cumulative | 10,163 |  |  | 10,163 |
Equity Securities without readily determinable fair value, carrying value | $ | 74,445 |  |  | $ | 49,182 |
Equity securities without readily determinable fair values include Federal Home Loan Bank and other restricted stock, which are reported separately in the Company's consolidated balance sheets. Equity securities without readily determinable fair values also include the Company's investments in the common stock of Trax Group, Inc. and Warehouse Solutions Inc., discussed below, and other investments, which are included in other assets in the Company's consolidated balance sheets. The gross realized and unrealized gains (losses) recognized on equity securities without readily determinable fair values in noninterest income in the Company’s consolidated statements of income were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Unrealized gains (losses) on equity securities still held at the reporting date | $ | — |  |  | $ | 10,163 |  |  | $ | — |  |  | $ | 10,163 |
Realized gains (losses) on equity securities sold during the period | — |  |  | — |  |  | — |  |  | — |
| $ | — |  |  | $ | 10,163 |  |  | $ | — |  |  | $ | 10,163 |
Trax Group, Inc. On June 22, 2023, the Company made a $9,700,000 minority investment in Trax Group, Inc. ("Trax"), a leader in transportation spend management solutions. The investment in Trax is accounted for as an equity investment without a readily determinable fair value measured under the measurement alternative and is included in other assets in the Company's consolidated balance sheets. Warehouse Solutions Inc. On October 17, 2019, the Company made a minority equity investment of $8,000,000 in Warehouse Solutions Inc. (“WSI”), purchasing 8% of the common stock of WSI and receiving warrants to purchase an additional 10% of the common stock of WSI upon exercise of the warrants at a later date. WSI provides technology solutions to help reduce supply chain costs for a global client base across multiple industries. Although the Company held less than 20% of the voting stock of WSI, the investment in common stock was initially accounted for using the equity method as the Company’s representation on WSI’s board of directors, which was disproportionately larger in size than the common stock investment held, demonstrated that it had significant influence over the investee. On June 10, 2022, the Company entered into two separate agreements with WSI. First, the Company entered into an Affiliate Agreement. The Affiliate Agreement canceled the Company’s outstanding warrants and modified the structure of the existing operating agreement to be consistent with TriumphPay operating as an open loop payments network. By modifying the operating agreement, the Company’s Payments segment operations now have greater ability to operate in the freight shipper audit space. As a result of the Affiliate Agreement, the Company recognized a total loss on impairment of the warrants of $3,224,000, which represented the full book balance of the warrants on the date the Affiliate Agreement was executed. The impairment loss was included in other noninterest income on the Company's consolidated statements of income during the three months ended June 30, 2022. Separately, the Company also entered into an Amended and Restated Investor Rights Agreement (the “Investor Rights Agreement”). The Investor Rights Agreement eliminated the Company’s representation on WSI’s board of directors making the Company a completely passive investor. The Investor Rights Agreement also provided for the Company’s purchase of an additional 10% of WSI’s common stock for $23,000,000 raising the Company’s ownership of WSI’s common stock to 18%. As a passive investor, the Company no longer holds significant influence over the investee and the investment in WSI’s common stock no longer qualifies for equity method accounting. The investment in WSI’s common stock is now accounted for as an equity investment without a readily determinable fair value measured under the measurement alternative. The measurement alternative requires the Company to remeasure its investment in the common stock of WSI only upon the execution of an orderly and observable transaction in an identical or similar instrument. The Company's additional investment in WSI under the Investor Rights Agreement qualified as an orderly and observable transaction for an identical investment in WSI, therefore the fair value of the Company's original 8% common stock investment was required to be adjusted from $4,925,000 at March 31, 2022 to $15,088,000, resulting in a gain of $10,163,000 that was recorded in other noninterest income on the Company's consolidated statements of income during the three months ended June 30, 2022. The Company's investment in WSI totaled $38,088,000 at June 30, 2023 and December 31, 2022 and has been allocated to the Payments segment. Debt Securities Debt securities have been classified in the financial statements as available for sale or held to maturity. The following table summarizes the amortized cost, fair value, and allowance for credit losses of debt securities and the corresponding amounts of gross unrealized gains and losses of available for sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities:
(Dollars in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Allowance for Credit Losses |  | Fair Value
June 30, 2023 |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities, residential |  | $ | 51,069 |  |  | $ | — |  |  | $ | (5,240) |  |  | $ | — |  |  | $ | 45,829 |
Asset-backed securities |  | 1,286 |  |  | — |  |  | (34) |  |  | — |  |  | 1,252 |
State and municipal |  | 5,283 |  |  | — |  |  | (88) |  |  | — |  |  | 5,195 |
CLO securities |  | 250,260 |  |  | 481 |  |  | (1,662) |  |  | — |  |  | 249,079 |
Corporate bonds |  | 769 |  |  | — |  |  | (9) |  |  | — |  |  | 760 |
SBA pooled securities |  | 1,773 |  |  | 5 |  |  | (114) |  |  | — |  |  | 1,664 |
Total available for sale securities |  | $ | 310,440 |  |  | $ | 486 |  |  | $ | (7,147) |  |  | $ | — |  |  | $ | 303,779 |
(Dollars in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrecognized Losses |  | Fair Value
June 30, 2023 |  |  |  |
Held to maturity securities: |  |  |  |  |  |  |  |
CLO securities |  | $ | 6,256 |  |  | $ | 284 |  |  | $ | (1,790) |  |  | $ | 4,750 |
Allowance for credit losses |  | (2,876) |  |  |  |  |  |  |
Total held to maturity securities, net of ACL |  | $ | 3,380 |  |  |  |  |  |  |
(Dollars in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Allowance for Credit Losses |  | Fair Value
December 31, 2022 |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities, residential |  | $ | 55,329 |  |  | $ | 235 |  |  | $ | (4,931) |  |  | $ | — |  |  | $ | 50,633 |
Asset-backed securities |  | 6,389 |  |  | — |  |  | (58) |  |  | — |  |  | 6,331 |
State and municipal |  | 13,553 |  |  | 1 |  |  | (116) |  |  | — |  |  | 13,438 |
CLO Securities |  | 185,068 |  |  | 161 |  |  | (4,218) |  |  | — |  |  | 181,011 |
Corporate bonds |  | 1,270 |  |  | 1 |  |  | (8) |  |  | — |  |  | 1,263 |
SBA pooled securities |  | 1,910 |  |  | 29 |  |  | (111) |  |  | — |  |  | 1,828 |
Total available for sale securities |  | $ | 263,519 |  |  | $ | 427 |  |  | $ | (9,442) |  |  | $ | — |  |  | $ | 254,504 |
(Dollars in thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrecognized Losses |  | Fair Value
December 31, 2022 |  |  |  |
Held to maturity securities: |  |  |  |  |  |  |  |
CLO securities |  | $ | 6,521 |  |  | $ | 458 |  |  | $ | (1,503) |  |  | $ | 5,476 |
Allowance for credit losses |  | (2,444) |  |  |  |  |  |  |
Total held to maturity securities, net of ACL |  | $ | 4,077 |  |  |  |  |  |  |
The amortized cost and estimated fair value of securities at June 30, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|  | Available for Sale Securities |  | Held to Maturity Securities
(Dollars in thousands) |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Due in one year or less |  | $ | 1,224 |  |  | $ | 1,220 |  |  | $ | — |  |  | $ | — |
Due from one year to five years |  | 2,213 |  |  | 2,175 |  |  | 1,913 |  |  | 2,106 |
Due from five years to ten years |  | 73,022 |  |  | 72,397 |  |  | 4,343 |  |  | 2,644 |
Due after ten years |  | 179,853 |  |  | 179,242 |  |  | — |  |  | — |
|  | 256,312 |  |  | 255,034 |  |  | 6,256 |  |  | 4,750 |
Mortgage-backed securities, residential |  | 51,069 |  |  | 45,829 |  |  | — |  |  | — |
Asset-backed securities |  | 1,286 |  |  | 1,252 |  |  | — |  |  | — |
SBA pooled securities |  | 1,773 |  |  | 1,664 |  |  | — |  |  | — |
|  | $ | 310,440 |  |  | $ | 303,779 |  |  | $ | 6,256 |  |  | $ | 4,750 |
Proceeds from sales of debt securities and the associated gross gains and losses as well as net gains and losses from calls of debt securities are as follows:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Proceeds |  | $ | 4,000 |  |  | $ | 40,163 |  |  | $ | 4,000 |  |  | $ | 40,163 |
Gross gains |  | — |  |  | 2,512 |  |  | — |  |  | 2,512 |
Gross losses |  | — |  |  | — |  |  | — |  |  | — |
Net gains and losses from calls of securities |  | — |  |  | 2 |  |  | — |  |  | 2 |
Debt securities with a carrying amount of approximately $35,749,000 and $93,813,000 at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public deposits, customer repurchase agreements, and for other purposes required or permitted by law. Accrued interest on available for sale securities totaled $4,299,000 and $2,593,000 at June 30, 2023 and December 31, 2022, respectively, and was included in other assets on the Company's consolidated balance sheets. There was no accrued interest related to debt securities reversed against interest income for the three and six months ended June 30, 2023 and 2022. The following table summarizes available for sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous loss position:
|  | Less than 12 Months |  | 12 Months or More |  | Total
(Dollars in thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
June 30, 2023 |  |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities, residential |  | $ | 18,822 |  |  | $ | (574) |  |  | $ | 26,886 |  |  | $ | (4,666) |  |  | $ | 45,708 |  |  | $ | (5,240) |
Asset-backed securities |  | — |  |  | — |  |  | 1,252 |  |  | (34) |  |  | 1,252 |  |  | (34) |
State and municipal |  | 4,134 |  |  | (57) |  |  | 471 |  |  | (31) |  |  | 4,605 |  |  | (88) |
CLO securities |  | 23,028 |  |  | (49) |  |  | 107,197 |  |  | (1,613) |  |  | 130,225 |  |  | (1,662) |
Corporate bonds |  | 759 |  |  | (9) |  |  | — |  |  | — |  |  | 759 |  |  | (9) |
SBA pooled securities |  | 223 |  |  | (3) |  |  | 1,133 |  |  | (111) |  |  | 1,356 |  |  | (114) |
|  | $ | 46,966 |  |  | $ | (692) |  |  | $ | 136,939 |  |  | $ | (6,455) |  |  | $ | 183,905 |  |  | $ | (7,147) |
|  | Less than 12 Months |  | 12 Months or More |  | Total
(Dollars in thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
December 31, 2022 |  |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities, residential |  | $ | 26,030 |  |  | $ | (1,507) |  |  | $ | 15,828 |  |  | $ | (3,424) |  |  | $ | 41,858 |  |  | $ | (4,931) |
Asset-backed securities |  | 1,337 |  |  | (52) |  |  | 4,994 |  |  | (6) |  |  | 6,331 |  |  | (58) |
State and municipal |  | 12,680 |  |  | (116) |  |  | — |  |  | — |  |  | 12,680 |  |  | (116) |
CLO Securities |  | 151,572 |  |  | (3,407) |  |  | 19,439 |  |  | (811) |  |  | 171,011 |  |  | (4,218) |
Corporate bonds |  | 261 |  |  | (8) |  |  | — |  |  | — |  |  | 261 |  |  | (8) |
SBA pooled securities |  | 1,262 |  |  | (111) |  |  | — |  |  | — |  |  | 1,262 |  |  | (111) |
|  | $ | 193,142 |  |  | $ | (5,201) |  |  | $ | 40,261 |  |  | $ | (4,241) |  |  | $ | 233,403 |  |  | $ | (9,442) |
Management evaluates available for sale debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. At June 30, 2023, the Company had 137 available for sale debt securities in an unrealized loss position without an allowance for credit losses. Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of June 30, 2023, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore the Company carried no allowance for credit losses on available for sale debt securities at June 30, 2023. The following table presents the activity in the allowance for credit losses for held to maturity debt securities:
(Dollars in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30,
Held to Maturity CLO Securities |  | 2023 |  | 2022 |  | 2023 |  | 2022
Allowance for credit losses: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 2,585 |  |  | $ | 2,455 |  |  | $ | 2,444 |  |  | $ | 2,082 |
Credit loss expense |  | 291 |  |  | (100) |  |  | 432 |  |  | 273 |
Allowance for credit losses ending balance |  | $ | 2,876 |  |  | $ | 2,355 |  |  | $ | 2,876 |  |  | $ | 2,355 |
The Company’s held to maturity securities are investments in the unrated subordinated notes of collateralized loan obligation funds. These securities are the junior-most in securitization capital structures, and are subject to suspension of distributions if the credit of the underlying loan portfolios deteriorates materially. The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type. At June 30, 2023 and December 31, 2022, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call. At June 30, 2023, $4,778,000 of the Company’s held to maturity securities were classified as nonaccrual.

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