INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

3. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, fair value and related ACL on HTM and AFS debt securities are as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
March 31, 2022
Held-to-maturity:
Debt securities:
States and political subdivisions	$	41,730	$	—	$	(1)	$	41,729	$	—

Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	$	287,777	$	—	$	(3)	$	287,774	$	—

Total held-to-maturity securities	$	329,507	$	—	$	(4)	$	329,503	$	—

Available-for-sale:
Debt securities:
States and political subdivisions	$	178,137	$	487	$	(14,443)	$	164,181	$	—
Corporate securities	36,561		—		(3,507)		33,054		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	33,275		120		(1,224)		32,171		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	926,988		220		(69,010)		858,198		—
Residential - Non-government agencies	11,088		101		(281)		10,908		—
Commercial - U.S. Government-sponsored entities	63,074		17		(3,733)		59,358		—
Commercial - Non-government agencies	41,333		279		—		41,612		—
Total available-for-sale securities	$	1,290,456	$	1,224	$	(92,198)	$	1,199,482	$	—


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
December 31, 2021






Available-for-sale:
Debt securities:
States and political subdivisions	$	235,521	$	3,156	$	(1,849)	$	236,828	$	—
Corporate securities	41,687		24		(1,065)		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,833		69		(568)		35,334		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	1,213,910		4,899		(19,993)		1,198,816		—
Residential - Non-government agencies	11,942		335		(64)		12,213		—
Commercial - U.S. Government-sponsored entities	66,287		756		(1,194)		65,849		—
Commercial - Non-government agencies	41,328		685		—		42,013		—
Total available-for-sale securities	$	1,646,508	$	9,924	$	(24,733)	$	1,631,699	$	—

During the three months ended March 31, 2022, the Company transferred 41 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $361.8 million and a fair market value of $329.5 million. On the date of transfer, these securities had a total net unrealized loss of $32.3 million. There was no impact to net income as a result of the reclassification. This transfer was to mitigate the potential future impact to capital through accumulated other comprehensive loss in consideration of a rising interest rate environment and the impact of rising rates on the market value of the investment securities. The Company believes that it maintains sufficient liquidity for future business needs and it has the positive intent and ability to hold these securities to maturity.

The amortized cost and estimated fair value of our HTM and AFS debt securities at March 31, 2022 are shown below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.


	March 31, 2022
(dollars in thousands)	Amortized Cost		Fair Value
Held-to-maturity:
Debt securities:
Due after ten years	$	41,730	$	41,729


Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	287,777		287,774

Total held-to-maturity securities	$	329,507	$	329,503

Available-for-sale:
Debt securities:
Due in one year or less	$	5,614	$	5,607
Due after one year through five years	20,250		20,432
Due after five years through ten years	83,032		78,488
Due after ten years	139,077		124,879
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	926,988		858,198
Residential - Non-government agencies	11,088		10,908
Commercial - U.S. Government-sponsored entities	63,074		59,358
Commercial - Non-government agencies	41,333		41,612

Total available-for-sale securities	$	1,290,456	$	1,199,482

The Company did not sell any investment securities during the three months ended March 31, 2022 and 2021.

Investment securities with fair value of $408.3 million and $455.8 million at March 31, 2022 and December 31, 2021, respectively, were pledged to secure public funds on deposit and other short-term borrowings.

At March 31, 2022 and December 31, 2021, there were no holdings of investment securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

There were a total of 273 and 153 debt securities which were in an unrealized loss position, without an ACL, at March 31, 2022 and December 31, 2021, respectively. The following tables summarize AFS debt securities which were in an unrealized loss position at March 31, 2022 and December 31, 2021, 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		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2022
Debt securities:
States and political subdivisions	$	163,055	$	(12,432)	$	9,445	$	(2,012)	$	172,500	$	(14,444)
Corporate securities	4,696		(325)		28,358		(3,182)		33,054		(3,507)
U.S. Treasury obligations and direct obligations of U.S Government agencies	4,808		(54)		19,215		(1,170)		24,023		(1,224)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	951,100		(50,975)		170,132		(18,038)		1,121,232		(69,013)
Residential - Non-government agencies	6,336		(137)		852		(144)		7,188		(281)
Commercial - U.S. Government-sponsored entities	36,944		(1,104)		14,579		(2,629)		51,523		(3,733)

Total temporarily impaired securities	$	1,166,939	$	(65,027)	$	242,581	$	(27,175)	$	1,409,520	$	(92,202)


	Less Than 12 Months				12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2021
Debt securities:
States and political subdivisions	$	79,360	$	(1,252)	$	10,864	$	(597)	$	90,224	$	(1,849)
Corporate securities	8,633		(235)		21,960		(830)		30,593		(1,065)
U.S. Treasury obligations and direct obligations of U.S Government agencies	16,103		(415)		10,891		(153)		26,994		(568)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	926,570		(15,883)		114,747		(4,110)		1,041,317		(19,993)
Residential - Non-government agencies	—		—		938		(64)		938		(64)
Commercial - U.S. Government-sponsored entities	6,313		(205)		16,281		(989)		22,594		(1,194)

Total temporarily impaired securities	$	1,036,979	$	(17,990)	$	175,681	$	(6,743)	$	1,212,660	$	(24,733)

The Company has evaluated its AFS investment securities that are in an unrealized loss position and has determined that the unrealized losses on the Company's investment securities are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the financial markets since purchase. Investment securities in an unrealized loss position are evaluated on at least a quarterly basis, and include evaluating the changes in the investment securities' ratings issued by rating agencies and changes in the financial condition of the issuer. For mortgage-related securities, delinquency and loss information with respect to the underlying collateral, changes in levels of subordination for the Company's particular position within the repayment structure, and remaining credit enhancement as compared to projected credit losses of the security are also evaluated. All of the investment securities in an unrealized loss position continue to be rated investment grade by one or more major rating agencies. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, the Company has not recorded an ACL and unrealized losses on these securities have not been recognized into income.

Visa Class B Common Stock

As of March 31, 2022, the Company owns 34,631 shares of Class B common stock of Visa, Inc. ("Visa"). These shares were received in 2008 as part of Visa's initial public offering ("IPO"). These shares are transferable only under limited circumstances until they can be converted into shares of the publicly traded Class A common stock. This conversion will not occur until the resolution of certain litigation, which is indemnified by Visa members. Since its IPO, Visa has funded a litigation reserve to settle these litigation claims. At its discretion, Visa may continue to increase the litigation reserve based upon a change in the

conversion ratio of each member bank’s restricted Class B common stock to unrestricted Class A common stock. Due to the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the Company has determined that the Visa Class B common stock does not have a readily determinable fair value and chooses to carry the shares on the Company's consolidated balance sheets at zero cost basis.