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INVESTMENT SECURITIES | 3 Months Ended
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Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
INVESTMENT SECURITIES | 3. INVESTMENT SECURITIES The amortized cost, fair value and related ACL, and corresponding gross unrecognized gains and losses on HTM debt securities at June 30, 2023 and December 31, 2022 are as follows:
|  | Amortized Cost |  | Gross Unrecognized Gains |  | Gross Unrecognized Losses |  | Fair Value |  | ACL
(dollars in thousands) |  |  |  |  |
June 30, 2023 |  |  |  |  |
Held-to-maturity: |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 41,898 |  |  | $ | — |  |  | $ | (5,262) |  |  | $ | 36,636 |  |  | $ | — |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 608,048 |  |  | — |  |  | (63,462) |  |  | 544,586 |  |  | — |
Total held-to-maturity securities |  | $ | 649,946 |  |  | $ | — |  |  | $ | (68,724) |  |  | $ | 581,222 |  |  | $ | — |
|  | Amortized Cost |  | Gross Unrecognized Gains |  | Gross Unrecognized Losses |  | Fair Value |  | ACL
(dollars in thousands) |  |  |  |  |
December 31, 2022 |  |  |  |  |
Held-to-maturity: |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 41,840 |  |  | $ | — |  |  | $ | (4,727) |  |  | $ | 37,113 |  |  | $ | — |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 623,043 |  |  | — |  |  | (63,376) |  |  | 559,667 |  |  | — |
Total held-to-maturity securities |  | $ | 664,883 |  |  | $ | — |  |  | $ | (68,103) |  |  | $ | 596,780 |  |  | $ | — |
The amortized cost, fair value and related ACL, and corresponding gross unrealized gains and losses on AFS debt securities at June 30, 2023 and December 31, 2022 are as follows:
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | ACL
(dollars in thousands) |  |  |  |  |
June 30, 2023 |  |  |  |  |
Available-for-sale: |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 167,314 |  |  | $ | 4 |  |  | $ | (32,146) |  |  | $ | 135,172 |  |  | $ | — |
Corporate securities |  | 35,968 |  |  | — |  |  | (5,248) |  |  | 30,720 |  |  | — |
U.S. Treasury obligations and direct obligations of U.S. Government agencies |  | 24,933 |  |  | 9 |  |  | (2,295) |  |  | 22,647 |  |  | — |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 479,165 |  |  | — |  |  | (73,038) |  |  | 406,127 |  |  | — |
Residential - Non-government agencies |  | 9,512 |  |  | — |  |  | (1,157) |  |  | 8,355 |  |  | — |
Commercial - U.S. Government-sponsored entities |  | 53,142 |  |  | — |  |  | (8,157) |  |  | 44,985 |  |  | — |
Commercial - Non-government agencies |  | 16,559 |  |  | — |  |  | (494) |  |  | 16,065 |  |  | — |
Total available-for-sale securities |  | $ | 786,593 |  |  | $ | 13 |  |  | $ | (122,535) |  |  | $ | 664,071 |  |  | $ | — |
|  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | ACL
(dollars in thousands) |  |  |  |  |
December 31, 2022 |  |  |  |  |
Available-for-sale: |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 172,427 |  |  | $ | 6 |  |  | $ | (36,681) |  |  | $ | 135,752 |  |  | $ | — |
Corporate securities |  | 36,206 |  |  | — |  |  | (5,995) |  |  | 30,211 |  |  | — |
U.S. Treasury obligations and direct obligations of U.S. Government agencies |  | 28,032 |  |  | — |  |  | (2,317) |  |  | 25,715 |  |  | — |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 498,989 |  |  | — |  |  | (75,186) |  |  | 423,803 |  |  | — |
Residential - Non-government agencies |  | 9,829 |  |  | — |  |  | (1,167) |  |  | 8,662 |  |  | — |
Commercial - U.S. Government-sponsored entities |  | 54,346 |  |  | — |  |  | (8,202) |  |  | 46,144 |  |  | — |
Commercial - Non-government agencies |  | 1,541 |  |  | — |  |  | (34) |  |  | 1,507 |  |  | — |
Total available-for-sale securities |  | $ | 801,370 |  |  | $ | 6 |  |  | $ | (129,582) |  |  | $ | 671,794 |  |  | $ | — |
In March 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. In May 2022, the Company transferred 40 investment securities that were classified as AFS to HTM. The investment securities had an amortized cost basis of $400.9 million and a fair market value of $343.7 million. On the date of transfer, these securities had a total net unrealized loss of $57.2 million. There was no impact to net income as a result of the reclassification. During the three and six months ended June 30, 2023, the Company recorded a total of $2.0 million and $3.6 million in amortization of unrecognized losses on the aforementioned investment securities transferred from AFS to HTM. As of June 30, 2023, the Company has recorded a total of $9.9 million in amortization of unrecognized losses on the aforementioned investment securities transferred from AFS to HTM. These transfers were executed 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, estimated fair value and weighted average yield of our HTM and AFS debt securities at June 30, 2023, by contractual maturity, are shown below. 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.
(dollars in thousands) |  | Amortized Cost |  | Fair Value |  | Weighted Average Yield (1)
Held-to-maturity: |  |  |  |  |  |
Debt securities: |  |  |  |  |  |
Due in one year or less |  | $ | — |  |  | $ | — |  |  | — | %
Due after one year through five years |  | — |  |  | — |  |  | — |
Due after five years through ten years |  | — |  |  | — |  |  | — |
Due after ten years |  | 41,898 |  |  | 36,636 |  |  | 2.26 |
Mortgage-backed securities: |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 608,048 |  |  | 544,586 |  |  | 1.92 |
Total held-to-maturity securities |  | $ | 649,946 |  |  | $ | 581,222 |  |  | 1.94 | %
Available-for-sale: |  |  |  |  |  |
Debt securities: |  |  |  |  |  |
Due in one year or less |  | $ | 5,000 |  |  | $ | 4,986 |  |  | 3.03 | %
Due after one year through five years |  | 23,629 |  |  | 22,594 |  |  | 3.67 |
Due after five years through ten years |  | 68,204 |  |  | 60,466 |  |  | 2.67 |
Due after ten years |  | 131,382 |  |  | 100,493 |  |  | 2.52 |
Mortgage-backed securities: |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 479,165 |  |  | 406,127 |  |  | 2.02 |
Residential - Non-government agencies |  | 9,512 |  |  | 8,355 |  |  | 3.32 |
Commercial - U.S. Government-sponsored entities |  | 53,142 |  |  | 44,985 |  |  | 2.35 |
Commercial - Non-government agencies |  | 16,559 |  |  | 16,065 |  |  | 5.06 |
Total available-for-sale securities |  | $ | 786,593 |  |  | $ | 664,071 |  |  | 2.33 | %
(1)Weighted-average yields are computed on an annual basis, and yields on tax-exempt obligations are computed on a taxable-equivalent basis using a federal statutory tax rate of 21% During the three and six months ended June 30, 2023, the Company did not sell any investment securities. In 2022, the Company completed one sale of investment securities for its Class B common stock of Visa during the second quarter and is discussed later in this footnote. Investment securities with carrying values totaling $841.9 million and $607.7 million at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds on deposit and other financial transactions. At June 30, 2023 and December 31, 2022, 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 83 HTM investment securities which were in an unrecognized loss position, without an ACL, at June 30, 2023 and 83 at December 31, 2022. Th e following tables summarize HTM investment securities, which were in an unrecognized loss position at June 30, 2023 and December 31, 2022, aggregated by major security type and length of time in a continuous unrecognized loss position.
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
(dollars in thousands) |  | Fair Value |  | Unrecognized Losses |  | Fair Value |  | Unrecognized Losses |  | Fair Value |  | Unrecognized Losses
June 30, 2023 |  |  |  |  |  |
Held-to-maturity: |  |  |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | — |  |  | $ | — |  |  | $ | 36,636 |  |  | $ | (5,262) |  |  | $ | 36,636 |  |  | $ | (5,262) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 63,078 |  |  | (3,725) |  |  | 481,508 |  |  | (59,737) |  |  | 544,586 |  |  | (63,462) |
Total temporarily impaired securities |  | $ | 63,078 |  |  | $ | (3,725) |  |  | $ | 518,144 |  |  | $ | (64,999) |  |  | $ | 581,222 |  |  | $ | (68,724) |
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
(dollars in thousands) |  | Fair Value |  | Unrecognized Losses |  | Fair Value |  | Unrecognized Losses |  | Fair Value |  | Unrecognized Losses
December 31, 2022 |  |  |  |  |  |
Held-to-maturity: |  |  |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 37,113 |  |  | $ | (4,727) |  |  | $ | — |  |  | $ | — |  |  | $ | 37,113 |  |  | $ | (4,727) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 559,667 |  |  | (63,376) |  |  | — |  |  | — |  |  | 559,667 |  |  | (63,376) |
Total temporarily impaired securities |  | $ | 596,780 |  |  | $ | (68,103) |  |  | $ | — |  |  | $ | — |  |  | $ | 596,780 |  |  | $ | (68,103) |
There were a total of 245 AFS investment securities which were in an unrealized loss position, without an ACL, at June 30, 2023 and 243 at December 31, 2022. Th e following tables summarize AFS investment securities, which were in an unrealized loss position at June 30, 2023 and December 31, 2022, 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
June 30, 2023 |  |  |  |  |  |
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 15,254 |  |  | $ | (187) |  |  | $ | 116,009 |  |  | $ | (31,959) |  |  | $ | 131,263 |  |  | $ | (32,146) |
Corporate securities |  | — |  |  | — |  |  | 30,720 |  |  | (5,248) |  |  | 30,720 |  |  | (5,248) |
U.S. Treasury obligations and direct obligations of U.S Government agencies |  | 3,911 |  |  | (83) |  |  | 16,354 |  |  | (2,212) |  |  | 20,265 |  |  | (2,295) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 9,227 |  |  | (440) |  |  | 396,900 |  |  | (72,598) |  |  | 406,127 |  |  | (73,038) |
Residential - Non-government agencies |  | 2,747 |  |  | (336) |  |  | 5,608 |  |  | (821) |  |  | 8,355 |  |  | (1,157) |
Commercial - U.S. Government-sponsored entities |  | — |  |  | — |  |  | 44,985 |  |  | (8,157) |  |  | 44,985 |  |  | (8,157) |
Commercial - Non-government agencies |  | 14,660 |  |  | (359) |  |  | 1,404 |  |  | (135) |  |  | 16,064 |  |  | (494) |
Total temporarily impaired securities |  | $ | 45,799 |  |  | $ | (1,405) |  |  | $ | 611,980 |  |  | $ | (121,130) |  |  | $ | 657,779 |  |  | $ | (122,535) |
|  | 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, 2022 |  |  |  |  |  |
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | 52,244 |  |  | $ | (4,807) |  |  | $ | 78,389 |  |  | $ | (31,874) |  |  | $ | 130,633 |  |  | $ | (36,681) |
Corporate securities |  | — |  |  | — |  |  | 30,211 |  |  | (5,995) |  |  | 30,211 |  |  | (5,995) |
U.S. Treasury obligations and direct obligations of U.S Government agencies |  | 9,651 |  |  | (245) |  |  | 15,541 |  |  | (2,072) |  |  | 25,192 |  |  | (2,317) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Residential - U.S. Government-sponsored entities |  | 149,624 |  |  | (13,990) |  |  | 274,179 |  |  | (61,196) |  |  | 423,803 |  |  | (75,186) |
Residential - Non-government agencies |  | 2,890 |  |  | (334) |  |  | 5,772 |  |  | (833) |  |  | 8,662 |  |  | (1,167) |
Commercial - U.S. Government-sponsored entities |  | 25,034 |  |  | (1,724) |  |  | 21,110 |  |  | (6,478) |  |  | 46,144 |  |  | (8,202) |
Commercial - Non-government agencies |  | 1,506 |  |  | (34) |  |  | — |  |  | — |  |  | 1,506 |  |  | (34) |
Total temporarily impaired securities |  | $ | 240,949 |  |  | $ | (21,134) |  |  | $ | 425,202 |  |  | $ | (108,448) |  |  | $ | 666,151 |  |  | $ | (129,582) |
Investment securities in an unrecognized or 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. The Company has evaluated its HTM and AFS investment securities that are in an unrecognized or unrealized loss position and has determined that the unrecognized or unrealized losses on the Company's investment securities are unrelated to credit quality and primarily attributable to changes in interest rates and volatility in the financial markets since purchase. All of the investment securities in an unrecognized or unrealized loss position continue to be rated investment grade by one or more major rating agencies. As the Company does not intend to sell the HTM and AFS securities that are in an unrecognized or unrealized loss position and it is unlikely that we will be required to sell these securities before recovery of its amortized cost basis that may be at maturity, the Company has not recorded an ACL on these securities and the unrecognized or unrealized losses on these securities have not been recognized into income. Visa Class B Common Stock During the second quarter of 2022, the Company sold its 34,631 shares of Class B common stock of Visa, Inc. ("Visa") and received net proceeds of $8.5 million. As of June 30, 2023, the Company no longer owns any shares of Class B common stock of Visa. The Company received these shares in 2008 as part of Visa's initial public offering ("IPO"). These shares were transferable only under limited circumstances until they could 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 determined that the Visa Class B common stock did not have a readily determinable fair value and chose to carry the shares on the Company's consolidated balance sheets at zero cost basis. As a result, the entire net proceeds of $8.5 million were recognized as a pre-tax gain and included in net gain on sales of investment securities in the Company's consolidated statements of income in 2022.

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