Investment Securities

9 Months Ended

Sep. 30, 2022

Investments, Debt and Equity Securities [Abstract]

The amortized cost and estimated fair value of the Company's available-for-sale and held-to-maturity securities are summarized as follows:


			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
September 30, 2022
Investment securities available-for-sale:
U.S. treasury bonds	$	49,767	$	—	$	(3,719)	$	—	$	46,048
U.S. agency securities	750,997		15		(82,684)		—		668,328
Residential mortgage-backed securities	958,800		9		(130,442)		—		828,367
Commercial mortgage-backed securities	100,278		—		(6,106)		—		94,172
Municipal bonds	12,030		11		(1,047)		(1)		10,993
Corporate bonds	2,000		—		(138)		(17)		1,845

Total	$	1,873,872	$	35	$	(224,136)	$	(18)	$	1,649,753

			Gross		Gross		Estimated		Allowance
	Amortized		Unrecognized		Unrecognized		Fair		for Credit
(dollars in thousands)	Cost		Gains		Losses		Value		Losses
September 30, 2022
Investment securities held-to-maturity:


Residential mortgage-backed securities	$	761,304	$	—	$	(87,023)	$	674,281	$	—
Commercial mortgage-backed securities	92,948		—		(11,215)		81,733		—
Municipal bonds	128,386		—		(15,512)		112,874		(16)
Corporate bonds	132,248		—		(12,135)		120,113		(786)

Total	$	1,114,886	$	—	$	(125,885)	$	989,001	$	(802)

			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
December 31, 2021
Investment securities available-for-sale:
U.S. treasury bonds	$	49,693	$	22	$	(257)	$	—	$	49,458
U.S. agency securities	629,273		736		(7,622)		—		622,387
Residential mortgage-backed securities	1,692,773		5,697		(20,797)		—		1,677,673
Municipal bonds	141,916		3,865		(347)		(3)		145,431
Corporate bonds	129,012		648		(584)		(617)		128,459
Total	$	2,642,667	$	10,968	$	(29,607)	$	(620)	$	2,623,408

In addition, at September 30, 2022 and December 31, 2021 the Company held $42.3 million and $34.2 million, respectively, in equity securities in a combination of FRB and FHLB stocks, which were required to be held for regulatory purposes and which were not marketable, and therefore are carried at cost.

The Company reassessed classification of certain investments in the first quarter of 2022 and, effective March 31, 2022, it transferred a total of $1.1 billion of mortgage-backed securities, municipal bonds and corporate bonds from available-for-sale to held-to-maturity securities, including $237.0 million of securities acquired in the first quarter of 2022 for which its intention to hold to maturity was finalized. At the time of transfer, the Company reversed the allowance for credit losses associated with the available-for-sale securities through the provision for credit losses. The securities were transferred at their amortized cost basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income. The related unrealized loss of $66.2 million was included in other comprehensive loss at the time of transfer and, as of September 30, 2022, $61.1 million remains in accumulated other comprehensive loss, to be amortized out through interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer. Subsequent to transfer, the allowance for credit losses on these securities was evaluated under the accounting policy for held-to-maturity securities.

Accrued interest receivable on available-for-sale securities totaled $4.5 million and $6.0 million at September 30, 2022 and December 31, 2021, respectively, and accrued interest receivable on held-to-maturity securities totaled $3.8 million at September 30, 2022. The accrued interest on investment securities is excluded from the amortized cost of the securities and is reported in other assets in the Consolidated Balance Sheets.

The following table summarizes available for sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded, by length of time:


		Less Than				12 Months
		12 Months				or Greater				Total
		Estimated				Estimated				Estimated
	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
September 30, 2022
U.S. treasury bonds	2	$	46,048	$	(3,719)	$	—	$	—	$	46,048	$	(3,719)
U. S. agency securities	84	450,079		(49,232)		212,988		(33,452)		663,067		(82,684)
Residential mortgage-backed securities	159	581,381		(80,300)		245,304		(50,142)		826,685		(130,442)
Commercial mortgage-backed securities	14	94,172		(6,106)		—		—		94,172		(6,106)
Municipal bonds	2	8,463		(1,047)		—		—		8,463		(1,047)
Corporate bonds	1	1,862		(138)		—		—		1,862		(138)
	262	$	1,182,005	$	(140,542)	$	458,292	$	(83,594)	$	1,640,297	$	(224,136)

December 31, 2021
U.S. treasury bond	1	$	24,593	$	(257)	$	—	$	—	$	24,593	$	(257)
U. S. agency securities	64	452,966		(6,256)		68,977		(1,366)		521,943		(7,622)
Residential mortgage-backed securities	153	1,327,519		(16,841)		108,061		(3,956)		1,435,580		(20,797)
Municipal bonds	8	20,181		(347)		—		—		20,181		(347)
Corporate bonds	13	66,051		(584)		—		—		66,051		(584)
	239	$	1,891,310	$	(24,285)	$	177,038	$	(5,322)	$	2,068,348	$	(29,607)

Unrealized losses at September 30, 2022 were generally attributable to changes in market interest rates and interest spread relationships since the investment securities were originally purchased, and not due to the credit quality concerns on the investment securities. However, as of September 30, 2022, the Company determined that certain of the unrealized loss positions in available-for-sale and held-to-maturity corporate and municipal bonds were evidence of expected credit losses, and therefore, an allowance for credit losses of $18 thousand was recorded for AFS securities and $802 thousand for HTM securities. The weighted average duration of debt securities, which comprise 100% of total investment securities, is 4.84 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company currently has no plans to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at September 30, 2022 and December 31, 2021 by contractual maturity are shown in the table below. Contractual maturities for mortgage-backed securities ("MBS") are excluded as they may differ significantly from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2022				December 31, 2021
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost (1)		Fair Value		Cost		Fair Value
Investment securities available-for-sale
U.S. treasury bonds (maturing after one year through five years)	$	49,767	$	46,048	$	49,693	$	49,458
U. S. agency securities maturing:
One year or less	535,826		474,498		425,597		421,347
After one year through five years	160,848		147,596		141,537		140,785
After five years through ten years	54,323		46,234		62,092		60,255
Residential mortgage-backed securities:	958,800		828,367		1,692,820		1,677,673
Commercial mortgage-backed securities	100,278		94,172		—		—
Municipal bonds maturing:
One year or less	1,600		1,600		4,806		4,861
After one year through five years	1,430		1,441		25,457		26,816
After five years through ten years	9,000		7,953		97,945		99,960
After ten years	—		—		13,708		13,797
Corporate bonds maturing:
One year or less	—		—		18,924		18,991
After one year through five years	2,000		1,862		54,630		54,833
After five years through ten years	—		—		55,458		55,252

Allowance for credit losses	—		(18)		—		(620)
	1,873,872		1,649,753		2,642,667		2,623,408
Investment securities held-to-maturity





Residential mortgage-backed securities:	761,304		674,281		—		—
Commercial mortgage-backed securities	92,948		81,733		—		—
Municipal bonds maturing:
One year or less	3,161		3,100		—		—
After one year through five years	35,637		32,630		—		—
After five years through ten years	77,278		66,457		—		—
After ten years	12,310		10,687		—		—
Corporate bonds maturing:
One year or less	19,553		17,364		—		—
After one year through five years	89,358		82,204		—		—
After five years through ten years	23,337		20,545		—		—

Allowance for credit losses	(802)		—		—		—
	1,114,084		989,001		—		—
	$	2,987,956	$	2,638,754	$	2,642,667	$	2,623,408

(1)Amortized cost for investment securities held-to-maturity is presented net of the allowance for credit losses on the Consolidated Balance Sheet.

For the three and nine months ended September 30, 2022, gross realized gains on sales and calls of investments securities were $4 thousand and $16 thousand, respectively as compared to $1.5 million and $2.2 million for the same three and nine month period ended September 30, 2021. For the three and nine months ended September 30, 2022, gross realized losses on sales of investments securities were $0 and $187 thousand, respectively as compared to $0 and $187 thousand for the same three and nine month period for the prior year. Gross sales and call proceeds were $12.6 million and $32.7 million for the three and nine months ended September 30, 2022 and $85.5 million and $164.6 million for the same periods in 2021.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2022 and December 31, 2021 was $146.1 million and $261.0 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of September 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders' equity.