Quarterly report pursuant to Section 13 or 15(d)

SECURITIES

v3.21.1
SECURITIES
3 Months Ended
Mar. 31, 2021
Securities [Abstract]  
SECURITIES

2. SECURITIES

Available for Sale

The Company’s AFS investment portfolio is generally highly-rated or agency backed. All AFS securities were current with no securities past due or on non-accrual as of March 31, 2021 and December 31, 2020.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of March 31, 2021 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

    

Cost

    

Gains

    

(Losses)

    

Fair Value

March 31, 2021

 

  

 

  

 

  

  

U.S. government and agency securities

$

11,470

$

254

$

(47)

$

11,677

Obligations of states and political subdivisions

 

868,297

 

35,757

 

(4,956)

 

899,098

Corporate and other bonds (1)

 

145,403

 

2,448

 

(243)

 

147,608

Commercial mortgage-backed securities

 

 

Agency

316,527

 

11,260

 

(1,615)

326,172

Non-agency

58,691

 

79

 

(110)

58,660

Total commercial mortgage-backed securities

375,218

 

11,339

 

(1,725)

384,832

Residential mortgage-backed securities

Agency

1,138,014

 

26,812

 

(13,668)

1,151,158

Non-agency

100,036

 

1,521

 

(512)

101,045

Total residential mortgage-backed securities

1,238,050

 

28,333

 

(14,180)

1,252,203

Other securities

 

1,625

 

 

 

1,625

Total AFS securities

$

2,640,063

$

78,131

$

(21,151)

$

2,697,043

(1) Other bonds include asset-backed securities.

The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of December 31, 2020 are summarized as follows (dollars in thousands):

Amortized

Gross Unrealized

Estimated

    

Cost

    

Gains

    

(Losses)

    

Fair Value

December 31, 2020

U.S. government and agency securities

$

13,009

$

437

$

(52)

$

13,394

Obligations of states and political subdivisions

786,466

50,878

(18)

837,326

Corporate and other bonds (1)

 

148,747

 

2,430

 

(99)

 

151,078

Commercial mortgage-backed securities

 

 

Agency

321,015

16,277

(2)

337,290

Non-agency

51,244

167

(17)

51,394

Total commercial mortgage-backed securities

372,259

16,444

(19)

388,684

Residential mortgage-backed securities

Agency

1,012,237

31,816

(1,946)

1,042,107

Non-agency

104,904

1,507

(206)

106,205

Total residential mortgage-backed securities

1,117,141

33,323

(2,152)

1,148,312

Other securities

 

1,625

 

 

 

1,625

Total AFS securities

$

2,439,247

$

103,512

$

(2,340)

$

2,540,419

(1) Other bonds include asset-backed securities

The following table shows the gross unrealized losses and fair value of the Company’s AFS securities with unrealized losses for which an ACL has not been recorded at March 31, 2021 and December 31, 2020 and that are not deemed to be impaired as of those dates. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position (dollars in thousands).

Less than 12 months

More than 12 months

Total

  

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

Value

Losses

Value

Losses

Value

Losses

March 31, 2021

 

 

 

 

 

 

U.S. government and agency securities

$

$

$

4,899

$

(47)

$

4,899

$

(47)

Obligations of states and political subdivisions

271,172

(4,956)

271,172

(4,956)

Corporate and other bonds(1)

 

42,612

 

(237)

 

4,785

 

(6)

 

47,397

 

(243)

Commercial mortgage-backed securities

 

 

 

 

 

 

Agency

65,708

(1,614)

359

(1)

66,067

(1,615)

Non-agency

26,736

(110)

26,736

(110)

Total commercial mortgage-backed securities

92,444

(1,724)

359

(1)

92,803

(1,725)

Residential mortgage-backed securities

Agency

558,523

(13,650)

1,175

(18)

559,698

(13,668)

Non-agency

36,031

(491)

10,070

(21)

46,101

(512)

Total residential mortgage-backed securities

594,554

(14,141)

11,245

(39)

605,799

(14,180)

Total AFS securities

$

1,000,782

$

(21,058)

$

21,288

$

(93)

$

1,022,070

$

(21,151)

December 31, 2020

 

  

 

  

 

  

 

  

 

  

 

  

U.S. government and agency securities

$

$

$

5,456

$

(52)

$

5,456

$

(52)

Obligations of states and political subdivisions

5,091

(18)

5,091

(18)

Corporate and other bonds(1)

 

17,946

 

(52)

 

10,698

 

(47)

 

28,644

 

(99)

Commercial mortgage-backed securities

 

 

 

 

 

 

Agency

5,893

(2)

376

6,269

(2)

Non-agency

17,654

(17)

17,654

(17)

Total commercial mortgage-backed securities

23,547

(19)

376

23,923

(19)

Residential mortgage-backed securities

Agency

219,388

(1,944)

1,055

(2)

220,443

(1,946)

Non-agency

36,942

(206)

36,942

(206)

Total residential mortgage-backed securities

256,330

(2,150)

1,055

(2)

257,385

(2,152)

Total AFS securities

$

302,914

$

(2,239)

$

17,585

$

(101)

$

320,499

$

(2,340)

(1) Other bonds includes asset-backed securities.

As of March 31, 2021, there were $21.3 million, or 12 instances, of individual AFS securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $93,000. As of December 31, 2020, there were $17.6 million, or 15 instances, of individual securities that had been in a continuous loss position for more than 12 months and had an aggregate unrealized loss of $101,000.

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at March 31, 2021 and December 31, 2020 and concluded no impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis.

Additionally, the majority of the Company’s mortgage-backed securities are issued by FNMA, FHLMC, and GNMA and do not have credit risk given the implicit and explicit government guarantees associated with these agencies. In addition, the non-agency mortgage-backed and asset-backed securities generally received a 20% SSFA rating.

The following table presents the amortized cost and estimated fair value of AFS securities as of March 31, 2021 and December 31, 2020, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands).

March 31, 2021

December 31, 2020

    

Amortized

    

Estimated

    

Amortized

    

Estimated

Cost

Fair Value

Cost

Fair Value

Due in one year or less

$

18,007

$

18,168

$

19,875

$

19,997

Due after one year through five years

 

166,575

 

172,723

 

161,448

 

169,103

Due after five years through ten years

 

233,566

 

239,838

 

235,021

 

242,791

Due after ten years

 

2,221,915

 

2,266,314

 

2,022,903

 

2,108,528

Total AFS securities

$

2,640,063

$

2,697,043

$

2,439,247

$

2,540,419

Refer to Note 7 "Commitments and Contingencies" for information regarding the estimated fair value of AFS securities that were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of March 31, 2021 and December 31, 2020.

Held to Maturity

The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities and the estimated credit loss inherent in the portfolio is currently immaterial. The Company’s HTM securities were all current, with no securities past due or on non-accrual at March 31, 2021 and December 31, 2020.

The Company reports HTM securities on the Company’s Consolidated Balance Sheets at carrying value. Carrying value is amortized cost, which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive income prior to reclassifying the securities from AFS securities to HTM securities. Investment securities transferred into the HTM category from the AFS category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the HTM securities. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of March 31, 2021 are summarized as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

    

Value

    

Gains

    

(Losses)

Fair Value

March 31, 2021

 

  

 

  

 

  

  

U.S. government and agency securities

$

2,676

$

$

(31)

$

2,645

Obligations of states and political subdivisions

535,634

62,880

598,514

Commercial mortgage-backed securities

 

Agency

5,265

1

(66)

5,200

Non-agency

Total commercial mortgage-backed securities

5,265

1

(66)

5,200

Total held-to-maturity securities

$

543,575

$

62,881

$

(97)

$

606,359

The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of December 31, 2020 are summarized as follows (dollars in thousands):

Carrying

Gross Unrealized

Estimated

    

Value

    

Gains

    

(Losses)

    

Fair Value

December 31, 2020

 

  

 

  

 

  

 

  

U.S. government and agency securities

$

2,751

$

$

(18)

$

2,733

Obligations of states and political subdivisions

536,767

74,978

611,745

Commercial mortgage-backed securities

 

 

 

Agency

5,333

4

(50)

5,287

Non-agency

Total commercial mortgage-backed securities

5,333

4

(50)

5,287

Total held-to-maturity securities

$

544,851

$

74,982

$

(68)

$

619,765

Credit Quality Indicators & Allowance for Credit Losses - HTM

For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The Company estimates expected credit losses on HTM debt securities on an individual basis based on the PD/LGD methodology primarily using security-level credit ratings. The Company’s HTM securities ACL was immaterial at March 31, 2021 and December 31, 2020. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The Company’s only HTM securities with credit risk are obligations of states and political subdivisions.

The following table presents the amortized cost of HTM securities as of March 31, 2021 and December 31, 2020 by security type and credit rating (dollars in thousands):

    

U.S. Government and Agency

    

Obligations of states and political

    

Mortgage-backed

    

Total HTM

securities

subdivisions

securities

securities

March 31, 2021

Credit Rating:

 

 

AAA/AA/A

$

$

531,203

$

$

531,203

Not Rated - Agency(1)

2,676

5,265

7,941

Not Rated - Non-Agency

 

4,431

4,431

Total

$

2,676

$

535,634

$

5,265

$

543,575

December 31, 2020

Credit Rating:

 

 

AAA/AA/A

$

$

532,157

$

$

532,157

Not Rated - Agency(1)

2,751

5,333

8,084

Not Rated - Non-Agency

 

4,610

4,610

Total

$

2,751

$

536,767

$

5,333

$

544,851

(1) Generally considered not to have credit risk given the government guarantees associated with these agencies

The following table presents the amortized cost and estimated fair value of HTM securities as of March 31, 2021 and December 31, 2020, by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands).

March 31, 2021

December 31, 2020

    

Carrying

    

Estimated

    

Carrying

    

Estimated

Value

Fair Value

Value

Fair Value

Due in one year or less

$

1,441

$

1,449

$

1,443

$

1,460

Due after one year through five years

 

8,518

 

8,786

 

8,577

 

8,893

Due after five years through ten years

 

1,680

 

1,719

 

1,744

 

1,805

Due after ten years

 

531,936

 

594,405

 

533,087

 

607,607

Total HTM securities

$

543,575

$

606,359

$

544,851

$

619,765

Refer to Note 7 "Commitments and Contingencies" for information regarding the estimated fair value of HTM securities that were pledged to secure public deposits as permitted or required by law as of March 31, 2021 and December 31, 2020.

Restricted Stock, at cost

Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. The FHLB required the Bank to maintain stock in an amount equal to 3.75% and 4.25% of outstanding borrowings at March 31, 2021 and December 31, 2020, respectively, as well as a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of the Bank’s outstanding capital at both March 31, 2021 and December 31, 2020. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $67.0 million for March 31, 2021 and December 31, 2020 and FHLB stock in the amount of $9.8 million and $27.8 million as of March 31, 2021 and December 31, 2020, respectively.

Realized Gains and Losses

The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three months ended March 31, 2021 and 2020 (dollars in thousands).

    

Three Months Ended

    

Three Months Ended

March 31, 2021

March 31, 2020

Realized gains (losses):

 

  

 

  

Gross realized gains

$

138

$

2,164

Gross realized losses

 

(60)

 

(228)

Net realized gains

$

78

$

1,936

Proceeds from sales of securities

$

45,436

$

120,701