| 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 September 30, 2023 and December 31, 2022.
The amortized cost, gross unrealized gains and losses, and estimated fair values of AFS securities as of September 30, 2023 are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
Gross Unrealized |
|
Estimated |
|
|
Cost |
|
Gains |
|
(Losses) |
|
Fair Value |
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities |
|
$ |
62,221 |
|
$ |
— |
|
$ |
(383) |
|
$ |
61,838 |
Obligations of states and political subdivisions |
|
|
587,340 |
|
|
— |
|
|
(169,880) |
|
|
417,460 |
Corporate and other bonds (1) |
|
|
267,816 |
|
|
— |
|
|
(24,998) |
|
|
242,818 |
Commercial MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
215,203 |
|
|
307 |
|
|
(50,289) |
|
|
165,221 |
Non-agency |
|
|
72,057 |
|
|
— |
|
|
(2,575) |
|
|
69,482 |
Total commercial MBS |
|
|
287,260 |
|
|
307 |
|
|
(52,864) |
|
|
234,703 |
Residential MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
1,319,987 |
|
|
1 |
|
|
(268,152) |
|
|
1,051,836 |
Non-agency |
|
|
81,677 |
|
|
— |
|
|
(7,131) |
|
|
74,546 |
Total residential MBS |
|
|
1,401,664 |
|
|
1 |
|
|
(275,283) |
|
|
1,126,382 |
Other securities |
|
|
1,727 |
|
|
— |
|
|
— |
|
|
1,727 |
Total AFS securities |
|
$ |
2,608,028 |
|
$ |
308 |
|
$ |
(523,408) |
|
$ |
2,084,928 |
(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, 2022 are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
Gross Unrealized |
|
Estimated |
|
|
Cost |
|
Gains |
|
(Losses) |
|
Fair Value |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities |
|
$ |
70,196 |
|
$ |
— |
|
$ |
(8,253) |
|
$ |
61,943 |
Obligations of states and political subdivisions |
|
|
959,999 |
|
|
137 |
|
|
(152,701) |
|
|
807,435 |
Corporate and other bonds (1) |
|
|
243,979 |
|
|
— |
|
|
(17,599) |
|
|
226,380 |
Commercial MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
250,186 |
|
|
75 |
|
|
(39,268) |
|
|
210,993 |
Non-agency |
|
|
99,412 |
|
|
— |
|
|
(4,244) |
|
|
95,168 |
Total commercial MBS |
|
|
349,598 |
|
|
75 |
|
|
(43,512) |
|
|
306,161 |
Residential MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
1,510,110 |
|
|
81 |
|
|
(233,961) |
|
|
1,276,230 |
Non-agency |
|
|
68,815 |
|
|
— |
|
|
(6,812) |
|
|
62,003 |
Total residential MBS |
|
|
1,578,925 |
|
|
81 |
|
|
(240,773) |
|
|
1,338,233 |
Other securities |
|
|
1,664 |
|
|
— |
|
|
— |
|
|
1,664 |
Total AFS securities |
|
$ |
3,204,361 |
|
$ |
293 |
|
$ |
(462,838) |
|
$ |
2,741,816 |
(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. 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(2) |
|
Losses |
|
Value |
|
Losses |
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities |
|
$ |
59,568 |
|
$ |
(349) |
|
$ |
2,169 |
|
$ |
(34) |
|
$ |
61,737 |
|
$ |
(383) |
Obligations of states and political subdivisions |
|
|
16,023 |
|
|
(3,567) |
|
|
399,438 |
|
|
(166,313) |
|
|
415,461 |
|
|
(169,880) |
Corporate and other bonds(1) |
|
|
100,231 |
|
|
(776) |
|
|
142,587 |
|
|
(24,222) |
|
|
242,818 |
|
|
(24,998) |
Commercial MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
15,074 |
|
|
(709) |
|
|
135,725 |
|
|
(49,580) |
|
|
150,799 |
|
|
(50,289) |
Non-agency |
|
|
— |
|
|
— |
|
|
69,482 |
|
|
(2,575) |
|
|
69,482 |
|
|
(2,575) |
Total commercial MBS |
|
|
15,074 |
|
|
(709) |
|
|
205,207 |
|
|
(52,155) |
|
|
220,281 |
|
|
(52,864) |
Residential MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
55,550 |
|
|
(461) |
|
|
972,755 |
|
|
(267,691) |
|
|
1,028,305 |
|
|
(268,152) |
Non-agency |
|
|
19,776 |
|
|
(90) |
|
|
45,745 |
|
|
(7,041) |
|
|
65,521 |
|
|
(7,131) |
Total residential MBS |
|
|
75,326 |
|
|
(551) |
|
|
1,018,500 |
|
|
(274,732) |
|
|
1,093,826 |
|
|
(275,283) |
Total AFS securities |
|
$ |
266,222 |
|
$ |
(5,952) |
|
$ |
1,767,901 |
|
$ |
(517,456) |
|
$ |
2,034,123 |
|
$ |
(523,408) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities |
|
$ |
2,594 |
|
$ |
(166) |
|
$ |
59,269 |
|
$ |
(8,087) |
|
$ |
61,863 |
|
$ |
(8,253) |
Obligations of states and political subdivisions |
|
|
588,668 |
|
|
(86,895) |
|
|
187,375 |
|
|
(65,806) |
|
|
776,043 |
|
|
(152,701) |
Corporate and other bonds(1) |
|
|
206,861 |
|
|
(15,019) |
|
|
17,121 |
|
|
(2,580) |
|
|
223,982 |
|
|
(17,599) |
Commercial MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
73,362 |
|
|
(7,024) |
|
|
127,193 |
|
|
(32,244) |
|
|
200,555 |
|
|
(39,268) |
Non-agency |
|
|
66,618 |
|
|
(2,231) |
|
|
28,550 |
|
|
(2,013) |
|
|
95,168 |
|
|
(4,244) |
Total commercial MBS |
|
|
139,980 |
|
|
(9,255) |
|
|
155,743 |
|
|
(34,257) |
|
|
295,723 |
|
|
(43,512) |
Residential MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
328,590 |
|
|
(27,769) |
|
|
929,581 |
|
|
(206,192) |
|
|
1,258,171 |
|
|
(233,961) |
Non-agency |
|
|
18,939 |
|
|
(1,288) |
|
|
43,064 |
|
|
(5,524) |
|
|
62,003 |
|
|
(6,812) |
Total residential MBS |
|
|
347,529 |
|
|
(29,057) |
|
|
972,645 |
|
|
(211,716) |
|
|
1,320,174 |
|
|
(240,773) |
Total AFS securities |
|
$ |
1,285,632 |
|
$ |
(140,392) |
|
$ |
1,392,153 |
|
$ |
(322,446) |
|
$ |
2,677,785 |
|
$ |
(462,838) |
(1) Other bonds include asset-backed securities.
(2) Comprised of 761 and 363 individual securities as of September 30, 2023 and December 31, 2022, respectively.
The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at September 30, 2023 and December 31, 2022 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 and increases in market interest rates, (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 MBS 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% simplified supervisory formula approach rating.
The following table presents the amortized cost and estimated fair value of AFS securities as of September 30, 2023 and December 31, 2022, by contractual maturity (dollars in thousands). 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023 |
|
December 31, 2022 |
|
|
Amortized |
|
Estimated |
|
Amortized |
|
Estimated |
|
|
Cost |
|
Fair Value |
|
Cost |
|
Fair Value |
Due in one year or less |
|
$ |
56,948 |
|
$ |
56,120 |
|
$ |
42,447 |
|
$ |
41,735 |
Due after one year through five years |
|
|
138,070 |
|
|
135,530 |
|
|
158,063 |
|
|
152,523 |
Due after five years through ten years |
|
|
262,259 |
|
|
236,096 |
|
|
343,303 |
|
|
312,935 |
Due after ten years |
|
|
2,150,751 |
|
|
1,657,182 |
|
|
2,660,548 |
|
|
2,234,623 |
Total AFS securities |
|
$ |
2,608,028 |
|
$ |
2,084,928 |
|
$ |
3,204,361 |
|
$ |
2,741,816 |
Refer to Note 7 “Commitments and Contingencies” within this Item 1 of this Quarterly Report 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 September 30, 2023 and December 31, 2022.
Held to Maturity
The Company’s HTM investment portfolio primarily consists of highly-rated municipal securities. The Company’s HTM securities were all current, with no securities past due or on non-accrual at September 30, 2023 and December 31, 2022.
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 AOCI prior to reclassifying the securities from AFS securities to HTM securities.
The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of September 30, 2023 are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
Gross Unrealized |
|
Estimated |
|
|
Value |
|
Gains |
|
(Losses) |
|
Fair Value |
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions |
|
$ |
700,400 |
|
$ |
49 |
|
$ |
(64,625) |
|
$ |
635,824 |
Corporate and other bonds(1) |
|
|
4,536 |
|
|
— |
|
|
(170) |
|
|
4,366 |
Commercial MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
27,568 |
|
|
— |
|
|
(6,788) |
|
|
20,780 |
Non-agency |
|
|
24,930 |
|
|
— |
|
|
(904) |
|
|
24,026 |
Total commercial MBS |
|
|
52,498 |
|
|
— |
|
|
(7,692) |
|
|
44,806 |
Residential MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
40,992 |
|
|
— |
|
|
(7,865) |
|
|
33,127 |
Non-agency |
|
|
44,843 |
|
|
— |
|
|
(920) |
|
|
43,923 |
Total residential MBS |
|
|
85,835 |
|
|
— |
|
|
(8,785) |
|
|
77,050 |
Total HTM securities |
|
$ |
843,269 |
|
$ |
49 |
|
$ |
(81,272) |
|
$ |
762,046 |
(1) Other bonds include asset-backed securities.
The carrying value, gross unrealized gains and losses, and estimated fair values of HTM securities as of December 31, 2022 are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
Gross Unrealized |
|
Estimated |
|
|
Value |
|
Gains |
|
(Losses) |
|
Fair Value |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities |
|
$ |
687 |
|
$ |
— |
|
$ |
(56) |
|
$ |
631 |
Obligations of states and political subdivisions |
|
|
705,990 |
|
|
2,218 |
|
|
(35,957) |
|
|
672,251 |
Corporate and other bonds(1) |
|
|
5,159 |
|
|
— |
|
|
(10) |
|
|
5,149 |
Commercial MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
29,025 |
|
|
— |
|
|
(4,873) |
|
|
24,152 |
Non-agency |
|
|
13,736 |
|
|
— |
|
|
(126) |
|
|
13,610 |
Total commercial MBS |
|
|
42,761 |
|
|
— |
|
|
(4,999) |
|
|
37,762 |
Residential MBS |
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
42,699 |
|
|
— |
|
|
(6,427) |
|
|
36,272 |
Non-agency |
|
|
50,436 |
|
|
— |
|
|
(614) |
|
|
49,822 |
Total residential MBS |
|
|
93,135 |
|
|
— |
|
|
(7,041) |
|
|
86,094 |
Total HTM securities |
|
$ |
847,732 |
|
$ |
2,218 |
|
$ |
(48,063) |
|
$ |
801,887 |
(1) Other bonds include asset-backed securities.
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 insignificant at September 30, 2023 and December 31, 2022. 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 majority of the Company’s HTM securities with credit risk are obligations of states and political subdivisions.
The following table presents the amortized cost of HTM securities as of September 30, 2023 and December 31, 2022 by security type and credit rating (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency |
|
Obligations of states and political |
|
Corporate and other |
|
Mortgage-backed |
|
Total HTM |
|
|
securities |
|
subdivisions |
|
bonds |
|
securities |
|
securities |
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA/AA/A |
|
$ |
— |
|
$ |
689,699 |
|
$ |
— |
|
$ |
9,471 |
|
$ |
699,170 |
BBB/BB/B |
|
|
— |
|
|
1,171 |
|
|
— |
|
|
— |
|
|
1,171 |
Not Rated – Agency(1) |
|
|
— |
|
|
— |
|
|
— |
|
|
68,561 |
|
|
68,561 |
Not Rated – Non-Agency(2) |
|
|
— |
|
|
9,530 |
|
|
4,536 |
|
|
60,301 |
|
|
74,367 |
Total |
|
$ |
— |
|
$ |
700,400 |
|
$ |
4,536 |
|
$ |
138,333 |
|
$ |
843,269 |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA/AA/A |
|
$ |
— |
|
$ |
704,803 |
|
$ |
— |
|
$ |
2,702 |
|
$ |
707,505 |
BBB/BB/B |
|
|
— |
|
|
1,187 |
|
|
— |
|
|
— |
|
|
1,187 |
Not Rated – Agency(1) |
|
|
687 |
|
|
— |
|
|
— |
|
|
71,725 |
|
|
72,412 |
Not Rated – Non-Agency(2) |
|
|
— |
|
|
— |
|
|
5,159 |
|
|
61,469 |
|
|
66,628 |
Total |
|
$ |
687 |
|
$ |
705,990 |
|
$ |
5,159 |
|
$ |
135,896 |
|
$ |
847,732 |
(1) Generally considered not to have credit risk given the government guarantees associated with these agencies.
(2) Non-agency mortgage-backed and asset-backed securities have limited credit risk, supported by most receiving a 20% simplified supervisory formula approach rating.
The following table presents the amortized cost and estimated fair value of HTM securities as of September 30, 2023 and December 31, 2022, by contractual maturity (dollars in thousands). 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023 |
|
December 31, 2022 |
|
|
Carrying |
|
Estimated |
|
Carrying |
|
Estimated |
|
|
Value |
|
Fair Value |
|
Value |
|
Fair Value |
Due in one year or less |
|
$ |
2,759 |
|
$ |
2,735 |
|
$ |
2,010 |
|
$ |
2,006 |
Due after one year through five years |
|
|
36,604 |
|
|
36,272 |
|
|
35,044 |
|
|
35,014 |
Due after five years through ten years |
|
|
43,652 |
|
|
41,057 |
|
|
19,941 |
|
|
20,239 |
Due after ten years |
|
|
760,254 |
|
|
681,982 |
|
|
790,737 |
|
|
744,628 |
Total HTM securities |
|
$ |
843,269 |
|
$ |
762,046 |
|
$ |
847,732 |
|
$ |
801,887 |
Refer to Note 7 Commitments and Contingencies within this Item 1 of this Quarterly Report 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 September 30, 2023 and December 31, 2022.
Restricted Stock, at cost
Due to restrictions placed upon the Bank’s common stock investment in the FRB and the 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. At September 30, 2023 and December 31, 2022, restricted stock consists of FRB stock in the amount of $67.0 million, respectively, and FHLB stock in the amount of $37.8 million and $53.2 million, 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 and nine months ended September 30, 2023 and 2022 (dollars in thousands):
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, 2023 |
|
September 30, 2023 |
Realized gains (losses)(1): |
|
|
|
|
|
|
Gross realized gains |
|
$ |
4 |
|
$ |
1,352 |
Gross realized losses |
|
|
(27,598) |
|
|
(42,344) |
Net realized losses |
|
$ |
(27,594) |
|
$ |
(40,992) |
|
|
|
|
|
|
|
Proceeds from sales of securities |
|
$ |
256,780 |
|
$ |
856,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, 2022 |
|
September 30, 2022 |
Realized losses(1): |
|
|
|
|
|
|
Gross realized losses |
|
|
(2) |
|
|
(2) |
Net realized losses |
|
$ |
(2) |
|
$ |
(2) |
|
|
|
|
|
|
|
Proceeds from sales of securities |
|
$ |
12,469 |
|
$ |
12,469 |
(1) Includes gains (losses) on sales and calls of securities.
|