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Securities
3 Months Ended
Mar. 31, 2024
Investments, Debt and Equity Securities [Abstract]  
Securities

4. SECURITIES

The amortized cost and fair value of investment securities were as follows:

 

 

 

March 31, 2024

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

 

(Dollars in thousands)

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

14,350

 

 

$

1,830

 

 

$

(335

)

 

$

15,845

 

Collateralized mortgage obligations

 

 

198,180

 

 

 

 

 

 

(3,374

)

 

 

194,806

 

Mortgage-backed securities

 

 

105,723

 

 

 

58

 

 

 

(1,132

)

 

 

104,649

 

Total

 

$

318,253

 

 

$

1,888

 

 

$

(4,841

)

 

$

315,300

 

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government agencies

 

$

7,691

 

 

$

 

 

$

(107

)

 

$

7,584

 

States and political subdivisions

 

 

111,699

 

 

 

764

 

 

 

(2,581

)

 

 

109,882

 

Corporate debt securities

 

 

12,000

 

 

 

 

 

 

(3,840

)

 

 

8,160

 

Collateralized mortgage obligations

 

 

256,216

 

 

 

 

 

 

(25,076

)

 

 

231,140

 

Mortgage-backed securities

 

 

11,598,232

 

 

 

388

 

 

 

(1,477,027

)

 

 

10,121,593

 

Total

 

$

11,985,838

 

 

$

1,152

 

 

$

(1,508,631

)

 

$

10,478,359

 

 

 

 

December 31, 2023

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

 

(Dollars in thousands)

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

20,698

 

 

$

1,827

 

 

$

(738

)

 

$

21,787

 

Collateralized mortgage obligations

 

 

321,881

 

 

 

967

 

 

 

(2,804

)

 

 

320,044

 

Mortgage-backed securities

 

 

97,779

 

 

 

96

 

 

 

(1,118

)

 

 

96,757

 

Total

 

$

440,358

 

 

$

2,890

 

 

$

(4,660

)

 

$

438,588

 

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government agencies

 

$

7,631

 

 

$

 

 

$

(52

)

 

$

7,579

 

States and political subdivisions

 

 

116,497

 

 

 

1,864

 

 

 

(2,306

)

 

 

116,055

 

Corporate debt securities

 

 

12,000

 

 

 

 

 

 

(4,200

)

 

 

7,800

 

Collateralized mortgage obligations

 

 

263,250

 

 

 

 

 

 

(20,864

)

 

 

242,386

 

Mortgage-backed securities

 

 

11,965,930

 

 

 

2,131

 

 

 

(1,357,283

)

 

 

10,610,778

 

Total

 

$

12,365,308

 

 

$

3,995

 

 

$

(1,384,705

)

 

$

10,984,598

 

 

The investment securities portfolio is measured for expected credit losses by segregating the portfolio into two general classifications and applying the appropriate expected credit losses methodology. Investment securities classified as available for sale or held to maturity are evaluated for expected credit losses under FASB ASC 326,“Financial Instruments – Credit Losses.”

Available for sale securities. For available for sale securities in an unrealized loss position, the amount of the expected credit losses recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the expected credit losses will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the expected credit losses will be separated into the amount representing the credit-related portion of the impairment loss (“credit loss”) and the noncredit portion of the impairment loss (“noncredit portion”). The amount of the total expected credit losses related to the credit loss is determined based on the difference between the present value of cash flows expected to be collected and the amortized cost basis and such difference is recognized in earnings. The amount of the total expected credit losses related to the noncredit portion is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the expected credit losses recognized in earnings will become the new amortized cost basis of the investment.

As of March 31, 2024, management does not have the intent to sell any of the securities classified as available for sale before a recovery of cost. In addition, management believes it is more likely than not that the Company will not be required to sell any of its investment securities before a recovery of cost. The unrealized losses are largely due to changes in market interest rates and spread relationships since the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of March 31, 2024, management believes that there is no potential for credit losses on available for sale securities.

 

Held to maturity securities. The Company’s held to maturity investments include mortgage-related bonds issued by either the Government National Mortgage Corporation (“Ginnie Mae”), Federal National Mortgage Association (“Fannie Mae”) or Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae issued securities are explicitly guaranteed by the U.S. government, while Fannie Mae and Freddie Mac issued securities are fully guaranteed by those respective United States government-sponsored agencies and conditionally guaranteed by the full faith and credit of the United States. The Company’s held to maturity securities also include taxable and tax-exempt municipal securities issued primarily by school districts, utility districts and municipalities located in Texas. The Company’s investment in municipal securities is exposed to credit risk. The securities are highly rated by major rating agencies and regularly reviewed by management. A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of March 31, 2024, the Company’s municipal securities represent 0.9% of the securities portfolio. Management has the ability and intent to hold the securities classified as held to maturity until they mature,

at which time the Company will receive full value for the securities. Accordingly, as of March 31, 2024, management believes that there is no potential for material credit losses on held to maturity securities.

Securities with unrealized losses, segregated by length of time, that have been in a continuous loss position were as follows:

 

 

 

March 31, 2024

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

Estimated Fair Value

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

Unrealized Losses

 

 

 

(Dollars in thousands)

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

5,265

 

 

$

(335

)

 

$

 

 

$

 

 

$

5,265

 

 

$

(335

)

Collateralized mortgage obligations

 

 

58,266

 

 

 

(874

)

 

 

136,540

 

 

 

(2,500

)

 

 

194,806

 

 

 

(3,374

)

Mortgage-backed securities

 

 

10,043

 

 

 

(60

)

 

 

91,458

 

 

 

(1,072

)

 

 

101,501

 

 

 

(1,132

)

Total

 

$

73,574

 

 

$

(1,269

)

 

$

227,998

 

 

$

(3,572

)

 

$

301,572

 

 

$

(4,841

)

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government agencies

 

$

7,583

 

 

$

(107

)

 

$

 

 

$

 

 

$

7,583

 

 

$

(107

)

States and political subdivisions

 

 

14,877

 

 

 

(68

)

 

 

54,906

 

 

 

(2,513

)

 

 

69,783

 

 

 

(2,581

)

Corporate debt securities

 

 

 

 

 

 

 

 

8,160

 

 

 

(3,840

)

 

 

8,160

 

 

 

(3,840

)

Collateralized mortgage obligations

 

 

47,876

 

 

 

(1,261

)

 

 

183,228

 

 

 

(23,815

)

 

 

231,104

 

 

 

(25,076

)

Mortgage-backed securities

 

 

147,256

 

 

 

(1,836

)

 

 

9,900,482

 

 

 

(1,475,191

)

 

 

10,047,738

 

 

 

(1,477,027

)

Total

 

$

217,592

 

 

$

(3,272

)

 

$

10,146,776

 

 

$

(1,505,359

)

 

$

10,364,368

 

 

$

(1,508,631

)

 

 

 

December 31, 2023

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

Estimated Fair Value

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

Unrealized Losses

 

 

 

(Dollars in thousands)

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

7,300

 

 

$

(738

)

 

$

 

 

$

 

 

$

7,300

 

 

$

(738

)

Collateralized mortgage obligations

 

 

54,611

 

 

 

(729

)

 

 

114,758

 

 

 

(2,075

)

 

 

169,369

 

 

 

(2,804

)

Mortgage-backed securities

 

 

1,154

 

 

 

(13

)

 

 

92,211

 

 

 

(1,105

)

 

 

93,365

 

 

 

(1,118

)

Total

 

$

63,065

 

 

$

(1,480

)

 

$

206,969

 

 

$

(3,180

)

 

$

270,034

 

 

$

(4,660

)

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government agencies

 

$

7,580

 

 

$

(52

)

 

$

 

 

$

 

 

$

7,580

 

 

$

(52

)

States and political subdivisions

 

 

23,085

 

 

 

(79

)

 

 

41,039

 

 

 

(2,227

)

 

 

64,124

 

 

 

(2,306

)

Corporate debt securities

 

 

 

 

 

 

 

 

7,800

 

 

 

(4,200

)

 

 

7,800

 

 

 

(4,200

)

Collateralized mortgage obligations

 

 

50,147

 

 

 

(470

)

 

 

192,205

 

 

 

(20,394

)

 

 

242,352

 

 

 

(20,864

)

Mortgage-backed securities

 

 

52,853

 

 

 

(807

)

 

 

10,354,514

 

 

 

(1,356,476

)

 

 

10,407,367

 

 

 

(1,357,283

)

Total

 

$

133,665

 

 

$

(1,408

)

 

$

10,595,558

 

 

$

(1,383,297

)

 

$

10,729,223

 

 

$

(1,384,705

)

At March 31, 2024 and December 31, 2023, there were 1,028 securities and 941 securities, respectively, in an unrealized loss position for 12 months or more.

The table below summarizes the amortized cost and fair value of investment securities at March 31, 2024, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations at any time with or without call or prepayment penalties.

 

 

 

Held to Maturity

 

 

Available for Sale

 

 

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

 

 

(Dollars in thousands)

 

Due in one year or less

 

$

27,214

 

 

$

27,560

 

 

$

 

 

$

 

Due after one year through five years

 

 

45,853

 

 

 

45,608

 

 

 

 

 

 

 

Due after five years through ten years

 

 

46,427

 

 

 

41,573

 

 

 

14,350

 

 

 

15,845

 

Due after ten years

 

 

11,896

 

 

 

10,885

 

 

 

 

 

 

 

Subtotal

 

 

131,390

 

 

 

125,626

 

 

 

14,350

 

 

 

15,845

 

Mortgage-backed securities and collateralized mortgage obligations

 

 

11,854,448

 

 

 

10,352,733

 

 

 

303,903

 

 

 

299,455

 

Total

 

$

11,985,838

 

 

$

10,478,359

 

 

$

318,253

 

 

$

315,300

 

 

The Company recorded a $298 thousand net gain on the sale of securities for the three months ended March 31, 2024 and no gain or loss on the sale of securities for the three months ended March 31, 2023. As of March 31, 2024, the Company did not own any non-agency collateralized mortgage obligations.

At March 31, 2024 and December 31, 2023, the Company did not own securities of any one issuer (other than the U.S. government and its agencies) for which aggregate adjusted cost exceeded 10% of the consolidated shareholders’ equity at such respective dates.

Securities with an amortized cost of $10.99 billion and $11.34 billion and a fair value of $9.60 billion and $10.09 billion at March 31, 2024 and December 31, 2023, respectively, were pledged to collateralize public deposits and for other purposes required or permitted by law.