Securities

9 Months Ended

Sep. 30, 2020

Investments Debt And Equity Securities [Abstract]

Securities

NOTE 4. SECURITIES

The following table presents the fair value and amortized cost of available-for-sale and held-to-maturity debt securities:

	September 30, 2020									December 31, 2019
(unaudited, in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale debt securities
U.S. Treasury	$	19,985	$	7	$	—		$	19,992	$	32,790	$	47	$	(1	)	$	32,836
U.S. Government sponsored entities and agencies		184,877		7,978		(6	)		192,849		157,088		2,862		(322	)		159,628
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		1,378,963		42,892		(832	)		1,421,023		1,803,268		18,850		(6,131	)		1,815,987
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		246,985		12,684		(59	)		259,610		187,268		3,270		(129	)		190,409
Obligations of states and political subdivisions		119,235		7,304		—			126,539		140,357		5,253		(1	)		145,609
Corporate debt securities		24,976		956		(21	)		25,911		48,645		581		(137	)		49,089
Total available-for-sale debt securities	$	1,975,021	$	71,821	$	(918	)	$	2,045,924	$	2,369,416	$	30,863	$	(6,721	)	$	2,393,558
Held-to-maturity debt securities
U.S. Government sponsored entities and agencies	$	8,256	$	317	$	—		$	8,573	$	9,216	$	30	$	(116	)	$	9,130
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		99,703		3,797		(1	)		103,499		122,937		1,031		(261	)		123,707
Obligations of states and political subdivisions		605,636		28,379		(122	)		633,893		686,376		20,475		(258	)		706,593
Corporate debt securities		33,172		3,264		—			36,436		33,224		1,869		—			35,093
Total held-to-maturity debt securities	$	746,767	$	35,757	$	(123	)	$	782,401	$	851,753	$	23,405	$	(635	)	$	874,523
Total debt securities	$	2,721,788	$	107,578	$	(1,041	)	$	2,828,325	$	3,221,169	$	54,268	$	(7,356	)	$	3,268,081

(1) Total held to maturity securities are presented on the balance sheet net of their allowance for credit losses totaling $0.5 million at September 30, 2020.

At September 30, 2020 and December 31, 2019, there were no holdings of any one issuer, other than U.S. government sponsored entities and its agencies, in an amount greater than 10% of Wesbanco’s shareholders’ equity.  Equity securities, of which $9.5 million consist of investments in various mutual funds held in grantor trusts formed in connection with the Company’s deferred compensation plan, are recorded at fair value, and totaled $12.5 million and $12.3 million at September 30, 2020 and December 31, 2019, respectively.

The following table presents the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by contractual maturity date at September 30, 2020.  Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay debt obligations with or without prepayment penalties.  Mortgage-backed securities and collateralized mortgage obligations are classified in the table below based on their contractual maturity date; however, regular principal payments and prepayments of principal are received on a monthly basis.  

(unaudited, in thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities
Less than one year	$	44,340	$	44,461
1-5 years		152,865		161,571
5-10 years		328,452		342,555
Over 10 years		1,449,364		1,497,337
Total available-for-sale debt securities	$	1,975,021	$	2,045,924
Held-to-maturity debt securities
Less than one year	$	11,901	$	12,005
1-5 years		119,398		126,351
5-10 years		263,457		275,405
Over 10 years		352,011		368,640
Total held-to-maturity debt securities	$	746,767	$	782,401
Total debt securities	$	2,721,788	$	2,828,325

Securities with an aggregate fair value of $1.9 billion and $2.0 billion at September 30, 2020 and December 31, 2019, respectively, were pledged as security for public and trust funds, and securities sold under agreements to repurchase. Proceeds from the sale of available-for-sale securities were $226.1 million and $125.2 million for the nine months ended September 30, 2020 and 2019, respectively.  Net unrealized gains on available-for-sale securities included in accumulated other comprehensive income, net of tax, as of September 30, 2020 and December 31, 2019 were $54.0 million and $20.7 million, respectively.

The following table presents the gross realized gains and losses on sales and calls of available-for-sale and held-to-maturity debt securities, as well as gains and losses on equity securities from both sales and market adjustments, for the three and nine months ended September 30, 2020 and 2019, respectively.  All gains and losses presented in the table below are included in the net securities gains (losses) line item of the income statement.  For those equity securities relating to the key officer and director deferred compensation plan, the corresponding change in the obligation to the participant is recognized in employee benefits expense.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(unaudited, in thousands)	2020			2019			2020			2019
Debt securities:
Gross realized gains	$	100		$	1,096		$	3,715		$	1,443
Gross realized losses		(2	)		(741	)		(1,068	)		(950	)
Net gains on debt securities	$	98		$	355		$	2,647		$	493
Equity securities:
Net unrealized gains recognized on securities still held	$	687		$	(120	)	$	936		$	748
Net realized gains (losses) recognized on securities sold		2			—			(6	)		2,559
Net gains on equity securities	$	689		$	(120	)	$	930		$	3,307
Net securities gains	$	787		$	235		$	3,577		$	3,800

On January 1, 2020, Wesbanco adopted CECL. Upon adoption, the Company recognized $0.2 million to opening retained earnings, which represents the CECL allowance as of January 1, 2020.  The corporate and municipal bonds in Wesbanco’s held-to-maturity debt portfolio are analyzed quarterly to determine if an allowance for current expected credit losses is warranted.  Wesbanco uses a database of historical financials of all corporate and municipal issuers and actual historic default and recovery rates on rated and non-rated transactions to estimate expected credit losses on an individual security basis. The expected credit losses are adjusted quarterly and are recorded in an allowance for expected credit losses on the balance sheet, which is deducted from the amortized cost basis of the held-to-maturity portfolio as a contra asset. The losses are recorded on the income statement in the provision for credit losses. Accrued interest receivable on held-to-maturity securities, which was $6.3 million as of September 30, 2020, is excluded from the estimate of credit losses. Held-to-maturity investments in U.S. Government sponsored entities and agencies as well as mortgage-backed securities and collateralized mortgage obligations, which are all either issued by a direct governmental entity or a government-sponsored entity, have no historical evidence supporting expected credit losses; therefore, Wesbanco has estimated these losses at zero, and will monitor this assumption in the future for any economical or governmental policies that could affect this assumption.  

The following table provides a roll-forward of the allowance for credit losses on held-to-maturity securities for the nine months ended September 30, 2020:

	Allowance for Credit Losses By Category
	For the Nine Months Ended September 30, 2020
			Residential mortgage
			-backed
			securities and
			collateralized
			mortgage obligations		Obligations of
	U.S. Government		of government		state and		Corporate
	sponsored		sponsored entities		political		debt
(unaudited, in thousands)	entities and agencies		and agencies		subdivisions		Securities		Total
Beginning balance at January 1, 2020	$	—	$	—	$	96	$	133	$	229
Current period provision		—		—		172		60		232
Write-offs		—		—		—		—		—
Recoveries		—		—		—		—		—
Ending balance at September 30, 2020	$	—	$	—	$	268	$	193	$	461

The following table provides information on unrealized losses on available-for-sale debt securities that have been in an unrealized loss position for less than twelve months and twelve months or more, for which an allowance for credit losses has not been recorded as of September 30, 2020:

	September 30, 2020
	Less than 12 months							12 months or more							Total
(unaudited, dollars in thousands)	Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities
U.S. Government sponsored entities and agencies	$	14,979	$	(6	)		1	$	—	$	—			—	$	14,979	$	(6	)		1
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		133,841		(632	)		23		14,257		(200	)		4		148,098		(832	)		27
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		24,835		(59	)		3		—		—			—		24,835		(59	)		3
Corporate debt securities		9,477		(21	)		6		—		—			—		9,477		(21	)		6
Total	$	183,132	$	(718	)		33	$	14,257	$	(200	)		4	$	197,389	$	(918	)	$	37

Unrealized losses on debt securities in the table above represents temporary fluctuations resulting from changes in market rates in relation to fixed yields.  Unrealized losses in the available-for-sale portfolio are accounted for as an adjustment, net of taxes, to other comprehensive income in shareholders’ equity.  Wesbanco does not believe the securities presented above are impaired due to reasons of credit quality, as substantially all debt securities are rated above investment grade and all are paying principal and interest according to their contractual terms. Wesbanco does not intend to sell, nor is it more likely than not that it will be required to sell, loss position securities prior to recovery of their cost; therefore, management believes the unrealized losses detailed above do not require an allowance for credit losses relating to these securities to be recognized.  Securities that do not have readily determinable fair values and for which Wesbanco does not exercise significant influence are carried at cost.  Cost method investments consist primarily of FHLB of Pittsburgh, Cincinnati and Indianapolis stock totaling $44.7 million and $66.8 million at September 30, 2020 and December 31, 2019, respectively, and are included in other assets in the Consolidated Balance Sheets.  Cost method investments are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable.

The following table provides information on unrealized losses on held-to-maturity and available-for-sale debt securities that have been in an unrealized loss position for less than twelve months and twelve months or more as of December 31, 2019, prior to the date of adoption of the credit loss standard, and as defined by the previous accounting guidance in effect at that time:

	December 31, 2019
	Less than 12 months							12 months or more							Total
(unaudited, dollars in thousands)	Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities
U.S. Treasury	$	1,499	$	(1	)		1	$	—	$	—			—	$	1,499	$	(1	)		1
U.S. Government sponsored entities and agencies		57,650		(274	)		25		6,593		(164	)		2		64,243		(438	)		27
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		544,692		(3,725	)		116		272,884		(2,667	)		122		817,576		(6,392	)		238
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies		43,123		(124	)		7		3,704		(5	)		2		46,827		(129	)		9
Obligations of states and political subdivisions		17,876		(122	)		22		4,413		(137	)		8		22,289		(259	)		30
Corporate debt securities		4,120		(44	)		1		4,926		(93	)		2		9,046		(137	)		3
Total	$	668,960	$	(4,290	)		172	$	292,520	$	(3,066	)		136	$	961,480	$	(7,356	)		308