Note 3 - Investment Securities

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 3: Investment Securities

Effective January 1, 2020, the Company adopted FASB ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Upon adoption of the ASU the Company recorded allowance for credit losses for debt securities held to maturity of $16 thousand. During the fourth quarter ended December 31, 2020, the Company recorded $7 thousand of reversal of provision for credit loss on debt securities held to maturity, resulting in the balance of $9 thousand allowance for credit losses for debt securities held to maturity.

An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair value with net unrealized gains (losses) reported on an after-tax basis as a component of cumulative other comprehensive income, and debt securities held to maturity, which are carried at amortized cost, before allowance for credit losses of $9 thousand, follows:

	At March 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
Agency residential mortgage-backed securities ("MBS")	$	558,366	$	19,124	$	-		$	577,490
Securities of U.S. Government entities		146		-		(1	)		145
Obligations of states and political subdivisions		101,817		4,310		(10	)		106,117
Corporate securities		2,076,354		79,548		(6,536	)		2,149,366
Collateralized loan obligations		1,156,067		2,596		(1,211	)		1,157,452
Total debt securities available for sale		3,892,750		105,578		(7,758	)		3,990,570
Debt securities held to maturity
Agency residential MBS		212,463		5,623		(19	)		218,067
Non-agency residential MBS		1,266		10		(7	)		1,269
Obligations of states and political subdivisions		255,539		5,683		-			261,222
Total debt securities held to maturity		469,268		11,316		(26	)		480,558
Total	$	4,362,018	$	116,894	$	(7,784	)	$	4,471,128

	At December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Debt securities available for sale
Agency residential MBS	$	630,174	$	22,779	$	(1	)	$	652,952
Securities of U.S. Government entities		154		-		-			154
Obligations of states and political subdivisions		105,679		5,332		(1	)		111,010
Corporate securities		1,986,995		131,025		(42	)		2,117,978
Commercial paper		24,983		7		-			24,990
Collateralized loan obligations		1,152,766		4,433		(1,098	)		1,156,101
Total debt securities available for sale		3,900,751		163,576		(1,142	)		4,063,185
Debt securities held to maturity
Agency residential MBS		240,332		6,852		(32	)		247,152
Non-agency residential MBS		1,344		26		-			1,370
Obligations of states and political subdivisions		273,922		7,243		-			281,165
Total debt securities held to maturity		515,598		14,121		(32	)		529,687
Total	$	4,416,349	$	177,697	$	(1,174	)	$	4,592,872

The amortized cost and fair value of debt securities by contractual maturity are shown in the following tables at the dates indicated:

	At March 31, 2021
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	222,016	$	224,112	$	49,319	$	49,593
Over 1 to 5 years		851,915		894,939		129,579		132,526
Over 5 to 10 years		1,829,139		1,861,379		76,641		79,103
Over 10 years		431,314		432,650		-		-
Subtotal		3,334,384		3,413,080		255,539		261,222
MBS		558,366		577,490		213,729		219,336
Total	$	3,892,750	$	3,990,570	$	469,268	$	480,558

	At December 31, 2020
	Debt Securities Available				Debt Securities Held
	for Sale				to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Maturity in years:
1 year or less	$	212,140	$	213,715	$	54,526	$	54,927
Over 1 to 5 years		922,170		974,438		129,786		133,195
Over 5 to 10 years		1,767,747		1,851,184		89,610		93,043
Over 10 years		368,520		370,896		-		-
Subtotal		3,270,577		3,410,233		273,922		281,165
MBS		630,174		652,952		241,676		248,522
Total	$	3,900,751	$	4,063,185	$	515,598	$	529,687

Expected maturities of mortgage-related securities can differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities. At March 31, 2021 and December 31, 2020, the Company had no high-risk collateralized mortgage obligations as defined by regulatory guidelines.

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

	Debt Securities Available for Sale
	At March 31, 2021
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		1	$	95	$	-			1	$	15	$	-			2	$	110	$	-
Securities of U.S. Government entities		1		145		(1	)		-		-		-			1		145		(1	)
Obligations of states and political subdivisions		5		2,420		(10	)		-		-		-			5		2,420		(10	)
Corporate securities		19		210,618		(6,515	)		1		14,981		(21	)		20		225,599		(6,536	)
Collateralized loan obligations		49		359,104		(1,211	)		-		-		-			49		359,104		(1,211	)
Total		75	$	572,382	$	(7,737	)		2	$	14,996	$	(21	)		77	$	587,378	$	(7,758	)

An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

	Debt Securities Held to Maturity
	At March 31, 2021
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		2	$	200	$	-			3	$	686	$	(19	)		5	$	886	$	(19	)
Non-agency residential MBS		1		680		(7	)		-		-		-			1		680		(7	)
Total		3	$	880	$	(7	)		3	$	686	$	(19	)		6	$	1,566	$	(26	)

Based upon the most recent evaluation, the unrealized losses on the Company’s debt securities available for sale were most likely caused by market conditions for these types of investments, particularly changes in risk-free interest rates and/or market bid-ask spreads. The Company does not intend to sell any debt securities available for sale and has concluded that it is more likely than not that it will not be required to sell the debt securities prior to recovery of the amortized cost basis. Therefore, the Company does not consider these debt securities to have credit related loss as of March 31, 2021.

The fair values of debt securities available for sale could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the issuer’s financial condition deteriorates, or the liquidity for debt securities declines. As a result, significant credit loss on debt securities available for sale may occur in the future.

As of March 31, 2021 and December 31, 2020, the Company had debt securities pledged to secure public deposits and short-term borrowed funds of $844,502 thousand and $888,577 thousand, respectively.

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

	Debt Securities Available for Sale
	At December 31, 2020
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrealized			Investment				Unrealized			Investment				Unrealized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		1	$	96	$	(1	)		1	$	17	$	-			2	$	113	$	(1	)
Securities of U.S. Government entities		1		154		-			-		-		-			1		154		-
Obligations of states and political subdivisions		2		692		(1	)		-		-		-			2		692		(1	)
Corporate securities		-		-		-			1		14,963		(42	)		1		14,963		(42	)
Collateralized loan obligations		36		268,584		(1,098	)		-		-		-			36		268,584		(1,098	)
Total		40	$	269,526	$	(1,100	)		2	$	14,980	$	(42	)		42	$	284,506	$	(1,142	)

An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

	Debt Securities Held to Maturity
	At December 31, 2020
	No. of		Less than 12 months					No. of		12 months or longer					No. of		Total
	Investment				Unrecognized			Investment				Unrecognized			Investment				Unrecognized
	Positions		Fair Value		Losses			Positions		Fair Value		Losses			Positions		Fair Value		Losses
	($ in thousands)
Agency residential MBS		3	$	377	$	(1	)		3	$	788	$	(31	)		6	$	1,165	$	(32	)

The Company evaluates debt securities on a quarterly basis including changes in security ratings issued by rating agencies, changes in the financial condition of the issuer, and, for mortgage-backed and asset-backed securities, collateral levels, delinquency and loss information with respect to the underlying collateral, changes in the levels of subordination for the Company’s particular position within the repayment structure and remaining credit enhancement as compared to expected credit losses of the security. Substantially all of these securities continue to be investment grade rated by a major rating agency. One corporate bond with an amortized cost of $15.0 million and a fair value of $14.98 million at March 31, 2021, is rated below investment grade. The $14.98 million corporate bond was issued by a pharmaceutical company which develops, manufactures and markets generic and branded human pharmaceuticals, as well as active pharmaceutical ingredients, to customers worldwide. The bond matures in July 2021. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset backed securities.

The following table presents the activity in the allowance for credit losses for debt securities held to maturity:

	For the Three Months Ended March 31,
	2021		2020
	(In thousands)
Allowance for credit losses:
Balance, end of prior period	$	9	$	-
Impact of adopting ASU 2016-13		-		16
Beginning balance		9		16
Provision		-		-
Chargeoffs		-		-
Recoveries		-		-
Total ending balance	$	9	$	16

Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance.

The following table summarizes the amortized cost of debt securities held to maturity at March 31, 2021, aggregated by credit rating:

	Credit Risk Profile by Credit Rating
	At March 31, 2021
	AAA/AA/A		BBB		BB/B/NR		Total
	(In thousands)
Agency residential MBS	$	212,463	$	-	$	-	$	212,463
Non-agency residential MBS		325		-		941		1,266
Obligations of states and political subdivisions		227,479		21,821		6,239		255,539
Total	$	440,267	$	21,821	$	7,180	$	469,268

There were no debt securities held to maturity on nonaccrual status or past due 30 days or more as of March 31, 2021.

The following table provides information about the amount of interest income earned on investment securities which is fully taxable and which is exempt from federal income tax:

	For the Three Months
	Ended March 31,
	2021		2020
	(In thousands)
Taxable	$	25,198	$	21,964
Tax-exempt from regular federal income tax		2,399		3,362
Total interest income from investment securities	$	27,597	$	25,326