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Investment Securities
 12 Months Ended
Dec. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

5. INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are summarized below. The majority of securities held are available-for-sale securities with fair value based on quoted prices for similar assets in active markets or quoted prices for identical assets in markets that are not active. Estimated fair values were obtained from an independent pricing service based upon market quotes.

 

 

December 31, 2023

 

 

Amortized Cost

 

 

Gross Unrealized Holding Gain

 

 

Gross Unrealized Holding Loss

 

 

Fair Value

 

 

Total Percent

 

 

(Dollars in thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government agency/GSE

$

32,229

 

 

$

24

 

 

$

—

 

 

$

32,253

 

 

 

1.09

%

Mortgage-backed securities

 

2,843,744

 

 

 

42

 

 

 

(336,107

)

 

 

2,507,679

 

 

 

84.83

%

CMO/REMIC

 

502,234

 

 

 

—

 

 

 

(112,872

)

 

 

389,362

 

 

 

13.17

%

Municipal bonds

 

26,477

 

 

 

46

 

 

 

(888

)

 

 

25,635

 

 

 

0.87

%

Other securities

 

1,196

 

 

 

—

 

 

 

—

 

 

 

1,196

 

 

 

0.04

%

Unallocated portfolio layer fair value basis adjustments (1)

 

(6,938

)

 

 

6,938

 

 

 

—

 

 

 

—

 

 

 

0.00

%

Total available-for-sale securities

$

3,398,942

 

 

$

7,050

 

 

$

(449,867

)

 

$

2,956,125

 

 

 

100.00

%

Investment securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government agency/GSE

$

530,656

 

 

$

—

 

 

$

(97,972

)

 

$

432,684

 

 

 

21.53

%

Mortgage-backed securities

 

663,090

 

 

 

—

 

 

 

(97,436

)

 

 

565,654

 

 

 

26.90

%

CMO/REMIC

 

802,892

 

 

 

—

 

 

 

(156,155

)

 

 

646,737

 

 

 

32.58

%

Municipal bonds

 

467,972

 

 

 

3,438

 

 

 

(33,604

)

 

 

437,806

 

 

 

18.99

%

Total held-to-maturity securities

$

2,464,610

 

 

$

3,438

 

 

$

(385,167

)

 

$

2,082,881

 

 

 

100.00

%

 

(1)
Represents the amount of portfolio layer method basis adjustments related to AFS MBS securities hedged in a closed portfolio. Under U.S. GAAP, portfolio layer method basis adjustments are not allocated to individual securities, however the amounts impact the unrealized gains or losses for the individual securities being hedged. Refer to Note 3 and Note 19 for additional information.

 

 

 

December 31, 2022

 

 

Amortized Cost

 

 

Gross Unrealized Holding Gain

 

 

Gross Unrealized Holding Loss

 

 

Fair Value

 

 

Total Percent

 

 

(Dollars in thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

$

3,192,151

 

 

$

39

 

 

$

(403,049

)

 

$

2,789,141

 

 

 

85.68

%

CMO/REMIC

 

 

535,269

 

 

 

—

 

 

 

(95,966

)

 

 

439,303

 

 

 

13.50

%

Municipal bonds

 

 

26,797

 

 

 

67

 

 

 

(1,177

)

 

 

25,687

 

 

 

0.79

%

Other securities

 

 

1,080

 

 

 

—

 

 

 

—

 

 

 

1,080

 

 

 

0.03

%

Total available-for-sale securities

 

$

3,755,297

 

 

$

106

 

 

$

(500,192

)

 

$

3,255,211

 

 

 

100.00

%

Investment securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government agency/GSE

 

$

548,771

 

 

$

—

 

 

$

(114,343

)

 

$

434,428

 

 

 

21.48

%

Mortgage-backed securities

 

 

706,796

 

 

 

—

 

 

 

(105,867

)

 

 

600,929

 

 

 

27.67

%

CMO/REMIC

 

 

827,346

 

 

 

—

 

 

 

(131,730

)

 

 

695,616

 

 

 

32.39

%

Municipal bonds

 

 

471,388

 

 

 

913

 

 

 

(47,687

)

 

 

424,614

 

 

 

18.46

%

Total held-to-maturity securities

 

$

2,554,301

 

 

$

913

 

 

$

(399,627

)

 

$

2,155,587

 

 

 

100.00

%

 

 

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

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

 

(Dollars in thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

Taxable

 

$

82,889

 

 

$

67,803

 

 

$

37,532

 

Tax-advantaged

 

 

674

 

 

 

705

 

 

 

741

 

Total interest income from available-for-sale securities

 

 

83,563

 

 

 

68,508

 

 

 

38,273

 

Investment securities held-to-maturity:

 

 

 

 

 

 

 

 

 

Taxable

 

 

44,990

 

 

 

41,403

 

 

 

17,747

 

Tax-advantaged

 

 

9,760

 

 

 

7,645

 

 

 

4,428

 

Total interest income from held-to-maturity securities

 

 

54,750

 

 

 

49,048

 

 

 

22,175

 

Total interest income from investment securities

 

$

138,313

 

 

$

117,556

 

 

$

60,448

 

 

Approximately 91% of the total investment securities portfolio at December 31, 2023 represents securities issued by the U.S. government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. The remaining securities are predominately AA or better general-obligation municipal bonds. The allowance for credit losses for held-to-maturity investment securities under the CECL model was zero at December 31, 2023 and December 31, 2022.

 

The following table presents the Company’s available-for-sale and held-to-maturity investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of December 31, 2023 and December 31, 2022.

 

 

December 31, 2023

 

 

Less Than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

Fair Value

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

 

Gross Unrealized Holding Losses

 

 

(Dollars in thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government agency/GSE

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Mortgage-backed securities

 

48

 

 

 

—

 

 

 

2,506,162

 

 

 

(336,107

)

 

 

2,506,210

 

 

 

(336,107

)

CMO/REMIC

 

—

 

 

 

—

 

 

 

389,359

 

 

 

(112,872

)

 

 

389,359

 

 

 

(112,872

)

Municipal bonds

 

3,286

 

 

 

(17

)

 

 

18,105

 

 

 

(871

)

 

 

21,391

 

 

 

(888

)

Total available-for-sale securities

$

3,334

 

 

$

(17

)

 

$

2,913,626

 

 

$

(449,850

)

 

$

2,916,960

 

 

$

(449,867

)

Investment securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government agency/GSE

$

—

 

 

$

—

 

 

$

432,684

 

 

$

(97,972

)

 

$

432,684

 

 

$

(97,972

)

Mortgage-backed securities

$

—

 

 

 

—

 

 

 

565,655

 

 

 

(97,436

)

 

 

565,655

 

 

 

(97,436

)

CMO/REMIC

$

—

 

 

 

—

 

 

 

646,737

 

 

 

(156,155

)

 

 

646,737

 

 

 

(156,155

)

Municipal bonds

 

20,609

 

 

 

(200

)

 

 

293,467

 

 

 

(33,404

)

 

 

314,076

 

 

 

(33,604

)

Total held-to-maturity securities

$

20,609

 

 

$

(200

)

 

$

1,938,543

 

 

$

(384,967

)

 

$

1,959,152

 

 

$

(385,167

)

 

 

 

December 31, 2022

 

 

Less Than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

Fair Value

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

 

Gross Unrealized Holding Losses

 

 

(Dollars in thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

$

1,658,331

 

 

$

(187,842

)

 

$

1,129,257

 

 

$

(215,207

)

 

$

2,787,588

 

 

$

(403,049

)

CMO/REMIC

 

54,005

 

 

 

(4,796

)

 

 

385,295

 

 

 

(91,170

)

 

 

439,300

 

 

 

(95,966

)

Municipal bonds

 

24,507

 

 

 

(1,177

)

 

 

—

 

 

 

—

 

 

 

24,507

 

 

 

(1,177

)

Total available-for-sale securities

$

1,736,843

 

 

$

(193,815

)

 

$

1,514,552

 

 

$

(306,377

)

 

$

3,251,395

 

 

$

(500,192

)

Investment securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government agency/GSE

$

179,348

 

 

$

(39,866

)

 

$

255,080

 

 

$

(74,477

)

 

$

434,428

 

 

$

(114,343

)

Mortgage-backed securities

 

188,480

 

 

 

(9,042

)

 

 

412,449

 

 

 

(96,825

)

 

 

600,929

 

 

 

(105,867

)

CMO/REMIC

 

376,540

 

 

 

(60,598

)

 

 

319,076

 

 

 

(71,132

)

 

 

695,616

 

 

 

(131,730

)

Municipal bonds

 

312,702

 

 

 

(35,656

)

 

 

53,350

 

 

 

(12,031

)

 

 

366,052

 

 

 

(47,687

)

Total held-to-maturity securities

$

1,057,070

 

 

$

(145,162

)

 

$

1,039,955

 

 

$

(254,465

)

 

$

2,097,025

 

 

$

(399,627

)

 

The following summarizes our analysis of these securities and the unrealized losses.

Government Agency & Government-Sponsored Enterprise (“GSE”) — The government agency bonds are backed by the full faith and credit of agencies of the U.S. Government. While the Government-Sponsored Enterprise bonds are not expressly guaranteed by the U.S. Government, they are currently being supported by the U.S. Government under a conservatorship arrangement. These securities are bullet securities, that is, they have a defined maturity date on which the principal is paid. The contractual term of these investments provides that the Company will receive the face value of the bond at maturity which will equal the amortized cost of the bond. Interest is received throughout the life of the security. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the bonds.

Mortgage-Backed Securities (“MBS”) and CMO/REMIC — Most of the Company’s mortgage-backed and CMO/REMIC securities are issued by Government Agencies or Government-Sponsored Enterprises such as Ginnie Mae, Fannie Mae and Freddie Mac. These securities are collateralized or backed by the underlying residential or commercial mortgages. All mortgage-backed securities are considered to be rated investment grade with a weighted average life of approximately 7.5 years. Of the total MBS/CMO, 100% have the implied guarantee of U.S. Government-Sponsored Agencies and Enterprises. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the bonds. There were no credit-related impairments for the year ended December 31, 2023 and 2022.

Municipal Bonds — The majority of the Company’s municipal bonds, with maturities of approximately 12.8 years, represented approximately 9.1% of the total investment portfolio and are predominately AA or higher rated securities. The Company diversifies its holdings by owning selections of securities from different issuers and by holding securities from geographically diversified municipal issuers, thus reducing the Company’s exposure to any single adverse event. The decline in fair value is primarily due to the changes in interest rates. Since the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized costs, these investments were not considered impaired for the years ended December 31, 2023 and December 31, 2022.

At December 31, 2023, investment securities with carrying values of $2.26 billion were pledged to secure various types of deposits, including $1.38 billion of public funds. In addition, investment securities with carrying values of $3.02 billion were pledged to secure $372.5 million for repurchase agreements, $1.8 billion for outstanding borrowings, $796 million for unused borrowing capacity and approximately $51 million for other purposes as required or permitted by law.

At December 31, 2022, investment securities with carrying values of $1.56 billion were pledged to secure various types of deposits, including $1.13 billion of public funds. In addition, investment securities, with carrying values of $3.15 billion were pledged to secure $652.0 million for repurchase agreements, $550 million for outstanding borrowings, $105 million for unused borrowing capacity and approximately $27 million for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at December 31, 2023, by contractual maturity, are shown in the table below. Although mortgage-backed and CMO/REMIC securities have weighted average remaining contractual maturities of approximately 23 years, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed and CMO/REMIC securities are included in maturity categories based upon estimated average lives which incorporate estimated prepayment speeds.

 

December 31, 2023

 

 

Available-for-sale

 

 

Held-to-maturity

 

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

Due in one year or less

$

34,448

 

 

$

34,448

 

 

$

12,935

 

 

$

12,577

 

Due after one year through five years

 

268,224

 

 

 

264,349

 

 

 

36,466

 

 

 

35,528

 

Due after five years through ten years

 

2,528,106

 

 

 

2,205,784

 

 

 

321,288

 

 

 

287,284

 

Due after ten years

 

568,164

 

 

 

451,544

 

 

 

2,093,921

 

 

 

1,747,492

 

Total investment securities

$

3,398,942

 

 

$

2,956,125

 

 

$

2,464,610

 

 

$

2,082,881

 

 

The investment in FHLB stock is periodically evaluated for impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through December 31, 2023.