Investment Securities

12 Months Ended

Dec. 31, 2021

Investment Securities

Investment Securities

3. Investment Securities

As of December 31, 2021 and 2020, investment securities consisted predominantly of the following investment categories:

U.S. Treasury and debt securities – includes U.S. Treasury notes and debt securities issued by government-sponsored enterprises.

Mortgage-backed securities – includes securities backed by notes or receivables secured by mortgage assets with cash flows based on actual or scheduled payments.

Collateralized mortgage obligations – includes securities backed by a pool of mortgages with cash flows distributed based on certain rules rather than pass through payments.

Collateralized loan obligations – includes structured debt securities backed by a pool of loans, consisting of primarily non-investment grade broadly syndicated corporate loans with additional credit enhancement. These are floating rate securities that have an investment grade rating of AA or better.

Debt securities issue by states and political subdivisions – includes general obligation bonds issued by state and local governments.

As of December 31, 2021 and 2020, all of the Company’s investment securities were classified as debt securities and available-for-sale. Amortized cost and fair value of securities as of December 31, 2021 and 2020 were as follows:

	December 31,
	2021								2020
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency debt securities	$	196,662	$	125	$	(4,224)	$	192,563	$	170,123	$	1,359	$	(61)	$	171,421
Mortgage-backed securities:
Residential - Government agency		135,764		1,791		(291)		137,264		155,169		5,293		—		160,462
Residential - Government-sponsored enterprises		1,496,605		6,914		(12,419)		1,491,100		434,282		13,643		(725)		447,200
Commercial - Government agency		392,443		1,741		(6,521)		387,663		583,232		16,537		(119)		599,650
Commercial - Government-sponsored enterprises		1,415,511		2,646		(48,714)		1,369,443		931,095		9,045		(7,983)		932,157
Collateralized mortgage obligations:
Government agency		2,103,187		7,768		(31,432)		2,079,523		1,902,326		32,246		(1,019)		1,933,553
Government-sponsored enterprises		2,671,131		3,608		(53,695)		2,621,044		1,808,804		18,991		(823)		1,826,972
Collateralized loan obligations		105,245		2		—		105,247		—		—		—		—
Debt securities issued by states and political subdivisions		44,185		—		—		44,185		—		—		—		—
Total available-for-sale securities	$	8,560,733	$	24,595	$	(157,296)	$	8,428,032	$	5,985,031	$	97,114	$	(10,730)	$	6,071,415

Accrued interest receivable related to available-for-sale investment securities was $14.1 million and $10.6 million as of December 31, 2021 and 2020, respectively, and is recorded separately from the amortized cost basis of investment securities on the Company’s consolidated balance sheets.

Proceeds from call and sales of investment securities were $8.6 million and $2.5 million, respectively, for the year ended December 31, 2021. Proceeds from call and sales of investment securities were $102.0 million and $543.0 million, respectively, for the year ended December 31, 2020. Proceeds from calls and sales of investment securities were $63.0 million and $1.0 billion, respectively, for the year ended December 31, 2019. The Company recorded gross realized gains of $0.1 million and gross realized losses of nil for the year ended December 31, 2021. The Company recorded gross realized gains of $0.6 million and gross realized losses of $0.7 million for the year ended December 31, 2020. The Company recorded gross realized gains of $0.5 million and gross realized losses of $3.2 million for the year ended December 31, 2019. The income tax expense related to the Company’s net realized gains on the sale of investment securities was nil for the year ended December 31, 2021. The income tax benefit related to the Company’s net realized loss on the sale of investment securities was nil and $0.7 million for the years ended December 31, 2020 and 2019, respectively. Gains and losses realized on sales of securities are determined using the specific identification method.

Interest income from taxable investment securities was $93.3 million, $80.9 million and $92.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. Interest income from non-taxable investment securities was $8.1 million, $0.9 million and nil for the years ended December 31, 2021, 2020 and 2019, respectively.

The amortized cost and fair value of debt securities issued by the U.S. Treasury, government agencies and states and political subdivisions and collateralized loan obligations as of December 31, 2021, by contractual maturity, are shown below. Mortgage-backed securities and collateralized mortgage obligations are disclosed separately in the table below as remaining expected maturities will differ from contractual maturities as borrowers have the right to prepay obligations.

	December 31, 2021
	Amortized		Fair
(dollars in thousands)	Cost		Value
Due in one year or less	$	—	$	—
Due after one year through five years		50,465		50,361
Due after five years through ten years		123,729		121,960
Due after ten years		171,898		169,674
		346,092		341,995
Mortgage-backed securities:
Residential - Government agency		135,764		137,264
Residential - Government-sponsored enterprises		1,496,605		1,491,100
Commercial - Government agency		392,443		387,663
Commercial - Government-sponsored enterprises		1,415,511		1,369,443
Total mortgage-backed securities		3,440,323		3,385,470
Collateralized mortgage obligations:
Government agency		2,103,187		2,079,523
Government-sponsored enterprises		2,671,131		2,621,044
Total collateralized mortgage obligations		4,774,318		4,700,567
Total available-for-sale securities	$	8,560,733	$	8,428,032

At December 31, 2021, pledged securities totaled $2.1 billion, of which $1.9 billion was pledged to secure public deposits and $193.2 million was pledged to secure other financial transactions. At December 31, 2020, pledged securities totaled $2.4 billion, of which $2.3 billion was pledged to secure public deposits and $186.1 million was pledged to secure other financial transactions.

The Company held no securities of any single issuer, other than debt securities issued by the U.S. government, government agencies and government-sponsored enterprises, which were in excess of 10% of stockholders’ equity as of December 31, 2021 and 2020.

The following tables present the unrealized gross losses and fair values of securities in the available-for-sale portfolio by length of time that the 318 and 50 individual securities in each category have been in a continuous loss position as of December 31, 2021 and 2020, respectively. The unrealized losses on investment securities were attributable to market conditions.

	Time in Continuous Loss as of December 31, 2021
	Less Than 12 Months				12 Months or More				Total
	Unrealized				Unrealized				Unrealized
(dollars in thousands)	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
U.S. Treasury and government agency debt securities	$	(3,355)	$	134,468	$	(869)	$	16,642	$	(4,224)	$	151,110
Mortgage-backed securities:
Residential - Government agency		(291)		51,231		—		—		(291)		51,231
Residential - Government-sponsored enterprises		(10,876)		1,230,104		(1,543)		32,415		(12,419)		1,262,519
Commercial - Government agency		(5,239)		186,024		(1,282)		26,063		(6,521)		212,087
Commercial - Government-sponsored enterprises		(22,179)		744,819		(26,535)		397,123		(48,714)		1,141,942
Collateralized mortgage obligations:
Government agency		(31,432)		1,441,848		—		—		(31,432)		1,441,848
Government-sponsored enterprises		(52,551)		2,255,535		(1,144)		24,959		(53,695)		2,280,494
Total available-for-sale securities with unrealized losses	$	(125,923)	$	6,044,029	$	(31,373)	$	497,202	$	(157,296)	$	6,541,231

	Time in Continuous Loss as of December 31, 2020
	Less Than 12 Months				12 Months or More				Total
	Unrealized				Unrealized				Unrealized
(dollars in thousands)	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
U.S. Treasury and government agency debt securities	$	(61)	$	38,507	$	—	$	—	$	(61)	$	38,507
Mortgage-backed securities:
Residential - Government-sponsored enterprises		(725)		64,987		—		—		(725)		64,987
Commercial - Government agency		(119)		32,346		—		—		(119)		32,346
Commercial - Government-sponsored enterprises		(7,983)		427,759		—		—		(7,983)		427,759
Collateralized mortgage obligations:
Government agency		(994)		209,124		(25)		6,190		(1,019)		215,314
Government-sponsored enterprises		(823)		296,160		—		—		(823)		296,160
Total available-for-sale securities with unrealized losses	$	(10,705)	$	1,068,883	$	(25)	$	6,190	$	(10,730)	$	1,075,073

At December 31, 2021 and 2020, the Company did not have any securities with the intent to sell and determined it was more likely than not that the Company would not be required to sell the securities prior to recovery of the amortized cost basis. As the Company had the intent and ability to hold the remaining securities in an unrealized loss position as of December 31, 2021 and 2020, each security with an unrealized loss position in the above tables has been further assessed to determine if a credit loss exists. As of December 31, 2021 and 2020, the Company did not expect any credit losses in its debt securities and no credit losses were recognized on securities during the years ended December 31, 2021 and 2020.

As of December 31, 2020, the Company’s available-for-sale investment securities were comprised entirely of debt, mortgage-backed securities and collateralized mortgage obligations issued by the U.S. Government, its agencies and government-sponsored enterprises. Management has concluded that the long history with no credit losses from these issuers indicates an expectation that nonpayment of the amortized cost basis is zero, and these securities are explicitly or implicitly fully guaranteed by the U.S. government. The U.S. government can print its own currency and its currency is routinely held by central banks and other major financial institutions. The dollar is used in international commerce, and commonly is viewed as a reserve currency, all of which qualitatively indicates that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. As of December 31, 2021, the Company’s available-for-sale investment securities continued to be comprised primarily of debt, mortgage-backed securities and collateralized mortgage obligations issued by the U.S. Government, its agencies and government-sponsored enterprises, with just under 2% of the available-for-sale investment securities comprised of collateralized loan obligations rated AA or better and obligations issued by local state and political subdivisions rated AA or better. These securities are investment grade and highly rated and carry either sufficient credit enhancement or days cash on hand to support timely payments of principal and interest. As a result, the Company does not expect any future payment defaults and has not recorded an allowance for credit losses for its available-for-sale debt securities as of December 31, 2021 and 2020.

The Company held approximately 120,000 Visa Class B restricted shares as of both December 31, 2021 and 2020. These shares continued to be carried at $0 cost basis during each of the respective periods.