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Investment Securities
 6 Months Ended
Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
INVESTMENT SECURITIES

The following table summarizes the amortized cost, gross unrealized gains and losses and approximate fair value of investment securities available for sale as of June 30, 2021 and December 31, 2020.

 Amortized
Cost		Gross Unrealized
Gains		Gross Unrealized
Losses		Fair
Value
Available for sale at June 30, 2021    
U.S. Treasury$1,000 $— $— $1,000 
U.S. Government-sponsored agency securities11,502 39 — 11,541 
State and municipal1,365,211 87,152 518 1,451,845 
U.S. Government-sponsored mortgage-backed securities952,720 12,937 7,371 958,286 
Corporate obligations4,031 197 — 4,228 
Total available for sale$2,334,464 $100,325 $7,889 $2,426,900 

 Amortized
Cost		Gross Unrealized
Gains		Gross Unrealized
Losses		Fair
Value
Available for sale at December 31, 2020    
U.S. Government-sponsored agency securities$2,380 $50 $— $2,430 
State and municipal1,168,711 89,420 246 1,257,885 
U.S. Government-sponsored mortgage-backed securities632,267 22,505 103 654,669 
Corporate obligations4,031 104 — 4,135 
Total available for sale$1,807,389 $112,079 $349 $1,919,119 
The following table summarizes the amortized cost, gross unrealized gains and losses, approximate fair value and allowance for credit losses on investment securities held to maturity as of June 30, 2021 and December 31, 2020.

Amortized
Cost		Allowance for Credit LossesNet Carrying AmountGross Unrealized
Gains		Gross Unrealized
Losses		Fair
Value
Held to maturity at June 30, 2021    
U.S. Government-sponsored agency securities$60,677 $— $60,677 $1 $715 $59,963 
State and municipal863,426 245 863,181 31,276 977 893,725 
U.S. Government-sponsored mortgage-backed securities796,056 — 796,056 12,164 2,561 805,659 
Foreign investment1,500 — 1,500 — — 1,500 
Total held to maturity$1,721,659 $245 $1,721,414 $43,441 $4,253 $1,760,847 


Amortized
Cost		Allowance for Credit LossesNet Carrying AmountGross Unrealized
Gains		Gross Unrealized
Losses		Fair
Value
Held to maturity at December 31, 2020    
U.S. Government-sponsored agency securities$31,087 $— $31,087 $10 $113 $30,984 
State and municipal619,927 — 619,927 34,978 32 654,873 
U.S. Government-sponsored mortgage-backed securities575,154 — 575,154 17,889 107 592,936 
Foreign investment1,500 — 1,500 — — 1,500 
Total held to maturity$1,227,668 $— $1,227,668 $52,877 $252 $1,280,293 


Accrued interest on investment securities available for sale and held to maturity of $22.9 million are included in the Interest Receivable line on the Corporation's Consolidated Condensed Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available for sale and held to maturity securities presented above.

In determining the allowance for credit losses on investment securities available for sale that are in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through the income statement. For investment securities available for sale that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Corporation considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Unrealized losses that have not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in the income statement as a component of the provision for credit loss. The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities available for sale from the estimate of credit losses. Investment securities available for sale are charged off against the allowance or, in the absence of any allowance, written down through the income statement when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met. The Corporation did not record an allowance for credit losses on its investment securities available for sale as the unrealized losses were attributable to changes in interest rates, not credit quality.

The allowance for credit losses on investment securities held to maturity is a contra asset-valuation account that is deducted from the amortized cost basis of investment securities held to maturity to present the net amount expected to be collected. Investment securities held to maturity are charged off against the allowance when deemed uncollectible. Adjustments to the allowance are reported in the income statement as a component of the provision for credit loss. The Corporation measures expected credit losses on investment securities held to maturity on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities held to maturity from the estimate of credit losses. With regard to U.S. Government-sponsored agency and mortgage-backed securities, all these securities are issued by a U.S. government-sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has been recorded for these securities. With regard to securities issued by states and municipalities and other investment securities held to maturity, management considers (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss rates associated with securities having similar grades as those in the Corporation's portfolio have been insignificant. Furthermore, as of June 30, 2021, there were no past due principal and interest payments associated with these securities. An allowance for credit losses of $245,000 was recorded on the state and municipal securities classified as held to maturity based on applying the long-term historical credit loss rate, as published by Moody’s, for similarly rated securities.
On a quarterly basis, the Corporation monitors the credit quality of investment securities held to maturity through the use of credit ratings. The following table summarizes the amortized cost of investment securities held to maturity at June 30, 2021, aggregated by credit quality indicator.
Held to Maturity
State and municipalOtherTotal
Credit Rating:
Aaa$54,753 $60,677 $115,430 
Aa1131,246 — 131,246 
Aa2136,008 — 136,008 
Aa396,915 — 96,915 
A166,549 — 66,549 
A218,962 — 18,962 
A31,065 — 1,065 
Baa2527 — 527 
Non-rated357,401 797,556 1,154,957 
Total$863,426 $858,233 $1,721,659 


The following table details activity in the allowance for credit losses on investment securities held to maturity during the six months ended June 30, 2021.
State and municipal
Allowance for Credit Losses:
Balance, December 31, 2020$— 
Impact of adopting ASC 326245 
Provision for credit loss— 
Securities charged off— 
Recoveries on securities— 
Balance, June 30, 2021$245 


The following tables summarize, as of June 30, 2021 and December 31, 2020, investment securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time in a continuous unrealized loss position.

Less than 12 Months12 Months or LongerTotal
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
Investment securities available for sale at June 30, 2021
State and municipal$63,102 $518 $— $— $63,102 $518 
U.S. Government-sponsored mortgage-backed securities460,616 7,371 — — 460,616 7,371 
Total investment securities available for sale$523,718 $7,889 $— $— $523,718 $7,889 


 
Less than 12 Months12 Months or LongerTotal
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
Investment securities available for sale at December 31, 2020
State and municipal$5,368 $246 $— $— $5,368 $246 
U.S. Government-sponsored mortgage-backed securities9,651 103 — — 9,651 103 
Total investment securities available for sale$15,019 $349 $— $— $15,019 $349 
Certain investment securities available for sale are reported in the financial statements at an amount less than their historical cost as indicated in the table below.
June 30, 2021December 31, 2020
Investments available for sale reported at less than historical cost:  
Historical cost$531,607 $15,368 
Fair value523,718 15,019 
Gross unrealized losses$7,889 $349 
Percent of the Corporation's investments available for sale21.6 %0.8 %


In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy.  The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor classified these securities based upon these inputs.  From these discussions, the Corporation’s management is comfortable that the classifications are proper.  The Corporation has gained trust in the data for two reasons:  (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis; and (b) actual gains or loss resulting from the sale of certain securities has proven the data to be accurate over time.   Fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

U.S. Government-Sponsored Mortgage-Backed Securities
The unrealized losses on the Corporation's investment in mortgage-backed securities were a result of interest rate changes. The Corporation expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. At June 30, 2021, the mortgage-backed securities portfolio contains unrealized losses of $7.4 million on forty-five securities in the available for sale portfolio. All these securities are issued by a government-sponsored entity.

State and Municipal Securities, U.S. Government-Sponsored Agency Securities and Corporate Obligation Securities 
The unrealized losses on the Corporation's investments in securities of state and political subdivisions, U.S. Government-Sponsored Agency securities and corporate obligations were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. At June 30, 2021, the state and municipal securities portfolio contains unrealized losses of $518,000 on fifty-one securities in the available for sale portfolio.
The amortized cost and fair value of investment securities available for sale and held to maturity at June 30, 2021 and December 31, 2020, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity are shown separately.

 Available for SaleHeld to Maturity
 Amortized CostFair ValueAmortized CostFair Value
Maturity Distribution at June 30, 2021    
Due in one year or less$1,060 $1,067 $8,405 $8,461 
Due after one through five years8,850 9,176 23,079 24,351 
Due after five through ten years90,059 95,333 147,663 152,770 
Due after ten years1,281,775 1,363,038 746,456 769,606 
 1,381,744 1,468,614 925,603 955,188 
U.S. Government-sponsored mortgage-backed securities952,720 958,286 796,056 805,659 
Total investment securities$2,334,464 $2,426,900 $1,721,659 $1,760,847 
 
 
Available for SaleHeld to Maturity
Amortized CostFair ValueAmortized CostFair Value
Maturity Distribution at December 31, 2020    
Due in one year or less$1,349 $1,353 $9,712 $9,755 
Due after one through five years5,545 5,764 22,241 23,190 
Due after five through ten years70,777 75,223 115,408 121,333 
Due after ten years1,097,451 1,182,110 505,153 533,079 
 1,175,122 1,264,450 652,514 687,357 
U.S. Government-sponsored mortgage-backed securities632,267 654,669 575,154 592,936 
Total investment securities$1,807,389 $1,919,119 $1,227,668 $1,280,293 
 
Securities with a carrying value of approximately $877.1 million and $890.0 million were pledged at June 30, 2021 and December 31, 2020, respectively, to secure certain deposits and securities sold under repurchase agreements, and for other purposes as permitted or required by law.

The book value of securities sold under agreements to repurchase amounted to $139.3 million at June 30, 2021 and $167.3 million at
December 31, 2020.

Gross gains on the sales and redemptions of investment securities available for sale for the three and six months ended June 30, 2021 and 2020 are shown below.
Three Months Ended
June 30,		Six Months Ended
June 30,
2021202020212020
Sales and redemptions of investment securities available for sale:    
Gross gains$1,822 $3,068 $3,898 $7,680 
Gross losses61 — 338 — 
Net gains on sales and redemptions of investment securities available for sale$1,761 $3,068 $3,560 $7,680