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Securities
 6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Securities Securities
The amortized cost, estimated fair value, and allowance for credit losses of debt securities available-for-sale and held-to-maturity at June 30, 2020, and December 31, 2019, are as follows (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Allowance for Credit Losses
At June 30, 2020
 
 
 
 
 
 
 
 
 
Debt securities available-for-sale:
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
$
138,460

 
$
4,004

 
$
—

 
$
142,464

 
$
—

State and municipal obligations
2,402

 
—

 
—

 
2,402

 
—

Corporate debt securities
8,000

 
59

 
—

 
8,059

 
—

Total investment securities
148,862

 
4,063

 
—

 
152,925


—

Mortgage-backed securities - FNMA
310

 
4

 
—

 
314

 
—

Total debt securities available-for-sale
$
149,172

 
$
4,067

 
$
—

 
$
153,239


$
—

Debt securities held-to-maturity:
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
$
6,242

 
$
38

 
$
—

 
$
6,280

 
$
—

State and municipal obligations
227,046

 
8,701

 
(185
)
 
235,562

 
(35
)
Corporate debt securities
76,277

 
899

 
(5,880
)
 
71,296

 
(1,582
)
Total investment securities
309,565

 
9,638

 
(6,065
)
 
313,138

 
(1,617
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
FHLMC
190,352

 
6,548

 
(33
)
 
196,867

 
—

FNMA
226,452

 
8,673

 
(29
)
 
235,096

 
—

GNMA
92,076

 
2,710

 
(20
)
 
94,766

 
—

SBA
5,849

 
—

 
(61
)
 
5,788

 
—

CMO
49,825

 
447

 
(30
)
 
50,242

 
(829
)
Total mortgage-backed securities
564,554

 
18,378

 
(173
)
 
582,759

 
(829
)
Total debt securities held-to-maturity
$
874,119

 
$
28,016

 
$
(6,238
)
 
$
895,897

 
$
(2,446
)
Total debt securities
$
1,023,291

 
$
32,083

 
$
(6,238
)
 
$
1,049,136

 
$
(2,446
)


There was no allowance for credit losses on debt securities available-for-sale at June 30, 2020.
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
At December 31, 2019
 
 
 
 
 
 
 
Debt securities available-for-sale:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
U.S. government and agency obligations
$
149,120

 
$
1,408

 
$
(93
)
 
$
150,435

State and municipal obligations
25

 
—

 
—

 
25

Total investment securities
149,145

 
1,408

 
(93
)
 
150,460

Mortgage-backed securities - FNMA
495

 
5

 
—

 
500

Total debt securities available-for-sale
$
149,640

 
$
1,413

 
$
(93
)
 
$
150,960

Debt securities held-to-maturity:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
U.S. government and agency obligations
$
4,984

 
$
14

 
$
—

 
$
4,998

State and municipal obligations
124,430

 
1,537

 
(208
)
 
125,759

Corporate debt securities
79,547

 
833

 
(2,421
)
 
77,959

Total investment securities
208,961

 
2,384

 
(2,629
)
 
208,716

Mortgage-backed securities:
 
 
 
 
 
 
 
FHLMC
206,985

 
2,221

 
(524
)
 
208,682

FNMA
244,428

 
2,680

 
(493
)
 
246,615

GNMA
110,661

 
939

 
(212
)
 
111,388

SBA
1,940

 
—

 
(51
)
 
1,889

Total mortgage-backed securities
564,014

 
5,840

 
(1,280
)
 
568,574

Total debt securities held-to-maturity
$
772,975

 
$
8,224

 
$
(3,909
)
 
$
777,290

Total debt securities
$
922,615

 
$
9,637

 
$
(4,002
)
 
$
928,250


The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity by major security type for the six months ended June 30, 2020 (in thousands):
 
Investment securities
 
Mortgage-backed securities
Allowance for credit losses
 
 
 
Beginning balance
$
—

 
$
—

Impact of CECL adoption
(1,268
)
 
—

Provision for credit loss expense
(349
)
 
(829
)
Total ending allowance balance
$
(1,617
)
 
$
(829
)


During the third quarter 2013, the Bank transferred $536.0 million of previously designated available-for-sale securities to a held-to-maturity designation at estimated fair value. The securities transferred had an unrealized net loss of $13.3 million at the time of transfer which continues to be reflected in accumulated other comprehensive loss on the consolidated balance sheet, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of the debt securities held-to-maturity at June 30, 2020, and December 31, 2019, is as follows (in thousands):
 
 
June 30, 2020
 
December 31, 2019
Amortized cost
$
874,119

 
$
772,975

Net loss on date of transfer from available-for-sale
(13,347
)
 
(13,347
)
Allowance for credit loss
(2,446
)
 
—

Accretion of net unrealized loss on securities reclassified as held-to-maturity
9,633

 
9,245

Carrying value
$
867,959

 
$
768,873


There were no realized gains or losses on debt securities for the three and six months ended June 30, 2020 and June 30, 2019, respectively.
During the three and six months ended June 30, 2020, there were $53,000 of realized losses on equity securities. There were no realized gains or losses on equity securities in the three and six months ended June 30, 2019. The realized and unrealized gains or losses on equity securities for the three and six months ended June 30, 2020 and June 30, 2019 are shown in the table below (in thousands).
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Net gain on equity investments
$
148

 
$
133

 
$
303

 
$
241

Less: Net losses recognized on equity securities sold
(53
)
 
—

 
(53
)
 
—

Unrealized gain recognized on equity securities still held
$
201

 
$
133

 
$
356

 
$
241


The amortized cost and estimated fair value of investment securities at June 30, 2020 by contractual maturity are shown below (in thousands). Actual maturities may differ from contractual maturities in instances where issuers have the right to call or prepay obligations with or without call or prepayment penalties. At June 30, 2020, corporate debt securities with an amortized cost of $56.2 million and estimated fair value of $52.6 million were callable prior to the maturity date.
 
June 30, 2020
Amortized
Cost
 
Estimated
Fair Value
Less than one year
$
71,600

 
$
71,952

Due after one year through five years
196,345

 
203,165

Due after five years through ten years
83,809

 
79,446

Due after ten years
106,673

 
111,500

 
$
458,427

 
$
466,063


Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.
The estimated fair value of securities pledged as required security for deposits and for other purposes amounted to $493.9 million and $475.6 million, at June 30, 2020 and December 31, 2019, respectively, including $155.9 million and $81.4 million at June 30, 2020 and December 31, 2019, respectively, pledged as collateral for securities sold under agreements to repurchase.
At June 30, 2020, there were no holdings of securities of any one issuer, other than the US government and its agencies, in an amount greater than 10% of shareholders’ equity.
The estimated fair value and unrealized losses of debt securities available-for-sale and held-to-maturity at June 30, 2020 and December 31, 2019, segregated by the duration of the unrealized losses, are as follows (in thousands):
 
At June 30, 2020
 
Less than 12 months
 
12 months or longer
 
Total
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Debt securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
State and municipal obligations
$
3,809

 
$
(44
)
 
$
6,621

 
$
(141
)
 
$
10,430

 
$
(185
)
Corporate debt securities
14,815

 
(756
)
 
33,208

 
(5,124
)
 
48,023

 
(5,880
)
Total investment securities
18,624

 
(800
)
 
39,829

 
(5,265
)
 
58,453

 
(6,065
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
FHLMC
4,314

 
(23
)
 
1,366

 
(10
)
 
5,680

 
(33
)
FNMA
2,990

 
(17
)
 
413

 
(12
)
 
3,403

 
(29
)
GNMA
—

 
—

 
6,020

 
(20
)
 
6,020

 
(20
)
SBA
4,046

 
(11
)
 
1,742

 
(50
)
 
5,788

 
(61
)
CMO
15,353

 
(30
)
 
—

 
—

 
15,353

 
(30
)
Total mortgage-backed securities
26,703

 
(81
)
 
9,541

 
(92
)
 
36,244

 
(173
)
Total debt securities held-to-maturity
45,327

 
(881
)
 
49,370

 
(5,357
)
 
94,697

 
(6,238
)
Total debt securities
$
45,327

 
$
(881
)
 
$
49,370

 
$
(5,357
)
 
$
94,697

 
$
(6,238
)
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2019
 
Less than 12 months
 
12 months or longer
 
Total
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Debt securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
Investment securities - U.S. government and agency obligations
$
25,021

 
$
(54
)
 
$
22,451

 
$
(39
)
 
$
47,472

 
$
(93
)
Total debt securities available-for-sale
25,021

 
(54
)
 
22,451

 
(39
)
 
47,472

 
(93
)
Debt securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
State and municipal obligations
7,308

 
(58
)
 
14,531

 
(150
)
 
21,839

 
(208
)
Corporate debt securities
9,727

 
(213
)
 
37,628

 
(2,208
)
 
47,355

 
(2,421
)
Total investment securities
17,035

 
(271
)
 
52,159

 
(2,358
)
 
69,194

 
(2,629
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
FHLMC
6,329

 
(29
)
 
38,641

 
(495
)
 
44,970

 
(524
)
FNMA
13,682

 
(59
)
 
38,568

 
(434
)
 
52,250

 
(493
)
GNMA
30,268

 
(93
)
 
19,828

 
(119
)
 
50,096

 
(212
)
SBA
—

 
—

 
1,889

 
(51
)
 
1,889

 
(51
)
Total mortgage-backed securities
50,279

 
(181
)
 
98,926

 
(1,099
)
 
149,205

 
(1,280
)
Total debt securities held-to-maturity
67,314

 
(452
)
 
151,085

 
(3,457
)
 
218,399

 
(3,909
)
Total debt securities
$
92,335

 
$
(506
)
 
$
173,536

 
$
(3,496
)
 
$
265,871

 
$
(4,002
)


At June 30, 2020, the amortized cost, estimated fair value and credit rating of the individual corporate debt securities in an unrealized loss position for greater than one year are as follows (in thousands):
Security Description
Amortized
Cost
 
Estimated
Fair Value
 
Credit Rating
Moody’s/
S&P
Chase Capital
$
10,000

 
$
8,804

 
Baa1/BBB-
Wells Fargo Capital
5,000

 
4,392

 
A1/BBB
Huntington Capital
5,000

 
4,268

 
Baa2/BB+
Keycorp Capital
5,000

 
4,305

 
Baa2/BB+
PNC Capital
5,000

 
4,303

 
Baa1/BBB-
SunTrust Capital
5,000

 
4,281

 
Not Rated/BBB-
State Street Capital
3,332

 
2,855

 
A3/BBB
 
$
38,332

 
$
33,208

 
 

 
At June 30, 2020, the estimated fair value of each of the above corporate debt securities was below cost. The Company concluded that these corporate debt securities were only temporarily impaired at June 30, 2020. In concluding that the impairments were only temporary, the Company considered several factors in its analysis. The Company noted that each issuer made all the contractually due payments when required. There were no defaults on principal or interest payments and no interest payments were deferred. Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security. Furthermore, the Company does not intend to sell these corporate debt securities and it is more likely than not that the Company will not be required to sell the securities. Historically, the Company has not utilized securities sales as a source of liquidity. The Company’s long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.
The mortgage-backed securities are issued and guaranteed by either the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”), or the Small Business Administration (“SBA”), corporations which are chartered by the United States Government and whose debt obligations are typically rated AA+ by one of the internationally-recognized credit rating services. Additionally, there are private label commercial mortgage-backed securities with credit ratings from multiple credit rating services ranging between Aaa and Aa2. The Company considers the unrealized losses to be the result of changes in interest rates, and not credit quality, which over time can have both a positive and negative impact on the estimated fair value of the mortgage-backed securities. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost. As a result, the Company concluded that these securities were only temporarily impaired at June 30, 2020.
The Company monitors the credit quality of debt securities held-to-maturity on a quarterly basis through the use of credit ratings. The following table summarized the amortized cost of debt securities held-to-maturity at June 30, 2020, aggregated by credit quality indicator (in thousands):
 
AAA
 
AA
 
A
 
BBB
 
BB
 
Total
As of June 30, 2020
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
$
—

 
$
6,242

 
$
—

 
$
—

 
$
—

 
$
6,242

State and municipal obligations
40,380

 
133,056

 
48,545

 
5,065

 
—

 
227,046

Corporate debt securities
—

 
1,494

 
15,454

 
48,798

 
10,531

 
76,277

Total investment securities
40,380

 
140,792

 
63,999

 
53,863

 
10,531

 
309,565

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
CMO
16,916

 
32,909

 
—

 
—

 
—

 
49,825

Total mortgage-backed securities
16,916

 
32,909

 
—

 
—

 
—

 
49,825

Total debt securities held-to-maturity
$
57,296

 
$
173,701

 
$
63,999

 
$
53,863

 
$
10,531

 
$
359,390


A debt security is considered to be past due once it is 30 days past due under the terms of the agreement. At June 30, 2020, there were no debt securities that were past due, on nonaccrual, or past due over 89 days and still accruing.