Investment Securities

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investment Securities

The following table shows the amortized cost, the estimated fair value and the allowance for credit losses of the held-to-maturity securities and available-for-sale securities at March 31, 2020 and the amortized cost and the estimated fair value of the held-to-maturity securities and available-for-sale securities at December 31, 2019, by contractual maturity within each type:


	At March 31, 2020																		At December 31, 2019
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Held-to-Maturity
U.S. government corporations and agencies:
After 1 year to 5 years	$	6,998	$	229	$	—	$	—	$	7,227	$	6,997	$	66	$	—	$	7,063
	6,998		229		—		—		7,227		6,997		66		—		7,063
Residential mortgage-backed securities:
After 5 years to 10 years	8,449		310		—		—		8,759		9,083		129		—		9,212
Over 10 years	206,942		6,624		—		—		213,566		175,972		2,749		(110)		178,611
	215,391		6,934		—		—		222,325		185,055		2,878		(110)		187,823




Total	$	222,389	$	7,163	$	—	$	—	$	229,552	$	192,052	$	2,944	$	(110)	$	194,886
Securities Available-for-Sale




U.S. government corporations and agencies:
Within 1 year	$	300	$	—	$	—	—		$	300	$	301	$	—	$	(1)	$	300


	300		—		—		—		300		301		—		(1)		300
State and political subdivisions:

After 1 year to 5 years	5,062		35		—		—		5,097		4,717		23		—		4,740
After 5 years to 10 years	25,305		198		—		—		25,503		29,563		292		—		29,855

	30,367		233		—		—		30,600		34,280		315		—		34,595
Residential mortgage-backed securities:
Within 1 year	185		9		—		—		194		304		9		—		313
After 1 year to 5 years	136		4		—		—		140		611		3		(1)		613
After 5 years to 10 years	2,534		72		—		—		2,606		36,893		107		(21)		36,979
Over 10 years	80,291		2,192		(1)		—		82,482		80,630		378		(453)		80,555
	83,146		2,277		(1)		—		85,422		118,438		497		(475)		118,460
Collateralized mortgage obligations:

After 5 years to 10 years	974		4		—		—		978		2,377		6		(22)		2,361

	974		4		—		—		978		2,377		6		(22)		2,361
Corporate bonds:
Within 1 year	4,503		3		(5)		(4)		4,497		6,012		1		(4)		6,009
After 1 year to 5 years	28,847		486		(385)		(46)		28,902		29,606		596		(61)		30,141
After 5 years to 10 years	499		22		—		—		521		—		—		—		—
Over 10 years	60,000		—		(11,487)		(847)		47,666		60,000		—		(4,942)		55,058
	93,849		511		(11,877)		(897)		81,586		95,618		597		(5,007)		91,208
Total	$	208,636	$	3,025	$	(11,878)	$	(897)	$	198,886	$	251,014	$	1,415	$	(5,505)	$	246,924

Gross unrealized gains and losses are recognized in accumulated other comprehensive income (loss) and changes in the allowance for credit loss are recorded in the provision for credit loss expense. Expected maturities may differ from contractual maturities because debt issuers may have the right to call or prepay obligations without call or prepayment penalties and mortgage-backed securities typically prepay at a rate faster than contractually due.

Securities with a carrying value of $335.5 million and $340.8 million at March 31, 2020 and December 31, 2019, respectively, were pledged to secure public funds deposits and other contractual obligations. In addition, securities of $30.2

million and $12.5 million were pledged to secure credit derivatives and interest rate swaps at March 31, 2020 and December 31, 2019, respectively. See Note 11, "Derivative Instruments and Hedging Activities" for additional information.

The following table presents information related to sales of securities available-for-sale during the three months ended March 31, 2020 and 2019:


	Three Months Ended March 31,
(Dollars in thousands)	2020		2019
Securities available-for-sale:
Proceeds from sales	$	62,276	$	491
Gross realized gains on sales	709		1
Gross realized losses on sales	14		—
Tax expense related to net realized gains on sales	146		—

At March 31, 2020 and December 31, 2019, there were no reportable investments in any single issuer representing more than 10% of shareholders’ equity.

The following table shows the fair value of securities that were in an unrealized loss position for which an allowance for credit losses has not been recorded at March 31, 2020 and December 31, 2019, by the length of time those securities were in a continuous loss position.


	Less than Twelve Months						Twelve Months or Longer						Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At March 31, 2020





Securities Available-for-Sale



Residential mortgage-backed securities	$	466	$	(1)	$	35	$	—	$	501	$	(1)


Total	$	466	$	(1)	$	35	$	—	$	501	$	(1)
At December 31, 2019
Securities Held-to-Maturity

Residential mortgage-backed securities	$	26,767	$	(110)	$	—	$	—	$	26,767	$	(110)

Total	$	26,767	$	(110)	$	—	$	—	$	26,767	$	(110)
Securities Available-for-Sale

U.S. government corporations and agencies	$	—	$	—	$	300	$	(1)	$	300	$	(1)

Residential mortgage-backed securities	21,827		(62)		48,672		(413)		70,499		(475)
Collateralized mortgage obligations	—		—		1,295		(22)		1,295		(22)
Corporate bonds	998		—		65,506		(5,007)		66,504		(5,007)
Total	$	22,825	$	(62)	$	115,773	$	(5,443)	$	138,598	$	(5,505)

At March 31, 2020, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $501 thousand, including unrealized losses of $1 thousand. These holdings were comprised of four federal agency mortgage-backed securities, which are U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The Corporation does not intend to sell the securities in an unrealized loss position and is unlikely to be required to sell these securities before a recovery of fair value, which may be maturity. The Corporation concluded that the decline in the value of these securities was not indicative of a credit loss. The Corporation did not recognize any credit losses on these available-for-sale debt securities for the three months ended March 31, 2020 or other-than-temporary impairment charges for the three months ended March 31, 2019.

At March 31, 2020, no held-to-maturity securities held by the Corporation were in a unrealized loss position. The Corporation did not recognize any credit losses on these held-to-maturity debt securities for the three months ended March 31, 2020 or other-than-temporary impairment charges for the three months ended March 31, 2019.

The table below presents a rollforward by major security type for the three months ended March 31, 2020 of the allowance for credit losses on securities available-for-sale.


	Corporate Bonds
Three months ended March 31, 2020
Securities Available-for-Sale
Beginning balance	$	—
Adjustment to initially apply ASU No. 2016-13 for CECL	(300)
Additions for securities for which no previous expected credit losses were recognized	(25)
Change in securities for which a previous expected credit loss was recognized	(572)
Ending balance	$	(897)

At March 31, 2020, the fair value of available-for-sale securities in an unrealized loss position was $63.2 million, including unrealized losses of $11.9 million, and allowance for credit losses of $897 thousand. These holdings include available-for-sale securities with a fair value of $47.7 million which were in an unrealized loss position of $11.5 million for a period of greater than twelve months. These holdings were comprised of twenty-four investment grade corporate bonds which fluctuate in value based on changes in market conditions, which for these underlying securities is primarily due to changes in the interest rate environment. The Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell the securities before their anticipated recovery. The underlying issuers continue to make timely principal and interest payments on the securities. The Corporation concluded that a portion of decline in the value of these securities was indicative of a credit loss. The Corporation recorded a provision for credit losses of $597 thousand on these available-for-sale debt securities for the three months ended March 31, 2020. The Corporation did not record any other-than-temporary impairment charges for the three months ended March 31, 2019.

The Corporation recognized a $268 thousand net loss and $4 thousand net gain on equity securities during the three months ended March 31, 2020 and 2019, respectively, in other noninterest income. There were no sales of equity securities during the three months ended March 31, 2020 or March 31, 2019.