Investment Securities

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

Investments Securities

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, 2021 and December 31, 2020, by contractual maturity within each type:

	At March 31, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Securities Held-to-Maturity
U.S. government corporations and agencies:
Within 1 year	$	5,000	$	87	$	—	$	—	$	5,087
After 1 year to 5 years	1,999		51		—		—		2,050
	6,999		138		—		—		7,137
Residential mortgage-backed securities:
After 5 years to 10 years	5,683		248		—		—		5,931
Over 10 years	122,471		3,916		(157)		—		126,230
	128,154		4,164		(157)		—		132,161
Total	$	135,153	$	4,302	$	(157)	$	—	$	139,298
Securities Available-for-Sale
State and political subdivisions:
After 1 year to 5 years	$	3,562	$	22	$	—	$	—	$	3,584
After 5 years to 10 years	6,602		24		—		—		6,626
	10,164		46		—		—		10,210
Residential mortgage-backed securities:
After 1 year to 5 years	287		10		—		—		297
After 5 years to 10 years	1,498		58		—		—		1,556
Over 10 years	132,250		1,184		(1,896)		—		131,538
	134,035		1,252		(1,896)		—		133,391
Collateralized mortgage obligations:
After 5 years to 10 years	694		20		—		—		714
Over 10 years	3,943		—		—		—		3,943
	4,637		20		—		—		4,657
Corporate bonds:
Within 1 year	998		9		—		—		1,007
After 1 year to 5 years	29,480		1,239		(56)		(6)		30,657
After 5 years to 10 years	60,000		150		(764)		(479)		58,907
	90,478		1,398		(820)		(485)		90,571
Total	$	239,314	$	2,716	$	(2,716)	$	(485)	$	238,829

	At December 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Securities Held-to-Maturity
U.S. government corporations and agencies:
After 1 year to 5 years	$	6,998	$	171	$	—	$	—	$	7,169
	6,998		171		—		—		7,169
Residential mortgage-backed securities:
After 5 years to 10 years	6,325		253		—		—		6,578
Over 10 years	137,934		4,644		—		—		142,578
	144,259		4,897		—		—		149,156
Total	$	151,257	$	5,068	$	—	$	—	$	156,325
Securities Available-for-Sale
State and political subdivisions:
After 1 year to 5 years	3,560		33		—		—		3,593
After 5 years to 10 years	9,881		63		—		—		9,944
	13,441		96		—		—		13,537
Residential mortgage-backed securities:
After 1 year to 5 years	323		10		—		—		333
After 5 years to 10 years	1,664		58		—		—		1,722
Over 10 years	110,018		2,153		(63)		—		112,108
	112,005		2,221		(63)		—		114,163
Collateralized mortgage obligations:
After 5 years to 10 years	754		21		—		—		775
Over 10 years	4,561		—		(15)		—		4,546
	5,315		21		(15)		—		5,321
Corporate bonds:
Within 1 year	499		2		—		—		501
After 1 year to 5 years	29,498		1,440		—		(16)		30,922
After 5 years to 10 years	60,496		3		(5,450)		(853)		54,196
	90,493		1,445		(5,450)		(869)		85,619
Total	$	221,254	$	3,783	$	(5,528)	$	(869)	$	218,640

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 $248.9 million and $249.6 million at March 31, 2021 and December 31, 2020, respectively, were pledged to secure public funds deposits and other contractual obligations. In addition, securities of $15.5 million and $32.6 million were pledged to secure credit derivatives and interest rate swaps at March 31, 2021 and December 31, 2020, 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, 2021 and 2020:

	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Securities available-for-sale:
Proceeds from sales	$	1,563	$	62,276
Gross realized gains on sales	65		709
Gross realized losses on sales	—		14
Tax expense related to net realized gains on sales	14		146

At March 31, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, 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, 2021
Securities Held-to-Maturity
Residential mortgage-backed securities	$	4,462	$	(157)	$	—	$	—	$	4,462	$	(157)
Total	$	4,462	$	(157)	$	—	$	—	$	4,462	$	(157)
Securities Available-for-Sale
Residential mortgage-backed securities	$	77,457	$	(1,895)	$	29	$	(1)	$	77,486	$	(1,896)
Total	$	77,457	$	(1,895)	$	29	$	(1)	$	77,486	$	(1,896)
At December 31, 2020
Securities Held-to-Maturity
Total	$	—	$	—	$	—	$	—	$	—	$	—
Securities Available-for-Sale
Residential mortgage-backed securities	13,677		(62)		31		(1)		13,708		(63)
Collateralized mortgage obligations	4,545		(15)		—		—		4,545		(15)
Total	$	18,222	$	(77)	$	31	$	(1)	$	18,253	$	(78)

At March 31, 2021, the fair value of held-to-maturity securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $4.5 million, including unrealized losses of $157 thousand. These holdings were comprised of two 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 did not recognize any credit losses on held-to-maturity debt securities for the three months ended March 31, 2021 or March 31, 2020. Accrued interest receivable on held-to-maturity debt securities totaled $357 thousand at March 31, 2021 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

At March 31, 2021, 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 $77.5 million, including unrealized losses of $1.9 million. These holdings were comprised of sixteen 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 fair value of these securities was not indicative of a credit loss. Accrued interest receivable on available-for-sale debt securities totaled $602 thousand at March 31, 2021 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

The table below presents a rollforward by major security type for the three months ended March 31, 2021 of the allowance for credit losses on securities available-for-sale.

(Dollars in thousands)	Corporate Bonds
Three months ended March 31, 2021
Securities Available-for-Sale
Beginning balance	$	(869)
Additions for securities for which no previous expected credit losses were recognized	(19)
Change in securities for which a previous expected credit loss was recognized	403
Ending balance	$	(485)
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, 2021, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has been recorded was $52.6 million, including unrealized losses of $820 thousand, and allowance for credit losses of $485 thousand. These holdings were comprised of thirteen investment grade corporate bonds which fluctuate in value based on changes in market conditions. For these securities, fluctuations were 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 reversal of the provision for credit losses of $403 thousand for the three months ended March 31, 2021 was primarily related to the improvement in fair value of six underlying securities that are tied to the 10-year swap curve which had significantly steepened during the quarter.

The Corporation recognized a $115 thousand net gain and a $268 thousand net loss on equity securities during the three months ended March 31, 2021 and 2020, respectively, in other noninterest income. There were no sales of equity securities during the three months ended March 31, 2021 or March 31, 2020.