Investment Securities

9 Months Ended

Sep. 30, 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 September 30, 2021 and December 31, 2020, by contractual maturity within each type:

	At September 30, 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	$	6,999	$	72	$	—	$	—	$	7,071
	6,999		72		—		—		7,071
Residential mortgage-backed securities:
After 5 years to 10 years	5,761		251		—		—		6,012
Over 10 years	99,883		3,067		(372)		—		102,578
	105,644		3,318		(372)		—		108,590
Total	$	112,643	$	3,390	$	(372)	$	—	$	115,661
Securities Available-for-Sale
State and political subdivisions:
After 1 year to 5 years	$	2,325	$	8	$	—	$	—	$	2,333
	2,325		8		—		—		2,333
Residential mortgage-backed securities:
After 1 year to 5 years	214		7		—		—		221
After 5 years to 10 years	1,785		73		—		—		1,858
Over 10 years	179,675		1,101		(2,013)		—		178,763
	181,674		1,181		(2,013)		—		180,842
Collateralized mortgage obligations:
After 5 years to 10 years	528		13		—		—		541
Over 10 years	3,158		9		—		—		3,167
	3,686		22		—		—		3,708
Corporate bonds:
Within 1 year	3,500		15		—		—		3,515
After 1 year to 5 years	27,738		1,056		(14)		(23)		28,757
After 5 years to 10 years	60,000		—		(590)		(792)		58,618
	91,238		1,071		(604)		(815)		90,890
Total	$	278,923	$	2,282	$	(2,617)	$	(815)	$	277,773

	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 $298.4 million and $249.6 million at September 30, 2021 and December 31, 2020, respectively, were pledged to secure public funds deposits and other contractual obligations. In addition, securities of $25.1 million and $32.6 million were pledged to secure credit derivatives and interest rate swaps at September 30, 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 nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30,
(Dollars in thousands)	2021		2020
Securities available-for-sale:
Proceeds from sales	$	4,135	$	65,621
Gross realized gains on sales	140		831
Gross realized losses on sales	—		14
Tax expense related to net realized gains on sales	29		172

At September 30, 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 September 30, 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 September 30, 2021
Securities Held-to-Maturity
Residential mortgage-backed securities	$	14,360	$	(372)	$	—	$	—	$	14,360	$	(372)
Total	$	14,360	$	(372)	$	—	$	—	$	14,360	$	(372)
Securities Available-for-Sale
Residential mortgage-backed securities	$	133,703	$	(1,878)	$	3,124	$	(135)	$	136,827	$	(2,013)
Corporate bonds	1,412		(1)		—		—		1,412		(1)
Total	$	135,115	$	(1,879)	$	3,124	$	(135)	$	138,239	$	(2,014)
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 September 30, 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 $14.4 million, including unrealized losses of $372 thousand. These holdings were comprised of six 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 nine months ended September 30, 2021 or September 30, 2020. Accrued interest receivable on held-to-maturity debt securities totaled $286 thousand at September 30, 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 September 30, 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 $138.2 million, including unrealized losses of $2.0 million. These holdings were comprised of twenty-nine 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, and three investment grade corporate bonds. 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 $593 thousand at September 30, 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 nine months ended September 30, 2021 of the allowance for credit losses on securities available-for-sale.

(Dollars in thousands)	Corporate Bonds
Nine months ended September 30, 2021
Securities Available-for-Sale
Beginning balance	$	(869)
Additions for securities for which no previous expected credit losses were recognized	(22)
Change in securities for which a previous expected credit loss was recognized	76
Ending balance	$	(815)
Nine months ended September 30, 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	(1)
Change in securities for which a previous expected credit loss was recognized	(391)
Ending balance	$	(692)

At September 30, 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 $62.6 million, including unrealized losses of $1.4 million, and allowance for credit losses of $815 thousand. These holdings were comprised of fourteen 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 $76 thousand for the nine months ended September 30, 2021 was primarily related to the improvement in fair value of six securities that are tied to the 10-year swap curve, which had steepened during 2021.

The Corporation recognized a $164 thousand net gain and a $321 thousand net loss on equity securities during the nine months ended September 30, 2021 and 2020, respectively, in other noninterest income. There were no sales of equity securities during the nine months ended September 30, 2021 or September 30, 2020.