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Investment Securities

3 Months Ended

Mar. 31, 2021

3. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows (in thousands):

	Amortized		Gross Unrealized				Fair
March 31, 2021	Cost		Gains		Losses		Value
US Treasury Notes	$	14,885	$	348	$	-	$	15,233
US Government Agency SBA		7,894		1		86		7,809
Mortgage Backed Securities⁽¹⁾⁽²⁾		494,399		8,192		10,080		492,511
Corporate Securities		44,998		488		711		44,775
Other		645		-		-		645
Total	$	562,821	$	9,029	$	10,877	$	560,973

	Amortized		Gross Unrealized				Fair
December 31, 2020	Cost		Gains		Losses		Value
US Treasury Notes	$	14,859	$	429	$	-	$	15,288
US Government Agency SBA		8,252		1		93		8,160
Mortgage Backed Securities⁽¹⁾		720,562		17,359		48		737,873
Corporate Securities		45,010		927		18		45,919
Other		492		-		-		492
Total	$	789,175	$	18,716	$	159	$	807,732

	Amortized		Gross Unrealized				Fair
March 31, 2020	Cost		Gains		Losses		Value
US Treasury Notes	$	14,777	$	622	$	-	$	15,399
US Government Agency SBA		10,043		9		98		9,954
Mortgage Backed Securities⁽¹⁾		482,439		18,945		8		501,376
Other		5,517		-		-		5,517
Total	$	512,776	$	19,576	$	106	$	532,246

⁽¹⁾All Mortgage Backed Securities were issued by an agency or government sponsored entity of the U.S. Government.

⁽²⁾During Q1 2021, the Company transferred $316.9 million of AFS securities to HTM.

The amortized cost, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Amortized		Gross Unrealized				Fair
March 31, 2021	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	70,454	$	905	$	-	$	71,359
Mortgage Backed Securities⁽¹⁾⁽²⁾		314,600		-		11,131		303,469
Total	$	385,054	$	905	$	11,131	$	374,828

	Amortized		Gross Unrealized				Fair
December 31, 2020	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	68,933	$	1,116	$	-	$	70,049
Total	$	68,933	$	1,116	$	-	$	70,049

	Amortized		Gross Unrealized				Fair
March 31, 2020	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,701	$	812	$	10	$	59,503
Total	$	58,701	$	812	$	10	$	59,503

⁽¹⁾All Mortgage Backed Securities were issued by an agency or government sponsored entity of the U.S. Government.

⁽²⁾During Q1 2021, the Company transferred $316.9 million of AFS securities to HTM.

As part of our ongoing review of our investment securities portfolio, we reassessed the classification of certain MBS securities. During the first quarter of 2021, we transferred $316.9 million of these securities, which we intend and have the ability to hold to maturity, from available-for-sale securities to held-to-maturity at fair value. The unrealized pre-tax loss of $2,000 at the date of transfer remained in accumulated other comprehensive income and is amortized over the remaining lives of the securities.

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at March 31, 2021 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
March 31, 2021	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	5,642	$	5,650	$	8,152	$	8,152
After one year through five years		32,404		32,682		5,542		5,582
After five years through ten years		23,307		23,143		22,277		23,052
After ten years		7,069		6,987		34,483		34,573
		68,422		68,462		70,454		71,359

Investment securities not due at a single maturity date:
Mortgage-backed securities		494,399		492,511		314,600		303,469

Total	$	562,821	$	560,973	$	385,054	$	374,828

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
March 31, 2021	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Government Agency SBA	$	505	$	1	$	7,028	$	85	$	7,533	$	86
Mortgage Backed Securities		277,832		10,077		173		3		278,005		10,080
Corporate Securities		31,958		711		-		-		31,958		711
Total	$	310,295	$	10,789	$	7,201	$	88	$	317,496	$	10,877

Securities Held-to-Maturity
Mortgage Backed Securities		303,275		11,131		-		-		303,275		11,131
Total	$	303,275	$	11,131	$	-	$	-	$	303,275	$	11,131

	Less Than 12 Months				12 Months or More				Total
December 31, 2020	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Government Agency SBA	$	1,741	$	3	$	6,126	$	90	$	7,867	$	93
Mortgage Backed Securities		20,142		45		177		3		20,319		48
Corporate Securities		4,041		18		-		-		4,041		18
Total	$	25,924	$	66	$	6,303	$	93	$	32,227	$	159

There were no HTM investments with gross unrealized losses at December 31, 2020.

	Less Than 12 Months				12 Months or More				Total
March 31, 2020	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Government Agency SBA	$	2,458	$	5	$	4,674	$	93	$	7,132	$	98
Mortgage Backed Securities		1,503		2		255		6		1,758		8
Total	$	3,961	$	7	$	4,929	$	99	$	8,890	$	106

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	728	$	10	$	-	$	-	$	728	$	10
Total	$	728	$	10	$	-	$	-	$	728	$	10

As of March 31, 2021, the Company held 599 investment securities of which 83 were in an unrealized loss position for less than twelve months. 88 securities were in an unrealized loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

U.S. Treasury Notes – At March 31, 2021, December 31, 2020 and March 31, 2020, no U.S. Treasury Notes security investments were in a loss position.

U.S. Government SBA – At March 31, 2021, three U.S. Government SBA security investments were in an unrealized loss position for less than 12 months and 70 were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in U.S. Government SBA securities were $86,000 at March 31, 2021 and $93,000 at December 31, 2020, and $98,000 at March 31, 2020. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2021, December 31, 2020, and March 31, 2020.

Mortgage Backed Securities – At March 31, 2021, 62 mortgage backed security investments were in an unrealized loss position for less than 12 months and 18 were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in mortgage backed securities were $21.2 million, $48,000, and $8,000 at March 31, 2021, December 31, 2020, and March 31, 2020, respectively. The unrealized losses were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2021, December 31, 2020, and March 31, 2020.

Corporate Securities – At March 31, 2021, 18 corporate securities were in an unrealized loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company’s investment in corporate securities were $711,000, $18,000 and $0 at March 31, 2021, December 31, 2020, and March 31, 2020, respectively. Changes in the prices of corporate securities are primarily influenced by: (1) changes in market interest rates; (2) changes in perceived credit risk in the general economy or in particular industries; (3) changes in the perceived credit risk of a particular company; and (4) day to day trading supply, demand and liquidity. The Company monitors the status of each of our corporate securities and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2021, December 31, 2020, and March 31, 2020.

Obligations of States and Political Subdivisions - At March 31, 2021, no obligation of states and political subdivisions were in an unrealized loss position. As of March 31, 2021, one-hundred percent of the Company’s bank-qualified municipal bond portfolio was rated at either the issue or issuer level, and all of these ratings were “investment grade.” The Company monitors the status of all municipal investments in the portfolio and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $0 and $10,000 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively. Management believes that any unrealized losses on the Company’s investments in obligations of states and political subdivisions were caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company would not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2021, December 31, 2020, and March 31, 2020.

Proceeds from sales and calls of securities for the periods shown were as follows:

(in thousands)	Proceeds		Gains		Losses
Three Months Ended March 31, 2021	$	63,788	$	1,840	$	-
Three Months Ended March 31, 2020	$	2,255	$	13	$	-

Pledged Securities

As of March 31, 2021, securities carried at $390.9 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $439.7 million at December 31, 2020, and $381.3 million at March 31, 2020.