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Investment Securities

6 Months Ended

Jun. 30, 2021

3. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the debt securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair
June 30, 2021	Cost		Gains		Losses		Value
US Treasury Notes	$	9,905	$	282	$	-	$	10,187
US Government Agency SBA		7,323		73		49		7,347
Mortgage-Backed Securities⁽¹⁾⁽²⁾		286,529		4,894		3,806		287,617
Other		46,510		-		-		46,510
Total	$	350,267	$	5,249	$	3,855	$	351,661

	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
June 30, 2020	Cost		Gains		Losses		Value
US Treasury Notes	$	64,802	$	583	$	1	$	65,384
US Government Agency SBA		9,397		1		110		9,288
Mortgage-Backed Securities⁽¹⁾		448,904		20,326		5		469,225
Corporate Securities		10,190		25		12		10,203
Other		15,307		-		-		15,307
Total	$	548,600	$	20,935	$	128	$	569,407

⁽¹⁾	All Mortgage-backed securities consist of securities collateralized by residential real estate and 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
June 30, 2021	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	68,471	$	895	$	-	$	69,366
Mortgage Backed Securities (1)(2)		427,999		7		7,187		420,819
Total	$	496,470	$	902	$	7,187	$	490,185

	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
June 30, 2020	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	69,036	$	1,158	$	-	$	70,194
Total	$	69,036	$	1,158	$	-	$	70,194

⁽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 to yield 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 June 30, 2021 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
June 30, 2021	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	51,494	$	51,587	$	7,808	$	7,808
After one year through five years		5,153		5,341		5,804		5,840
After five years through ten years		601		604		21,182		21,937
After ten years		6,490		6,512		33,677		33,781
		63,738		64,044		68,471		69,366

Investment securities not due at a single maturity date:
Mortgage-backed securities		286,529		287,617		427,999		420,819

Total	$	350,267	$	351,661	$	496,470	$	490,185

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
June 30, 2021	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
U.S. Government Agency SBA	$	172	$	1	$	2,328	$	48	$	2,500	$	49
Mortgage-Backed Securities		143,643		3,804		124		2		143,767		3,806
Total	$	143,815	$	3,805	$	2,452	$	50	$	146,267	$	3,855

Securities Held-to-Maturity
Mortgage Backed Securities		419,976		7,187		-		-	$	419,976	$	7,187
Total	$	419,976	$	7,187	$	-	$	-	$	419,976	$	7,187

	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
U.S. 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
June 30, 2020	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
U.S. Treasury Notes	$	49,996	$	1	$	-	$	-	$	49,996	$	1
U.S. Government Agency SBA		4,396		14		4,293		96		8,689		110
Mortgage-Backed Securities		-		-		215		5		215		5
Corporate Securities		2,547		12		-		-		2,547		12
Total	$	56,939	$	27	$	4,508	$	101	$	61,447	$	128

There were no HTM investments with gross unrealized losses at June 30, 2020.

As of June 30, 2021, the Company held 562 investment securities of which 65 were in an unrealized loss position for less than twelve months. 61 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 June 30, 2021, no U.S. Treasury Note security investments were in an unrealized loss position. The unrealized loss on the Company’s investment in a U.S. Treasury Notes was $0, $0, and $1,000 at June 30, 2021, December 31, 2020, and June 30, 2020, respectively. 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 did not intend to sell the securities and it is was 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 June 30, 2020.

U.S. Government Agency SBA – At June 30, 2021, two U.S. Government Agency SBA security investments were in an unrealized loss position for less than 12 months and 45 were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in U.S. Government Agency SBA securities were $49,000, $93,000, and $110,000 at June 30, 2021, December 31, 2020, and June 30, 2020, respectively. 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 June 30, 2021, December 31, 2020, and June 30, 2020.

Mortgage-Backed Securities – At June 30, 2021, 63 mortgage-backed security investments were in an unrealized loss position for less than 12 months and 16 were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in mortgage-backed securities were $11.0 million, $48,000, and $5,000 at June 30, 2021, December 31, 2020, and June 30, 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 June 30, 2021, December 31, 2020, and June 30, 2020.

Corporate Securities - At June 30, 2021, we had no corporate securities in our portfolio, having sold all positions during the second quarter of 2021. The unrealized losses on the Company’s investment in the corporate securities were $0, $18,000 and $12,000 at June 30, 2021, December 31, 2020 and June 30, 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 did not intend to sell the securities and it was 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 December 31, 2020 and June 30, 2020.

Other Securities – At June 30, 2021, none of the Other securities were in an unrealized loss position. Other securities consisted of Money Market accounts held at investment brokerages.

Obligations of States and Political Subdivisions – At June 30, 2021, no obligations of states and political subdivisions were in an unrealized loss position. As of June 30, 2021, 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.

There were no unrealized losses on the Company’s investment in obligations of states and political subdivisions at June 30, 2021, December 31, 2020 and June 30, 2020.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Proceeds	$	236,082	$	745	$	299,870	$	3,000
Gains		3,730		-		5,570		13
Losses		3,016		-		3,016		-

Pledged Securities

As of June 30, 2021, securities carried at $465.8 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 $370.4 million at June 30, 2020.