Note 5. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities classified as available-for-sale and held-to-maturity at September 30, 2019 and December 31, 2018 are summarized as follows (in thousands):



Available-for-sale	September 30, 2019
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
U.S. Government agency securities	$ 53,479	$ 1,198	$ (149)	$ 54,528
Asset-backed securities *	259,516	225	(733)	259,008
Tax-exempt obligations of states and political subdivisions	6,173	137	-	6,310
Taxable obligations of states and political subdivisions	60,052	2,498	-	62,550
Residential mortgage-backed securities	349,909	4,154	(1,105)	352,958
Collateralized mortgage obligation securities	236,468	2,566	(200)	238,834
Commercial mortgage-backed securities	403,542	5,525	(818)	408,249
	$ 1,369,139	$ 16,303	$ (3,005)	$ 1,382,437


	September 30, 2019
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
* Asset-backed securities as shown above	cost	gains	losses	value
Federally insured student loan securities	$ 45,776	$ 22	$ (415)	$ 45,383
Collateralized loan obligation securities	210,869	199	(318)	210,750
Other	2,871	4	-	2,875
	$ 259,516	$ 225	$ (733)	$ 259,008



Held-to-maturity	September 30, 2019
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
Other debt securities - single issuers	$ 9,206	$ -	$ (2,060)	$ 7,146
Other debt securities - pooled	75,193	725	-	75,918
	$ 84,399	$ 725	$ (2,060)	$ 83,064



Available-for-sale	December 31, 2018
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
U.S. Government agency securities	$ 54,095	$ 146	$ (879)	$ 53,362
Asset-backed securities *	189,850	104	(1,352)	188,602
Tax-exempt obligations of states and political subdivisions	7,546	50	(45)	7,551
Taxable obligations of states and political subdivisions	60,152	803	(520)	60,435
Residential mortgage-backed securities	377,199	648	(8,106)	369,741
Collateralized mortgage obligation securities	265,914	287	(3,994)	262,207
Commercial mortgage-backed securities	300,143	190	(5,907)	294,426
	$ 1,254,899	$ 2,228	$ (20,803)	$ 1,236,324


	December 31, 2018
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
* Asset-backed securities as shown above	cost	gains	losses	value
Federally insured student loan securities	$ 59,705	$ 87	$ (283)	$ 59,509
Collateralized loan obligation securities	125,045	-	(1,069)	123,976
Other	5,100	17	-	5,117
	$ 189,850	$ 104	$ (1,352)	$ 188,602



Held-to-maturity	December 31, 2018
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
Other debt securities - single issuers	$ 9,168	$ -	$ (1,890)	$ 7,278
Other debt securities - pooled	75,264	849	-	76,113
	$ 84,432	$ 849	$ (1,890)	$ 83,391

Investments in Federal Home Loan Bank (FHLB) and Atlantic Central Bankers Bank stock are recorded at cost and amounted to $4.3 million and $1.1 million, respectively, at September 30, 2019 and December 31, 2018.

The amortized cost and fair value of the Company’s investment securities at September 30, 2019, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.



	Available-for-sale		Held-to-maturity
	Amortized	Fair	Amortized	Fair
	cost	value	cost	value
Due before one year	$ 6,877	$ 6,879	$ -	$ -
Due after one year through five years	73,153	74,685	-	-
Due after five years through ten years	248,936	254,860	-	-
Due after ten years	1,040,173	1,046,013	84,399	83,064
	$ 1,369,139	$ 1,382,437	$ 84,399	$ 83,064

At September 30, 2019 and December 31, 2018, investment securities with a fair value of approximately $258.9 million and $116.0 million, respectively, were pledged to secure a line of credit with the FHLB. At September 30, 2019 and December 31, 2018, investment securities with a fair value of approximately $165.0 million and $169.5 million, respectively, were pledged to secure a line of credit with the Federal Reserve Bank.

Fair values of available-for-sale securities are based on the fair market values supplied by a third-party market data provider, or where such third-party market data is not available, fair values are based on discounted cash flows,. The fair values of held-to-maturity securities are based on the present value of cash flows, derived by discounting expected cash flows from principal and interest using yield to maturity at the measurement date. Alternatively, held-to-maturity fair values may be based upon prices provided by securities dealers with expertise in the securities being evaluated, or actual trade data from an independent pricing service.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at September 30, 2019 (dollars in thousands):



Available-for-sale		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	3	$ 3,074	$ (5)	$ 4,473	$ (144)	$ 7,547	$ (149)
Asset-backed securities	27	136,446	(538)	13,541	(195)	149,987	(733)
Residential mortgage-backed securities	63	51,011	(131)	81,167	(974)	132,178	(1,105)
Collateralized mortgage obligation securities	21	25,706	(33)	20,232	(167)	45,938	(200)
Commercial mortgage-backed securities	5	43,979	(247)	24,297	(571)	68,276	(818)
Total temporarily impaired
investment securities	119	$ 260,216	$ (954)	$ 143,710	$ (2,051)	$ 403,926	$ (3,005)



Held-to-maturity		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Corporate and other debt securities:
Single issuers	1	$ -	$ -	$ 7,146	$ (2,060)	$ 7,146	$ (2,060)
Total temporarily impaired
investment securities	1	$ -	$ -	$ 7,146	$ (2,060)	$ 7,146	$ (2,060)

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2018 (dollars in thousands):



Available-for-sale		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	10	$ 679	$ (2)	$ 41,719	$ (877)	$ 42,398	$ (879)
Asset-backed securities	26	148,753	(1,230)	11,506	(122)	160,259	(1,352)
Tax-exempt obligations of states and
political subdivisions	3	-	-	3,625	(45)	3,625	(45)
Taxable obligations of states and
political subdivisions	22	4,492	(19)	35,599	(501)	40,091	(520)
Residential mortgage-backed securities	118	17,168	(49)	302,407	(8,057)	319,575	(8,106)
Collateralized mortgage obligation securities	44	1,522	(3)	193,355	(3,991)	194,877	(3,994)
Commercial mortgage-backed securities	26	121,860	(2,020)	151,453	(3,887)	273,313	(5,907)
Total temporarily impaired
investment securities	249	$ 294,474	$ (3,323)	$ 739,664	$ (17,480)	$ 1,034,138	$ (20,803)



Held-to-maturity		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Corporate and other debt securities:
Single issuers	1	$ -	$ -	$ 7,278	$ (1,890)	$ 7,278	$ (1,890)
Total temporarily impaired
investment securities	1	$ -	$ -	$ 7,278	$ (1,890)	$ 7,278	$ (1,890)

The Company owns one single issuer trust preferred security issued by an insurance company. The security is not rated by any bond rating service. At September 30, 2019, it had a book value of $9.2 million and a fair value of $7.1 million.

The Company has evaluated the securities in the above tables as of September 30, 2019 and has concluded that none of these securities has impairment that is other-than-temporary. The Company evaluates whether a credit impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral and (e) the payment structure of the security. The Company’s determination of the best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. The Company concluded that most of the securities that are in an unrealized loss position are in a loss position because of changes in market interest rates after the securities were purchased. Securities that have been in an unrealized loss position for 12 months or longer include other securities whose market values are sensitive to market interest rates. The Company’s unrealized loss for other debt securities, which include one single issuer trust preferred security, is primarily related to general market conditions, including a lack of liquidity in the market. The severity of the temporary impairments in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level. As a result of its review, the Company concluded that other-than-temporary impairment did not exist due to the Company’s ability and intention to hold these securities to recover their amortized cost basis.