Investment Securities

3 Months Ended

Mar. 31, 2022

Investment Securities

Investment Securities

Note 2— Investment Securities

The following table summarizes the amortized cost and fair value of securities held-to-maturity and available-for-sale and the corresponding amounts of gross unrealized gains and losses at March 31, 2022 and December 31, 2021.

	March 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		(Losses)		Value
Held-to-maturity
U.S Treasuries	$	6,001	$	—	$	(491)	$	5,510
U.S. government and federal agencies		35,673		—		(2,961)		32,712
Collateralized mortgage obligations		24,119		—		(2,094)		22,025
Taxable municipal		6,085		—		(662)		5,423
Mortgage-backed		32,299		—		(2,918)		29,381
Total Held-to-maturity Securities	$	104,177	$	—	$	(9,126)	$	95,051
Available-for-sale
U.S Treasuries	$	51,704	$	10	$	(2,203)	$	49,511
U.S. government and federal agencies		33,781		20		(1,841)		31,960
Corporate bonds		3,000		—		(35)		2,965
Collateralized mortgage obligations		39,910		3		(2,556)		37,357
Tax-exempt municipal		5,004		39		(192)		4,851
Taxable municipal		1,650		17		(18)		1,649
Mortgage-backed		177,329		103		(7,622)		169,810
Total Available-for-sale Securities	$	312,378	$	192	$	(14,467)	$	298,103

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		(Losses)		Value
Held-to-maturity
U.S Treasuries	$	6,000	$	—	$	(150)	$	5,850
U.S. government and federal agencies		35,720		—		(726)		34,994
Collateralized mortgage obligations		25,606		—		(534)		25,072
Taxable municipal		6,089		—		(194)		5,895
Mortgage-backed		32,094		—		(647)		31,447
Total Held-to-maturity Securities	$	105,509	$	—	$	(2,251)	$	103,258
Available-for-sale
U.S Treasuries	$	30,954	$	—	$	(411)	$	30,543
U.S. government and federal agencies		34,803		258		(524)		34,537
Corporate bonds		1,000		31		—		1,031
Collateralized mortgage obligations		39,596		179		(726)		39,049
Tax-exempt municipal		5,007		255		—		5,262
Taxable municipal		1,653		37		(5)		1,685
Mortgage-backed		127,287		1,232		(1,326)		127,193
Total Available-for-sale Securities	$	240,300	$	1,992	$	(2,992)	$	239,300

During 2021, the Company transferred investment securities with a carrying value of $99.0 million, including an unrealized gain of $593 thousand from available-for-sale to held-to-maturity and began classifying certain newly purchased debt securities as held-to-maturity, as it has the intent and ability to hold these securities to maturity. The unrealized gain at the time of transfer is being amortized over the remaining lives of the securities.

The Company did not sell nor recognize any gain or loss for any debt securities for the three months ended March 31, 2022. The Company did not sell any debt securities for the three months ended March 31, 2021. A gross gain of $10 thousand was recognized on the call of a security during the three months ended March 31, 2021.

Securities having a market value of $88.0 million and $78.6 million at March 31, 2022 and December 31, 2021, respectively, were pledged to secure public deposits and for other purposes required by law. These securities had an amortized cost of $93.5 million and $78.8 million at March 31, 2022 and December 31, 2021, respectively.

The following tables summarize the fair value of securities held-to-maturity and securities available-for-sale at March 31, 2022 and December 31, 2021 and the corresponding amounts of gross unrealized losses. Management uses the valuations as of month-end in determining when securities are in an unrealized loss position. Therefore, a security’s market value could have exceeded its amortized cost on other days during the prior twelve-month period.

	March 31, 2022
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Held-to-maturity
U.S Treasuries	$	5,510	$	(491)	$	—	$	—	$	5,510	$	(491)
U.S. government and federal agencies		19,818		(1,796)		12,894		(1,165)		32,712		(2,961)
Collateralized mortgage obligations		20,407		(1,918)		1,618		(176)		22,025		(2,094)
Taxable municipal		1,367		(184)		4,056		(478)		5,423		(662)
Mortgage-backed		17,229		(1,611)		12,152		(1,307)		29,381		(2,918)
Total Held-to-maturity Securities	$	64,331	$	(6,000)	$	30,720	$	(3,126)	$	95,051	$	(9,126)
Available-for-sale
U.S Treasuries	$	40,683	$	(2,203)	$	—	$	—	$	40,683	$	(2,203)
U.S. government and federal agencies		17,569		(619)		13,370		(1,222)		30,939		(1,841)
Corporate bonds		1,965		(35)		—		—		1,965		(35)
Collateralized mortgage obligations		33,514		(2,230)		3,284		(326)		36,798		(2,556)
Tax-exempt municipal		2,745		(192)		—		—		2,745		(192)
Taxable municipal		—		—		252		(18)		252		(18)
Mortgage-backed		143,279		(6,306)		13,494		(1,316)		156,773		(7,622)
Total Available-for-sale Securities	$	239,755	$	(11,585)	$	30,400	$	(2,882)	$	270,155	$	(14,467)

	December 31, 2021
	Less than 12 Months				12 Months or Longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Held-to-maturity
U.S Treasuries	$	5,851	$	(150)	$	—	$	—	$	5,851	$	(150)
U.S. government and federal agencies		31,617		(645)		3,376		(81)		34,993		(726)
Corporate bonds		—		—		—		—		—		—
Collateralized mortgage obligations		25,072		(534)		—		—		25,072		(534)
Tax-exempt municipal		—		—		—		—		—		—
Taxable municipal		3,971		(133)		1,923		(61)		5,894		(194)
Mortgage-backed		27,995		(573)		3,452		(74)		31,447		(647)
Total Held-to-maturity Securities	$	94,506	$	(2,035)	$	8,751	$	(216)	$	103,257	$	(2,251)
Available-for-sale
U.S Treasuries	$	30,543	$	(411)	$	—	$	—	$	30,543	$	(411)
U.S. government and federal agencies		14,154		(301)		6,877		(223)		21,031		(524)
Corporate bonds		—		—		—		—		—		—
Collateralized mortgage obligations		30,352		(726)		—		—		30,352		(726)
Tax-exempt municipal		—		—		—		—		—		—

Taxable municipal		265		(5)		—		—		265		(5)
Mortgage-backed		93,129		(1,280)		918		(46)		94,047		(1,326)
Total Available-for-sale Securities	$	168,443	$	(2,723)	$	7,795	$	(269)	$	176,238	$	(2,992)

U.S. Treasuries - The unrealized losses in 23 and 15 U.S. Treasury debt securities at March 31, 2022 and December 31, 2021, respectively, were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company did not consider those investments to be other-than-temporarily impaired at March 31, 2022 or December 31, 2021.

U.S. Government and Federal Agencies - The unrealized losses in 46 and 40 investments in direct obligations of U.S. government agencies at March 31, 2022 and December 31, 2021, respectively, were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company did not consider those investments to be other-than-temporarily impaired at March 31, 2022 or December 31, 2021.

Collateralized Mortgage Obligation Securities - The unrealized losses in 46 and 35 investments in collateralized mortgage obligation investments at March 31, 2022 and December 31, 2021, respectively, were caused by interest rate changes. The contractual cash flows of those investments are guaranteed by various agencies of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to change in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company did not consider the investment to be other-than-temporarily impaired at March 31, 2022 or December 31, 2021.

Municipal Securities - The unrealized losses in 11 and eight investments in municipal securities at March 31, 2022 and December 31, 2021, respectively, were caused by interest rate changes. Because the Company did not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at March 31, 2022 or December 31, 2021.

Corporate Securities - The unrealized losses in two corporate securities at March 31, 2022 were caused by interest rate changes. Because the Company did not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at March 31, 2022.

Mortgage-Backed Securities - The unrealized losses in 161 and 75 investments in federal agency mortgage-backed securities at March 31, 2022 and December 31, 2021, respectively, were caused by interest rate changes. The contractual cash flows of those investments are guaranteed by various agencies of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to change in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at March 31, 2022 or December 31, 2021.

The Company reviews each debt security for other-than-temporary impairment on at least a quarterly basis based on criteria that include the extent to which cost exceeds market price, the duration of that market decline, the financial health of and specific prospects for the issuer, the security’s ratings, the Company’s best estimate of the present value of cash flows expected to be collected from debt securities, the intention with regards to holding the security to maturity and the likelihood that the Company would be required to sell the security before recovery. The Company did not consider those investments to be other-than-temporary impaired at March 31, 2022 or December 31, 2021. Additionally, the Company has not recognized any other-than-temporary impairment on any of the investments owned as of March 31, 2022.

The table below summarizes, by major security type, the contractual maturities of our investment securities as of March 31, 2022. Borrowers may have the right to call or prepay certain obligations and as such, the expected maturities of our securities are likely to differ from the scheduled contractual maturities presented below.

	March 31, 2022
	Amortized		Fair
(Dollars in thousands)	Cost		Value
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years		—		—
Due after five years through ten years		43,331		39,718
Due after ten years		60,846		55,333
Total Held-to-maturity Securities	$	104,177	$	95,051
Available-for-sale
Due in one year or less	$	1,045	$	1,050
Due after one year through five years		65,548		63,018
Due after five years through ten years		112,263		107,900
Due after ten years		133,522		126,135
Total Available-for-sale Securities	$	312,378	$	298,103

In the prevailing rate environments as of March 31, 2022 and December 31, 2021, the Company’s investment portfolio had an estimated weighted average remaining life of approximately 5.0 years and 4.5 years, respectively.

The table below summarizes the carrying amount of restricted securities as of March 31, 2022 and December 31, 2021.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Federal Reserve Bank Stock	$	3,280	$	3,275
Federal Home Loan Bank Stock		1,748		1,616
Community Bankers’ Bank Stock		60		60
Total Restricted Securities	$	5,088	$	4,951

The Company held equity securities with readily determinable fair values totaling $2.3 million and $1.9 million at March 31, 2022 and December 31, 2021, respectively. Changes in the fair value of these securities are reflected in earnings. A loss of $117 thousand and a gain of $33 thousand was recorded in other non-interest income in the Consolidated Statements of Income for the three months ended March 31, 2022 and March 31, 2021, respectively. These securities consist of mutual funds held in a trust and were obtained for the purpose of economically hedging changes in the Company’s nonqualified deferred compensation liability.