Investments

6 Months Ended

Jun. 30, 2021

The aggregate carrying and approximate fair values of investment securities follow (in thousands). Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable financial instruments.


	June 30, 2021								December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
Obligations of states and
political subdivisions	271,658		9,853		167		281,344		266,483		11,467		139		277,811
Mortgage-backed securities:
U.S. government agencies	987,297		24,937		2,327		1,009,907		815,682		34,807		105		850,384
Private label	9,271		786		—		10,057		9,976		916		—		10,892
Trust preferred securities	4,563		—		280		4,283		4,557		—		457		4,100
Corporate securities	32,377		1,468		—		33,845		31,465		2,146		1		33,610
Total Debt Securities	1,305,166		37,044		2,774		1,339,436		1,128,163		49,336		702		1,176,797
Certificates of deposit held for investment	1,245		—		—		1,245		1,992		—		—		1,992
Total Securities Available-for-Sale	$	1,306,411	$	37,044	$	2,774	$	1,340,681	$	1,130,155	$	49,336	$	702	$	1,178,789

The Company's other investment securities include marketable and non-marketable equity securities. At June 30, 2021 and December 31, 2020, the Company held $9.1 million and $11.8 million in marketable equity securities, respectively. Marketable equity securities mainly consist of investments made by the Company in equity positions of various community banks. Included within this portfolio are ownership positions in community bank holding companies including Eagle Financial Services, Inc. (EFSI) (1.5%). Changes in the fair value of the marketable equity securities are recorded in "unrealized gains (losses) recognized on equity securities still held" in the consolidated statements of income. The Company's non-marketable securities consist of securities with limited marketability, such as stock in the Federal Reserve Bank ("FRB") or the Federal Home Loan Bank ("FHLB"). At June 30, 2021 and December 31, 2020, the Company held $15.4 million and $15.5 million, respectively, in non-marketable equity securities. These securities are carried at cost due to the restrictions placed on their transferability.

The Company's mortgage-backed U.S. government agency securities consist of both residential and commercial securities, all of which are guaranteed by Fannie Mae ("FNMA"), Freddie Mac ("FHLMC"), or Ginnie Mae ("GNMA"). At June 30, 2021 and December 31, 2020 there were no securities of any non-governmental issuer whose aggregate carrying value or estimated fair value exceeded 10% of shareholders' equity.

Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities) as of June 30, 2021 and December 31, 2020. The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):


	June 30, 2021
	Less Than Twelve Months				Twelve Months or Greater				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	10,876	$	102	$	2,419	$	65	$	13,295	$	167
Mortgage-backed securities:
U.S. Government agencies	349,736		2,314		32,229		13		381,965		2,327
Trust preferred securities	—		—		4,283		280		4,283		280
Total available-for-sale	$	360,612	$	2,416	$	38,931	$	358	$	399,543	$	2,774


	December 31, 2020
	Less Than Twelve Months				Twelve Months or Greater				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	10,578	$	139	$	—	$	—	$	10,578	$	139
Mortgage-backed securities:
U.S. Government agencies	62,412		105		35		—		62,447		105
Trust preferred securities	—		—		4,100		457		4,100		457
Corporate securities	488		1		—		—		488		1
Total available-for-sale	$	73,478	$	245	$	4,135	$	457	$	77,613	$	702

The Company incurred no credit-related investment impairment losses in either the six months ended June 30, 2021 or June 30, 2020.

As of June 30, 2021, management does not intend to sell any impaired security and it is not more than likely that it will be required to sell any impaired security before the recovery of its amortized cost basis. The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations on agency-issued mortgage-related securities, general financial market uncertainty and unprecedented market volatility. These conditions should not prohibit the Company from receiving its contractual principal and interest payments on its debt securities. The fair value is expected to recover as the securities approach their maturity date or repricing date. As of June 30, 2021, management believes the unrealized losses detailed in the table above are temporary and therefore no allowance for credit losses has been recognized on the Company’s securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss will be recognized in net income in the period the other-than-temporary impairment is identified, while any noncredit loss will be recognized in other comprehensive income. During the six months ended June 30, 2021 and 2020, the Company had no credit-related net investment impairment losses.

The amortized cost and estimated fair value of debt securities at June 30, 2021, by contractual maturity, is shown in the following table (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties. Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.


	Amortized Cost		Estimated Fair Value
Available-for-Sale Debt Securities
Due in one year or less	$	4,121	$	4,176
Due after one year through five years	41,677		43,217
Due after five years through ten years	261,225		275,126
Due after ten years	998,143		1,016,917
Total	$	1,305,166	$	1,339,436

Gross gains and gross losses recognized by the Company from investment security transactions are summarized in the table below (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Gross realized gains on securities sold	$	29	$	—	$	312	$	133
Gross realized losses on securities sold	—		(6)		—		(77)
Net investment security gains (losses)	$	29	$	(6)	$	312	$	56

Gross unrealized gains recognized on equity securities still held	$	2,216	$	708	$	2,720	$	837
Gross unrealized losses recognized on equity securities still held	(1,806)		(466)		(2,361)		(2,996)
Net unrealized gains (losses) recognized on equity securities still held	$	410	$	242	$	359	$	(2,159)

During January 2020, the Company sold the entirety of its Visa Inc. Class B common shares (86,605) in a cash transaction which resulted in a pre-tax gain of $17.8 million. The carrying value of the Visa Class B shares on the Company's balance sheet was $0, as the Company had no historical cost basis in the shares.

The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $645 million and $644 million at June 30, 2021 and December 31, 2020, respectively.