Investment Securities

12 Months Ended

Dec. 31, 2020

Investment Securities

Investment Securities

NOTE 5 Investment Securities

The amortized cost of investment securities and their estimated fair values, with gross unrealized gains (losses) at December 31, 2020 and 2019 are as follows:

	December 31, 2020
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
U.S. Treasury and agencies	$	5,926	$	—	$	(19)	$	5,907
Obligations of state and political agencies		148,491		5,282		—		153,773
Mortgage backed securities
Residential agency		254,002		8,002		—		262,004
Commercial		139,059		1,070		(436)		139,693
Asset backed securities		109		6		—		115
Corporate bonds		30,553		387		(90)		30,850
Total available-for-sale investment securities	$	578,140	$	14,747	$	(545)	$	592,342

	December 31, 2019
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
U.S. Treasury and agencies	$	21,246	$	9	$	(15)	$	21,240
Obligations of state and political agencies		68,162		647		(161)		68,648
Mortgage backed securities
Residential agency		180,411		2,258		(131)		182,538
Commercial		30,752		101		(168)		30,685
Asset backed securities		139		5		—		144
Corporate bonds		7,054		41		—		7,095
Total available-for-sale investment securities	$	307,764	$	3,061	$	(475)	$	310,350

The amortized cost and estimated fair value of investment securities at December 31, 2020, by contractual maturity are as follows:

	Amortized		Fair
(dollars in thousands)	Cost		Value
Due within one year or less	$	3,469	$	3,486
Due after one year through five years		31,607		32,256
Due after five years through ten years		155,141		160,462
Due after 10 years		387,923		396,138
Total available-for-sale investment securities	$	578,140	$	592,342

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities with carrying value of $160.8 million and $136.2 million, were pledged at December 31, 2020 and 2019, respectively, to secure public deposits and for other purposes required or permitted by law.

Proceeds from the sale of available-for-sale securities for the years ended December 31, 2020, 2019, and 2018 are displayed in the table below:

	Year ended
	December 31,
(dollars in thousands)	2020		2019		2018
Proceeds	$	75,647	$	32,565	$	6,488
Realized gains		2,737		357		144
Realized losses		—		(22)		(15)

Information pertaining to investment securities with gross unrealized losses that are not deemed to be other-than-temporarily impaired at December 31, 2020 and 2019 aggregated by investment category and length of time that individual investment securities have been in a continuous loss position, follows:

	December 31, 2020
	Less than 12 Months				Over 12 Months				Total
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(dollars in thousands)	Losses		Value		Losses		Value		Losses		Value
U.S. Treasury and agencies	$	(10)	$	4,509	$	(9)	$	1,309	$	(19)	$	5,818
Obligations of state and political agencies		—		—		—		—		—		—
Mortgage backed securities
Residential agency		—		—		—		—		—		—
Commercial		(432)		68,494		(4)		2,356		(436)		70,850
Asset backed securities		—		—		—		2		—		2
Corporate bonds		(90)		16,454		—		—		(90)		16,454
Total available-for-sale investment securities	$	(532)	$	89,457	$	(13)	$	3,667	$	(545)	$	93,124

	December 31, 2019
	Less than 12 Months				Over 12 Months				Total
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(dollars in thousands)	Losses		Value		Losses		Value		Losses		Value
U.S. Treasury and agencies	$	(5)	$	1,740	$	(10)	$	9,990	$	(15)	$	11,730
Obligations of state and political agencies		(140)		11,959		(21)		5,798		(161)		17,757
Mortgage backed securities
Residential agency		(52)		17,131		(79)		14,036		(131)		31,167
Commercial		(116)		15,235		(52)		6,195		(168)		21,430
Asset backed securities		—		2		—		—		—		2
Corporate bonds		—		—		—		—		—		—
Total available-for-sale investment securities	$	(313)	$	46,067	$	(162)	$	36,019	$	(475)	$	82,086

For all of the above investment securities, the unrealized losses were generally due to changes in interest rates and unrealized losses are considered to be temporary as the fair value is expected to recover as the securities approach maturity. The Company evaluates securities for other-than-temporary impairment, or OTTI, on a quarterly basis, at a minimum, and more frequently when economic or market concerns warrant such evaluation. In estimating OTTI losses, consideration is given to the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities, considers external credit ratings and recent downgrades and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value.

For the year ended December 31, 2020 and 2019, the Company did not believe any OTTI existed and therefore did not recognize any OTTI losses on its investment securities.

As of December 31, 2020 and 2019, the carrying value of the Company’s Federal Reserve Bank stock and FHLB stock was as follows:

	December 31,		December 31,
(dollars in thousands)	2020		2019
Federal Reserve	$	2,675	$	2,675
FHLB		3,090		3,080

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

Visa Class B Restricted Shares

In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of December 31, 2020, the conversion ratio was 1.6228. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (11,236 Class A equivalents) that the Company owned as of December 31, 2020 and 2019, are carried at a zero cost basis.