Investment Securities |
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Investment Securities | 5. Investment Securities The following tables summarize the amortized cost and fair value of available-for-sale securities at December 31, 2021 and 2020, and the corresponding amounts of gross unrealized and unrecognized gains and losses:
The amortized cost and fair value of the investment securities portfolio at December 31, 2021, is shown below by contractual maturity. Expected maturities will differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity tables below, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities which are not due at a single maturity date, have not been allocated over maturity groupings.
Securities pledged at year-end 2021 and 2020 had a carrying amount of $564.4 million and $324.4 million, respectively, and were pledged to secure public deposits, securities sold under repurchase agreements and FHLB advances. The following table summarizes Premier’s securities that were in an unrealized loss position at December 31, 2021, and December 31, 2020:
ASU 2016-13 makes targeted improvements to the accounting for credit losses on securities available for sale. The concept of other than-temporarily impaired (OTTI) was replaced in 2020 with the allowance for credit losses. Unlike securities held to maturity, securities available for sale are evaluated on an individual level and pooling of securities is not allowed.
Quarterly, the Company evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as outlined below:
• Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.
• Any securities that are downgraded by a third party ratings company above would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee. • If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value. As of December 31, 2021, management had determined that no credit loss exists. In 2021 and 2020, management determined there was no OTTI. Net realized gains from the sales of investment securities totaled $2.2 million ($1.8 million after tax) in 2021 while there were net realized gains of $1.5 million ($1.2 million after tax) and $24,000 ($19,000 after tax) in 2020 and 2019, respectively. The proceeds from sales of securities and the associated gains and losses for the years ended December 31 are listed below:
At December 31, 2021, the Company also owned $14.1 million of equity securities. During 2021, the Company recognized a gain of $2.0 million associated with the mark to market requirement for equity securities. In 2020, the Company owned $1.1 million of equity securities which consisted of a single trust preferred security, and recognized a gain of $90,000 associated with the mark to market requirement for equity securities. The Company did not own any equity securities at December 31, 2019. |