Investment Securities

As of March 31, 2020, and December 31, 2019, the investment portfolio was primarily comprised of debt securities, with a small portion of the portfolio invested in equity securities.

See also the section "Restricted Cash and Investments," under Item (c), "Accounting Policies," contained in Note 1, "Summary of Significant Accounting Policies," above in this Form 10-Q, for further information regarding the Company's investment in FHLB Stock. See Note 14, "Fair Value Measurements," to the Company's unaudited consolidated interim financial statements of this Form 10-Q, contained below, for further information regarding the Company's fair value measurements for investment securities.

Debt Securities

The amortized cost and fair values of debt securities at the dates specified are summarized as follows:



	March 31, 2020
(Dollars in thousands)	Amortized cost		Unrealized gains		Unrealized losses		Fair Value
Federal agency obligations⁽¹⁾	$	1,000	$	6	$	—	$	1,006
Residential federal agency MBS⁽¹⁾	181,399		7,361		47		188,713
Commercial federal agency MBS⁽¹⁾	110,441		6,372		—		116,813
Taxable municipal securities	84,034		4,077		237		87,874
Tax-exempt municipal securities	91,554		4,991		1		96,544
Corporate bonds	13,817		467		19		14,265
Certificate of deposits⁽²⁾("CDs")	454		2		—		456
Total debt securities, at fair value	$	482,699	$	23,276	$	304	$	505,671



	December 31, 2019
(Dollars in thousands)	Amortized cost		Unrealized gains		Unrealized losses		Fair Value
Federal agency obligations⁽¹⁾	$	999	$	5	$	—	$	1,004
Residential federal agency MBS⁽¹⁾	190,392		2,599		333		192,658
Commercial federal agency MBS⁽¹⁾	111,182		3,453		—		114,635
Taxable municipal securities	79,095		2,726		134		81,687
Tax-exempt municipal securities	95,342		4,696		—		100,038
Corporate bonds	13,826		485		—		14,311
CDs⁽²⁾	454		1		—		455
Total debt securities, at fair value	$	491,290	$	13,965	$	467	$	504,788

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(1)	These categories may include investments issued or guaranteed by government sponsored enterprises such as Fannie Mae ("FNMA"), Freddie Mac ("FHLMC"), Federal Farm Credit Bank ("FFCB"), or one of several Federal Home Loan Banks, as well as, investments guaranteed by Ginnie Mae ("GNMA"), a wholly-owned government entity.


(2)	CDs represent term deposits issued by banks that are subject to FDIC insurance and purchased on the open market.

As of the dates reflected in the tables above, the majority of residential and commercial federal agency MBS categories were collateralized mortgage obligations ("CMOs") issued by U.S. agencies. The remaining MBS investments totaled $23.7 million and $23.5 million at March 31, 2020 and December 31, 2019, respectively.

As of the dates reflected in the tables above, all of the Company's debt securities were classified as available-for-sale and carried at fair value.

Net unrealized appreciation and depreciation on debt securities available-for-sale, net of applicable income taxes, are reflected as a component of accumulated other comprehensive income (loss). The net unrealized gain or loss in the Company's debt security portfolio fluctuates as market interest rates rise and fall. Due to the fixed rate nature of this portfolio, as market rates fall, the value of the portfolio rises, and as market rates rise, the value of the portfolio declines. The unrealized gains or losses on debt securities will also decline as the securities approach maturity. Unrealized losses on debt securities that are deemed OTTI are generally charged to earnings, as described further in Note 1, "Summary of Significant Accounting Policies," under Item (e), "Investments," to the Company's audited consolidated financial statements contained in the Company's 2019 Annual Report on Form 10-K. Gains or losses will be recognized in the Consolidated Statement of Income if the securities are sold.

The following tables summarize debt securities with unrealized losses, due to the fair values having declined below the amortized costs of the individual investments, by the duration of their continuous unrealized loss positions at March 31, 2020 and December 31, 2019:



	March 31, 2020
	Less than 12 months				12 months or longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of holdings
Residential federal agency MBS	$	9,392	$	47	$	—	$	—	$	9,392	$	47	3
Taxable municipal securities	6,804		237		—		—		6,804		237		7
Tax-exempt municipal securities	582		1		—		—		582		1		1
Corporate bonds	2,304		19		—		—		2,304		19		17
Total temporarily impaired debt securities	$	19,082	$	304	$	—	$	—	$	19,082	$	304	28



	December 31, 2019
	Less than 12 months				12 months or longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of holdings
Residential federal agency MBS	$	36,464	$	263	$	5,060	$	70	$	41,524	$	333	11
Taxable municipal securities	16,826		134		—		—		16,826		134		15
Total temporarily impaired debt securities	$	53,290	$	397	$	5,060	$	70	$	58,350	$	467	26

During the three months ended March 31, 2020 and 2019, the Company did not record any OTTI on its investments in debt securities and at March 31, 2020, management did not consider any debt securities to have OTTI. Management regularly reviews the portfolio for debt securities with unrealized losses that are other-than-temporarily impaired. There have been no material changes to the Company's process for assessing investments for OTTI as reported in the Company's 2019 Annual Report on Form 10-K. For more information about the Company's assessment for OTTI, see Note 2, "Investment Securities," to the Company's audited consolidated financial statements contained in the Company's 2019 Annual Report on Form 10-K.

The contractual maturity distribution at March 31, 2020 of debt securities was as follows:



(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	11,425	$	11,478
Due after one, but within five years	85,244		89,501
Due after five, but within ten years	165,531		174,885
Due after ten years	220,499		229,807
Total debt securities	$	482,699	$	505,671

Scheduled contractual maturities shown above may not reflect the actual maturities of the investments. The actual MBS/CMO cash flows likely will be faster than presented above due to prepayments and amortization. Similarly, included in the table above are callable securities, comprised of municipal securities and corporate bonds, with a fair value of $89.8 million, which can be redeemed by the issuers prior to the maturity presented above. Management considers these factors when evaluating the interest-rate risk in the Company's asset-liability management program.

From time to time, the Company may pledge debt securities as collateral for deposit account balances of municipal customers, and for borrowing capacity with the FHLB and the FRB. The fair value of debt securities pledged as collateral for these purposes was $503.3 million at March 31, 2020.

Sales of debt securities for the three months ended March 31, 2020 and March 31, 2019 are summarized as follows:



	Three months ended March 31,
(Dollars in thousands)	2020		2019
Amortized cost of debt securities sold ⁽¹⁾	$	2,527	$	1,793
Gross realized gains on sales	100		2
Gross realized losses on sales	—		(3		)
Total proceeds from sales of debt securities	$	2,627	$	1,792

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(1)Amortized cost of investments sold is determined on a specific identification basis and includes pending trades based on trade date, if applicable.

Equity Securities

The Company held equity securities with a fair value of $588 thousand at March 31, 2020 and $467 thousand at December 31, 2019. At March 31, 2020, the equity portfolio consisted primarily of investments in common stock of individual entities in the financial services industry and mutual funds held in conjunction with the Company's supplemental executive retirement and deferred compensation plan.

Equity securities are accounted for under ASC Topic 321, "Investments-Equity Securities," and are recorded on the Company's consolidated balance sheet at fair value with changes in fair value recognized in the Company's consolidated income statement as a component of "Other Income." There were no sales of equity securities in either the three months ended March 31, 2020 or March 31, 2019. For the three months ended March 31, 2020, the Company recorded net losses of $198 thousand compared with net gains of $186 thousand for the three months ended March 31, 2019 to adjust the carrying value in each period to fair value. The amount recognized related to equity securities in "Other income" is dependent on the amount of dollars invested in equities, the magnitude of changes in equity market values, and the amount of gains or losses realized through equity sales.