Investment Securities Available-for-Sale

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available-for-Sale

Note 3. Investment Securities Available-for-Sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:

​	​		Gross		Gross		Allowance		Estimated
September 30, 2020	Amortized		Unrealized		Unrealized		for Credit		Fair
(dollars in thousands)	Cost		Gains		Losses		Losses		Value
U.S. agency securities	$	130,313	$	1,638	$	(665)	$	—	$	131,286
Residential mortgage backed securities	702,655		14,578		(590)		—		716,643
Municipal bonds	90,292		4,551		(114)		(16)		94,713
Corporate bonds	33,345		1,596		(71)		(140)		34,730
Other equity investments	198		—		—		—		198
​	$	956,803	$	22,363	$	(1,440)	$	(156)	$	977,570

​	​		Gross		Gross		Estimated
December 31, 2019	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
U.S. agency securities	$	180,228	$	621	$	(1,055)	$	179,794
Residential mortgage backed securities	541,490		4,337		(1,975)		543,852
Municipal bonds	71,902		2,034		(5)		73,931
Corporate bonds	10,530		203		—		10,733
U.S. Treasury	34,844		11		—		34,855
Other equity investments	198		—		—		198
​	$	839,192	$	7,206	$	(3,035)	$	843,363

In addition, at September 30, 2020 and December 31, 2019 the Company held $40.1 million and $35.2 million, respectively, in equity securities in a combination of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.

Accrued interest on available-for-sale securities totaled $3.1 million and $3.2 million at September 30, 2020 and December 31, 2019, respectively, and was included in other assets in the Consolidated Balance Sheets.

Gross unrealized losses and fair value of available-for-sale securities for which an allowance for credit losses has not been recorded, by length of time that individual securities have been in a continuous unrealized loss position are as follows:

​	​	Less than				12 Months				​		​
​	​	12 Months				or Greater				Total
​	​	Estimated		​		Estimated		​		Estimated		​
September 30, 2020	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	25	$	20,762	$	32	$	43,607	$	633	$	64,369	$	665
Residential mortgage backed securities	33	139,848		549		7,334		41		147,182		590
Municipal bonds	4	14,086		114		—		—		14,086		114
Corporate bonds	1	2,954		71		—		—		2,954		71
​	63	$	177,650	$	766	$	50,941	$	674	$	228,591	$	1,440

​	​	Less than				12 Months				​		​
​	​	12 Months				or Greater				Total
​	​	Estimated		​		Estimated		​		Estimated		​
December 31, 2019	Number of	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Value		Losses		Value		Losses
U. S. agency securities	36	$	75,159	$	439	$	51,481	$	616	$	126,640	$	1,055
Residential mortgage backed securities	111	197,794		1,148		90,742		827		288,536		1,975
Municipal bonds	1	1,994		5		—		—		1,994		5
​	148	$	274,947	$	1,592	$	142,223	$	1,443	$	417,170	$	3,035

The majority of the AFS debt securities in an unrealized loss position as of September 30, 2020, consisted of debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss.

As of September 30, 2020, total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. However, as of September 30, 2020, the Company determined that part of the unrealized loss positions in AFS corporate and municipal securities could be the result of credit losses, and therefore, an allowance for credit losses of $156 thousand was recorded. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is relatively short at 3.1 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of investments available-for-sale at September 30, 2020 and December 31, 2019 by contractual maturity are shown in the table below. Expected maturities for residential mortgage backed securities (“MBS”) will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

​	September 30, 2020				December 31, 2019
​	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value
U. S. agency securities maturing:	​		​		​		​
One year or less	$	38,000	$	38,111	$	96,332	$	96,226
After one year through five years	81,181		82,057		76,121		75,821
Five years through ten years	11,132		11,224		7,775		7,747
Residential mortgage backed securities	702,655		716,643		541,490		543,852
Municipal bonds maturing:
One year or less	4,834		4,868		5,897		5,969
After one year through five years	26,677		27,912		21,416		21,953
Five years through ten years	56,781		59,771		42,589		44,015
After ten years	2,000		2,072		2,000		1,994
Corporate bonds maturing:
One year or less	5,214		5,257		502		508
After one year through five years	21,156		22,124		8,528		8,725
After ten years	6,975		7,489		1,500		1,500
U.S. treasury	—		—		34,844		34,855
Other equity investments	198		198		198		198
Allowance for Credit Losses	—		(156)		—		—
​	$	956,803	$	977,570	$	839,192	$	843,363

For the nine months ended September 30, 2020, gross realized gains on sales of investments securities were $1.7 million and there were no gross realized losses on sales of investment securities. For the nine months ended September 30, 2019, gross realized gains on sales of investments securities were $1.6 million, of which $829 thousand was recognized during March 2019 on interest rate swap terminations, and there were no gross realized losses on sales of investment securities.

Proceeds from sales and calls of investment securities for the nine months ended September 30, 2020 were $130.3 million compared to $83.0 million for the same period in 2019.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2020 and December 31, 2019 was $320 million and $378 million, respectively, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of September 30, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders’ equity.