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Investment Securities

9 Months Ended

Sep. 30, 2020

3.	Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the debt securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair
September 30, 2020	Cost		Gains		Losses		Value
US Treasury Notes	$	94,830	$	512	$	-	$	95,342
US Government Agency SBA		8,530		1		102		8,429
Mortgage Backed Securities⁽¹⁾		421,263		18,050		39		439,274
Corporate Securities		25,002		159		98		25,063
Other		428		-		-		428
Total	$	550,053	$	18,722	$	239	$	568,536

	Amortized		Gross Unrealized				Fair/Book
December 31, 2019	Cost		Gains		Losses		Value
US Treasury Notes	$	54,745	$	250	$	-	$	54,995
US Government Agency SBA		10,902		9		113		10,798
Mortgage Backed Securities⁽¹⁾		436,531		4,646		99		441,078
Other		515		-		-		515
Total	$	502,693	$	4,905	$	212	$	507,386

	Amortized		Gross Unrealized				Fair
September 30, 2019	Cost		Gains		Losses		Value
US Treasury Notes	$	129,724	$	270	$	5	$	129,989
US Government Agency SBA		11,844		15		115		11,744
Mortgage Backed Securities⁽¹⁾		343,295		4,425		163		347,557
Other		3,640		-		-		3,640
Total	$	488,503	$	4,710	$	283	$	492,930

⁽¹⁾All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of debt securities classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
September 30, 2020	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	69,913	$	1,142	$	-	$	71,055
Total	$	69,913	$	1,142	$	-	$	71,055

	Book		Gross Unrealized				Fair
December 31, 2019	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	60,229	$	880	$	12	$	61,097
Total	$	60,229	$	880	$	12	$	61,097

	Book		Gross Unrealized				Fair
September 30, 2019	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	60,354	$	946	$	7	$	61,293
Total	$	60,354	$	946	$	7	$	61,293

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at September 30, 2020 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
September 30, 2020	Amortized Cost		Fair Value		Book Value		Fair Value
Within one year	$	85,403	$	85,463	$	7,898	$	7,898
After one year through five years		25,426		25,963		4,816		4,863
After five years through ten years		10,198		10,169		24,567		25,560
After ten years		7,763		7,667		32,632		32,734
		128,790		129,262		69,913		71,055

Investment securities not due at a single maturity date:
Mortgage-backed securities		421,263		439,274		-		-

Total	$	550,053	$	568,536	$	69,913	$	71,055

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
September 30, 2020	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Government Agency SBA	$	2,312	$	4	$	5,810	$	98	$	8,122	$	102
Mortgage Backed Securities		20,741		35		194		4		20,935		39
Corporate Securities		10,363		98		-		-		10,363		98
Total	$	33,416	$	137	$	6,004	$	102	$	39,420	$	239

There were no HTM investments with gross unrealized losses at September 30, 2020.

	Less Than 12 Months				12 Months or More				Total
December 31, 2019	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Government Agency SBA	$	2,693	$	6	$	5,198	$	107	$	7,891	$	113
Mortgage Backed Securities		131,005		88		713		11		131,718		99
Total	$	133,698	$	94	$	5,911	$	118	$	139,609	$	212

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	355	$	12	$	-	$	-	$	355	$	12
Total	$	355	$	12	$	-	$	-	$	355	$	12

	Less Than 12 Months				12 Months or More				Total
September 30, 2019	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	114,995	$	5	$	-	$	-	$	114,995	$	5
US Government Agency SBA		2,046		3		5,779		112		7,825		115
Mortgage Backed Securities		107,628		146		876		17		108,504		163
Total	$	224,669	$	154	$	6,655	$	129	$	231,324	$	283

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	212	$	7	$	-	$	-	$	212	$	7
Total	$	212	$	7	$	-	$	-	$	212	$	7

As of September 30, 2020, the Company held 568 investment securities of which 20 were in an unrealized loss position for less than twelve months and 82 securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – At September 30, 2020, December 31, 2019, and September 30, 2019, no securities of government agency and government sponsored entities were in an unrealized loss position for less than 12 months or for 12 months or more.

U.S. Treasury Notes – At September 30, 2020, no U.S. Treasury Note security investments were in an unrealized loss position for less than 12 months or for 12 months or more. The unrealized losses on the Company's investment in U.S. Treasury Notes were $0, $0, and $5,000 at September 30, 2020, December 31, 2019, and September 30, 2019, respectively. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2020, December 31, 2019, and September 30, 2019.

U.S. Government SBA – At September 30, 2020, 11 U.S. Government SBA security investments were in an unrealized loss position for less than 12 months and 63 were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Government SBA securities were $102,000, $113,000, and $115,000 at September 30, 2020, December 31, 2019, and September 30, 2019, respectively. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2020, December 31, 2019, and September 30, 2019.

Mortgage Backed Securities – At September 30, 2020, 3 mortgage backed security investments were in an unrealized loss position for less than 12 months and 19 were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $39,000, $99,000, and $163,000 at September 30, 2020, December 31, 2019, and September 30, 2019, respectively. The unrealized losses were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2020, December 31, 2019, and September 30, 2019.

Obligations of States and Political Subdivisions – At September 30, 2020, there were no obligation of states and political subdivisions in an unrealized loss position for less than 12 months or for 12 months or more. As of September 30, 2020, over ninety-nine percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the one percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $12,000 and $7,000 at September 30, 2020, December 31, 2019, and September 30, 2019, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2020, December 31, 2019, and September 30, 2019.

Corporate Securities - At September 30, 2020, 6 corporate securities were in an unrealized loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized loss on the Company’s investment in the corporate security was $98,000. Changes in the prices of corporate securities are primarily influenced by: (1) changes in market interest rates; (2) changes in perceived credit risk in the general economy or in particular industries; (3) changes in the perceived credit risk of a particular company; and (4) day to day trading supply, demand and liquidity. The Company monitors the status of each of our corporate securities and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2020.

Proceeds from sales and calls of securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Proceeds	$	50,620	$	2,780	$	53,620	$	4,090
Gains		-		1		13		1
Losses		-		-		-		-

Pledged Securities

As of September 30, 2020, securities carried at $333.2 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. Carrying amount of pledged securities was $352.5 million at December 31, 2019, and $267.2 million at September 30, 2019.