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Investment Securities

6 Months Ended

Jun. 30, 2022

Investment Securities [Abstract]

Investment Securities

Note 3—Investment Securities

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

Available-for-Sale Securities						Gross Unrealized
(Dollars in thousands)		Amortized Cost				Gains				Losses				Fair Value
As of June 30, 2022
U.S. Treasury notes		$	4,968			$	-			$	16			$	4,952
U.S. Government-sponsored securities			5,402				65				26				5,441
Mortgage-backed securities⁽¹⁾			232,368				116				28,877				203,607
Collateralized mortgage obligations⁽¹⁾			1,525				-				23				1,502
Corporate securities			10,049				-				523				9,526
Other			310				-				-				310
Total available-for-sale securities		$	254,622			$	181			$	29,465			$	225,338

⁽¹⁾All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

						Gross Unrealized
(Dollars in thousands)		Amortized Cost				Gains				Losses				Fair Value
As of December 31, 2021
U.S. Treasury notes		$	9,938			$	151			$	-			$	10,089
U.S. Government-sponsored securities			6,351				62				39				6,374
Mortgage-backed securities⁽¹⁾			253,300				3,200				5,380				251,120
Collateralized mortgage obligations⁽¹⁾			2,412				24				-				2,436
Other			435				-				-				435
Total available-for-sale securities		$	272,436			$	3,437			$	5,419			$	270,454

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations 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 investments classified as held-to-maturity are as follows:

Held-to-Maturity Securities						Gross Unrealized
(Dollars in thousands)		Amortized Cost				Gains				Losses				Fair Value					Allowance for Credit Losses
As of June 30, 2022
Municipal securities		$	62,459			$	33			$	151			$	62,341			$	393
Mortgage-backed securities⁽¹⁾			721,510				-				104,726				616,784				-
Collateralized mortgage obligations⁽¹⁾			84,414				-				8,705				75,709				-
Total held-to-maturity securities		$	868,383			$	33			$	113,582			$	754,834			$	393

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

						Gross Unrealized
(Dollars in thousands)		Amortized Cost				Gains				Losses				Fair Value
As of December 31, 2021
Municipal securities		$	66,496			$	701			$	-			$	67,197
Mortgage-backed securities⁽¹⁾			596,775				45				11,764				585,056
Collateralized mortgage obligations⁽¹⁾			73,781				36				229				73,588
Total held-to-maturity securities		$	737,052			$	782			$	11,993			$	725,841

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

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.

As of June 30, 2022, the Company held 556 investment securities of which 148 were in an unrealized loss position for less than twelve months and 101 securities were in an unrealized 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.

The following tables show the gross unrealized losses for available-for-sale securities that are less than 12 months and 12 months or more:

Available-for-Sale Securities									As of June 30, 2022
		Less Than 12 Months							12 Months or More								Total
(Dollars in thousands)		Fair Value			Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
As of June 30, 2022
U.S. Treasury notes		$	4,952			$	16			$	-			$	-			$	4,952			$	16
U.S. Government-sponsored securities			46				-				1,623				26				1,669				26
Mortgage-backed securities⁽¹⁾			90,670				6,663				103,737				22,214				194,407				28,877
Collateralized mortgage obligations⁽¹⁾			1,501				23				-				-				1,501				23
Corporate securities			9,526				523				-				-				9,526				523
Total available-for-sale securities		$	106,695			$	7,225			$	105,360			$	22,240			$	212,055			$	29,465

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

										As of December 31, 2021
		Less Than 12 Months								12 Months or More								Total
(Dollars in thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
As of December 31, 2021
U.S. Government-sponsored securities		$	183			$	-			$	2,007			$	39			$	2,190			$	39
Mortgage-backed securities⁽¹⁾			61,469				1,192				104,489				4,188				165,958				5,380
Total available-for-sale securities		$	61,652			$	1,192			$	106,496			$	4,227			$	168,148			$	5,419

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

The following tables show the gross unrealized losses for held-to-maturity securities that are less than 12 months and 12 months or more:

Held-to-Maturity Securities										As of June 30, 2022
		Less Than 12 Months								12 Months or More								Total
(Dollars in thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
As of June 30, 2022
Municipal securities		$	6,862			$	151			$	-			$	-			$	6,862			$	151
Mortgage-backed securities⁽¹⁾			404,026				57,850				212,758				46,876				616,784				104,726
Collateralized mortgage obligations⁽¹⁾			73,221				8,705				-				-				73,221				8,705
Total held-to-maturity securities		$	484,109			$	66,706			$	212,758			$	46,876			$	696,867			$	113,582

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

										As of December 31, 2021
		Less Than 12 Months								12 Months or More								Total
(Dollars in thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
As of December 31, 2021
Mortgage-backed securities⁽¹⁾		$	570,119			$	11,764			$	-			$	-			$	570,119			$	11,764
Collateralized mortgage obligations⁽¹⁾			58,977				229				-				-				58,977				229
Total held-to-maturity securities		$	629,096			$	11,993			$	-			$	-			$	629,096			$	11,993

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

U.S. Government-sponsored securities. The unrealized losses were caused by interest rate fluctuations. The decline in market value is attributable to changes in interest rates and not credit quality. The Company does not intend to sell the investments and it is more likely than not that the Company will not be requied to sell the investments before recovery of their amortized cost basis.

Mortgage-backed securities and collateralized mortgage obligations. 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. The decline in market value is attributable to changes in interest rates and not credit quality. 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 amortized cost basis.

Corporate securities. 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. The Company does not intend to sell the securities and it is more likely than not that the Company would not have to sell the securities before recovery of their amortized cost basis.

Obligations of states and political subdivisions. The Company’s bank-qualified municipal bond portfolio is comprised of two different segments: (1) publicly issued debt of $19.4 million purchased on the open market, all rated at either the issue or issuer level and all of these ratings are “investment grade”; and (2) municipal debt of $43 million purchased directly from the Bank’s customers, all of which is monitored through quarterly or annual financial reviews of the issuer. The Company monitors the status of all municipal investments in the portfolio 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 amortized cost and estimated fair values of investment securities at June 30, 2022 by contractual maturity are shown in the following tables:

		Available-for-Sale								Held-to-Maturity
(Dollars in thousands)		Amortized Cost				Fair Value				Amortized Cost				Fair Value
Securities maturing in:
One year or less		$	5,290			$	5,274			$	700			$	700
After one year through five years			5,120				4,842				7,089				7,074
After five years through ten years			5,411				5,168				15,948				15,926
After ten years			4,908				4,945				38,722				38,641
		$	20,729			$	20,229			$	62,459			$	62,341

Securities not due at a single maturity date:
Mortgage-backed securities			232,368				203,607				721,510				616,784
Collateralized mortgage obligations			1,525				1,502				84,414				75,709
Total		$	254,622			$	225,338			$	868,383			$	754,834

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

The Company monitors the credit quality of those available-for-sale and held-to-maturity debt securities not issued by the U.S. government or one of its agencies or government sponsored entities, through the use of credit ratings. Credit ratings are reviewed and updated quarterly. The following table summarizes the fair value of available-for-sale and amortized cost of held-to-maturity debt securities by credit rating at June 30, 2022:

		Available-for-Sale												Held-to-Maturity
		Fair Value												Amortized Cost
(Dollars in thousands)		AAA/AA/A				BBB/BB/B				Not Rated				AAA/AA/A				BBB/BB/B				Not Rated
June 30, 2022

Breakdown by Category:
U.S. Treasury notes		$	-			$	-			$	4,952			$	-			$	-			$	-
U.S. Government-sponsored securities			-				-				5,441				-				-				-
Mortgage-backed securities⁽¹⁾			-				-				203,607				-				-				721,510
Collateralized mortgage obligations⁽¹⁾			-				-				1,502				-				-				84,414
Municipal securities			-				-				-				19,271				149				43,039
Corporate securities			4,738				4,788				-				-				-				-
Other			-				-				310				-				-				-
Total Investment Grade		$	4,738			$	4,788			$	215,812			$	19,271			$	149			$	848,963

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. government.

The following table presents the activity in the allowance for credit losses for held-to-maturity debt securities by major type for the six months ended June 30, 2022.

		For the Six Months Ended June 30, 2022
(Dollars in thousands)		Municipal securities				Mortgage- backed securites				Collateralized Mortgage obligation				Total
Allowance for credit losses - securities
Beginning Balance		$	-			$	-			$	-			$	-
Provision for credit losses			393				-				-				393
Ending Balance		$	393			$	-			$	-			$	393

Proceeds from sales and calls of these securities were as follows:

(Dollars in thousands)		Gross Proceeds				Gross Gains				Gross Losses
Six months ended June 30, 2022		$	2,610			$	2			$	-
Six months ended June 30, 2021		$	299,870			$	5,570			$	3,016

Pledged Securities

As of June 30, 2022, securities carried at $512 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $426 million at December 31, 2021.