At June 30, 2020, the Company had $948.6 million and $439.3 million in available for sale debt securities and held to maturity debt securities, respectively. Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, regulatory actions, changes in the business environment or any changes in the competitive marketplace could have an adverse effect on the Company’s investment portfolio. The total number of available for sale and held to maturity debt securities in an unrealized loss position at June 30, 2020 totaled 16, compared with 85 at December 31, 2019.

On January 1, 2020, the Company adopted CECL which replaces the incurred loss methodology with an expected loss methodology. The Company did not record an allowance for credit losses on available for sale debt securities as this portfolio consisted primarily of debt securities explicitly or implicitly backed by the U.S. Government for which credit risk is deemed immaterial. The impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolio as well as the economic conditions at future reporting periods. The Company recorded a $70,000 increase to the allowance for credit losses on held to maturity debt securities with a corresponding cumulative effect adjustment to decrease retained earnings by $52,000, net of income taxes. (See Adoption of CECL table below for additional detail.)

Management measures expected credit losses on held to maturity debt securities on a collective basis by security type. Management classifies the held to maturity debt securities portfolio into the following security types:

All of the agency obligations held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The majority of the state and municipal, and corporate obligations carry no lower than A ratings at June 30, 2020 and the Company had one security rated with a triple-B by Moody’s Investors Service.

The Company adopted CECL using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2020. As a result, the amortized cost basis remains the same before and after the effective date of CECL.


	June 30, 2020
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value



Mortgage-backed securities	$	884,608	32,709	(332)	916,985
State and municipal obligations	3,882		214	—	4,096
Corporate obligations	27,028		531	(26)	27,533

	$	915,518	33,454	(358)	948,614


	December 31, 2019
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value



Mortgage-backed securities	$	936,196	12,367	(1,133)	947,430
State and municipal obligations	3,907		172	—	4,079
Corporate obligations	25,032		393	(15)	25,410

	$	965,135	12,932	(1,148)	976,919

The amortized cost and fair value of available for sale debt securities at June 30, 2020, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	June 30, 2020
	Amortized cost		Fair value
Due in one year or less	$	—	—
Due after one year through five years	3,655		3,820
Due after five years through ten years	25,255		25,805
Due after ten years	2,000		2,004
	$	30,910	31,629

Mortgage-backed securities totaling $884.6 million at amortized cost and $917.0 million at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.


	June 30, 2020
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses


Mortgage-backed securities	$	69,357	(330)	15	(2)	69,372	(332)

Corporate obligations	2,000		(26)	—	—	2,000	(26)
	$	71,357	(356)	15	(2)	71,372	(358)


	December 31, 2019
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses



Mortgage-backed securities	$	136,270	(629)	46,819	(504)	183,089	(1,133)

Corporate obligations	2,013		(15)	—	—	2,013	(15)
	$	138,283	(644)	46,819	(504)	185,102	(1,148)

The number of available for sale debt securities in an unrealized loss position at June 30, 2020 totaled 11, compared with 50 at December 31, 2019. The decrease in the number of securities in an unrealized loss position at June 30, 2020 was due to lower current market interest rates compared to rates at December 31, 2019. At June 30, 2020, there was one private label mortgage-backed security in an unrealized loss position, with an amortized cost of $18,000 and an unrealized loss of $2,000.

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit losses and the estimated fair value for held to maturity debt securities at June 30, 2020 and December 31, 2019 (in thousands):


	June 30, 2020
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Allowance for credit losses	Fair value
Agency obligations	$	6,840	5	(2)	—	6,843
Mortgage-backed securities	89		3	—	—	92
State and municipal obligations	424,166		21,136	(19)	(81)	445,202
Corporate obligations	8,295		161	—	(6)	8,450
	$	439,390	21,305	(21)	(87)	460,587


	December 31, 2019
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Allowance for credit losses	Fair value
Agency obligations	$	6,599	11	(9)	—	6,601
Mortgage-backed securities	118		4	—	—	122
State and municipal obligations	437,074		14,394	(115)	—	451,353
Corporate obligations	9,838		58	(6)	—	9,890
	$	453,629	14,467	(130)	—	467,966

The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period. There were no sales of securities from the held to maturity debt securities portfolio for the three and six months ended June 30, 2020 and 2019. For the three and six months ended June 30, 2020, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $12.6 million and $25.9 million, respectively. As to these calls of securities, for the three months ended June 30, 2020, there were gross gains of $44,000 and no gross losses. For the six months ended June 30, 2020, there were gross gains of $55,000 and no gross losses. For the three and six months ended June 30, 2019, proceeds from calls of securities in the held to maturity debt securities portfolio totaled $2.8 million and $12.1 million, respectively. As to these calls of securities, there were $29,000 of gross gains and no gross losses for the three and six months ended June 30, 2019.

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at June 30, 2020 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	June 30, 2020
	Amortized cost		Fair value
Due in one year or less	$	12,941	13,018
Due after one year through five years	118,220		121,910
Due after five years through ten years	232,672		245,565
Due after ten years	75,468		80,089
	$	439,301	460,582

Mortgage-backed securities totaling $89,000 at amortized cost and $92,000 at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments. Additionally, allowance for credit losses totaling $87,000 is excluded from the table above.


	January 1, 2020
	As reported under CECL		Prior to CECL	Impact of CECL adoption
Held to Maturity Debt Securities
Allowance for credit losses on corporate securities	$	6	—	6
Allowance for credit losses on municipal securities	64		—	64
Allowance for credit losses on held to maturity debt securities	$	70	—	70


	June 30, 2020 Unrealized Losses
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses
Agency obligations	$	999	(2)	—	—	999	(2)
State and municipal obligations	974		(1)	406	(18)	1,380	(19)

	$	1,973	(3)	406	(18)	2,379	(21)


	December 31, 2019 Unrealized Losses
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses
Agency obligations	$	3,601	(9)	—	—	3,601	(9)
State and municipal obligations	7,675		(42)	2,093	(73)	9,768	(115)
Corporate obligations	3,254		(6)	—	—	3,254	(6)
	$	14,530	(57)	2,093	(73)	16,623	(130)

The number of held to maturity debt securities in an unrealized loss position at June 30, 2020 totaled 5, compared with 35 at December 31, 2019. The decrease in the number of securities in an unrealized loss position at June 30, 2020, was due to lower current market interest rates compared to rates at December 31, 2019.


	June 30, 2020
Total Portfolio	AAA		AA	A	BBB	Not Rated	Total
Agency obligations	$	6,840	—	—	—	—	6,840
Mortgage-backed securities	89		—	—	—	—	89
State and municipal obligations	46,815		317,252	57,145	1,116	1,838	424,166
Corporate obligations	—		2,611	5,259	400	25	8,295
	$	53,744	319,863	62,404	1,516	1,863	439,390

	December 31, 2019
Total Portfolio	AAA		AA	A	BBB	Not Rated	Total
Agency obligations	$	6,599	—	—	—	—	6,599
Mortgage-backed securities	118		—	—	—	—	118
State and municipal obligations	49,316		330,322	56,317	1,119	—	437,074
Corporate obligations	—		3,128	6,335	350	25	9,838
	$	56,033	333,450	62,652	1,469	25	453,629

Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. At June 30, 2020, the held to maturity debt securities portfolio was comprised of 12% rated triple-A, 73% rated double-A, 14% rated single-A, and less than 1% either below a single-A rating or not rated by Moody’s Investors Service or Standard and Poor’s. Securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.