Investment Securities

3 Months Ended

Mar. 31, 2021

(4) Investment Securities

(a) Securities available for sale

The amortized cost and fair value of the securities available for sale are as follows:

	March 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	74,970		-		505		74,465
State and political subdivisions		48		-		-		48
Mortgage backed securities and collateralized mortgage obligations - residential		344,892		5,953		2,528		348,317
Corporate bonds		64,562		661		384		64,839
Small Business Administration - guaranteed participation securities		38,737		495		-		39,232
Other		685		1		-		686
Total Securities Available for Sale	$	523,894		7,110		3,417		527,587

	December 31, 2020
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	20,000		-		32		19,968
State and political subdivisions		103		-		-		103
Mortgage backed securities and collateralized mortgage obligations - residential		308,432		7,749		23		316,158
Corporate bonds		59,185		916		162		59,939
Small Business Administration - guaranteed participation securities		40,955		1,262		-		42,217
Other		685		1		-		686

Total securities available for sale	$	429,360		9,928		217		439,071

The following table distributes the debt securities included in the available for sale portfolio as of March 31, 2021, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately.

(dollars in thousands)	Amortized Cost		Fair Value

Due in one year or less	$	14,219		14,390
Due in one year through five years		121,037		120,669
Due after five years through ten years		5,009		4,979
Mortgage backed securities and collateralized mortgage obligations - residential		344,892		348,317
Small Business Administration - guaranteed participation securities		38,737		39,232
	$	523,894		527,587

Gross unrealized losses on securities available for sale and the related fair values aggregated by the length of time that individual securities have been in an unrealized loss position, were as follows:

	March 31, 2021
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss

U.S. government sponsored enterprises	$	74,465		505		-		-		74,465		505
Mortgage backed securities and collateralized mortgage obligations - residential		125,788		2,528		-		-		125,788		2,528
Corporate bonds		20,112		321		4,937		63		25,049		384

Total	$	220,365		3,354		4,937		63		225,302		3,417

	December 31, 2020
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss

U.S. government sponsored enterprises	$	19,968		32		-		-		19,968		32
Mortgage backed securities and collateralized mortgage obligations - residential		19,471		23		-		-		19,471		23
Corporate bonds		14,901		99		4,937		63		19,838		162

Total	$	54,340		154		4,937		63		59,277		217

The proceeds from sales and calls and maturities of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three months ended March 31, 2021 and 2020 are as follows:

	Three months ended March 31,
(dollars in thousands)	2021		2020

Proceeds from sales	$	-	$	29,219
Proceeds from calls/paydowns		36,820		69,144
Proceeds from maturities		55		5,000
Gross realized gains		-		1,155
Gross realized losses		-		-

(b) Held to maturity securities

The amortized cost and fair value of the held to maturity securities are as follows:

	March 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	12,729		1,162		-		13,891
Total held to maturity	$	12,729		1,162		-		13,891

	December 31, 2020
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	13,824		1,164		-		14,988
Total held to maturity	$	13,824		1,164		-		14,988

The following table distributes the debt securities included in the held to maturity portfolio as of March 31, 2021, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

(dollars in thousands)	Amortized Cost		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	12,729		13,891
	$	12,729		13,891

All held to maturity securities are held at cost on the financial statements. There were no gross unrealized losses on held to maturity securities as of March 31, 2021 and December 31, 2020.

There were no sales or transfers of held to maturity securities during the three months ended March 31, 2021 and 2020.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio by type and applying the appropriate OTTI model.

In determining OTTI for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether any other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI on debt securities shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of March 31, 2021, the Company’s securities portfolio included certain securities, which were in an unrealized loss position, and are discussed below.

U.S. government sponsored enterprises: In the case of unrealized losses on U.S. government sponsored enterprises, because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2021.

Mortgage backed securities and collateralized mortgage obligations – residential: At March 31, 2021, all mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2021.

Corporate Bonds: At March 31, 2021, corporate bonds held by the Company are investment grade quality. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2021.