Investment Securities

12 Months Ended

Dec. 31, 2021

(3)	Investment Securities

(a)	Securities available for sale

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

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

U.S. government sponsored enterprises	$	59,976		-		797		59,179
State and political subdivisions		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		269,907		3,367		2,476		270,798
Corporate bonds		45,805		157		625		45,337
Small Business Administration - guaranteed participation securities		31,303		371		-		31,674
Other		685		-		1		684
Total securities available for sale	$	407,717		3,895		3,899		407,713

(dollars in thousands)	December 31, 2020
	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 amortized cost and fair value of debt securities included in the available for sale portfolio as of December 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 are shown separately:

(dollars in thousands)	Amortized Cost		Fair Value

Due in one year or less	$	15,057		15,215
Due in one year through five years		91,450		90,026
Mortgage backed securities and collateralized mortgage obligations - residential		269,907		270,798
Small Business Administration - guaranteed participation securities		31,303		31,674
	$	407,717		407,713

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:

(dollars in thousands)	December 31, 2021
	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss
U.S. government sponsored enterprises	$	49,279		697		9,900		100		59,179		797
Mortgage backed securities and collateralized mortgage obligations - residential		93,447		1,888		22,098		588		115,545		2,476
Corporate bonds		15,670		171		14,546		454		30,216		625
Other		648		1		-		-		648		1

Total	$	159,044		2,757		46,544		1,142		205,588		3,899

(dollars in thousands)	December 31, 2020
	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. 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, calls/paydowns and maturities of securities available for sale, and gross realized gains and gross realized losses from sales during 2021, 2020, and 2019 are as follows:

	Years ended December 31,
(dollars in thousands)	2021		2020		2019

Proceeds from sales	$	-		29,219		-
Proceeds from calls/paydowns		148,609		247,624		192,003
Proceeds from maturities		9,162		10,007		10,052
Gross realized gains		-		1,155		-
Gross realized losses		-		-		-

The amount of securities pledged to secure short-term borrowings and for other purposes amounted to $283.2 million and $267.6 million at December 31, 2021 and 2020, respectively.

(b)	Held to maturity securities

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

	December 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	9,923		773		1		10,695
Total held to maturity	$	9,923		773		1		10,695

	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 December 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 shown separately.

(dollars in thousands)	Amortized Cost		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	9,923		10,695
	$	9,923		10,695

As of December 31, 2021 held to maturity securities with a fair value of $442 thousand had an unrecognized loss of approximately one thousand dollars that was less than twelve months. There were no held to maturity securities in an unrecognized loss position for 2020. There were no sales or transfers of held to maturity securities during 2021 and 2020.

(c)	Concentrations

The Company has the following balances of securities held in the available for sale and held to maturity portfolios as of December 31, 2021 that represent greater than 10% of shareholders’ equity:

(dollars in thousands)	Amortized Cost		Fair Value
Federal National Mortgage Association	$	179,997		180,857
Federal Home Loan Mortgage Corporation		70,829		71,027

(d)	Other-Than-Temporary-Impairment

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 December 31, 2021, the Company’s security 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 December 31, 2020.

Mortgage backed securities and collateralized mortgage obligations – residential

At December 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 December 31, 2021.

Corporate Bonds and other

At December 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 December 31, 2021.