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Investment Securities

3 Months Ended

Mar. 31, 2022

(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, 2022
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	64,978		-		2,919		62,059
State and political subdivisions		41		-		-		41
Mortgage backed securities and collateralized mortgage obligations - residential		257,248		80		13,283		244,045
Corporate bonds		76,086		49		2,046		74,089
Small Business Administration - guaranteed participation securities		29,181		-		1,095		28,086
Other		686		-		15		671
Total Securities Available for Sale	$	428,220		129		19,358		408,991

	December 31, 2021
(dollars in thousands)	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

The following table distributes the debt securities included in the available for sale portfolio as of March 31, 2022, 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	$	10,071		10,120
Due in one year through five years		131,720		126,740
Due after five years through ten years		-		-
Mortgage backed securities and collateralized mortgage obligations - residential		257,248		244,045
Small Business Administration - guaranteed participation securities		29,181		28,086
	$	428,220		408,991

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, 2022
	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 Unreal. Loss

U.S. government sponsored enterprises	$	23,723		1,264		38,336		1,655		62,059		2,919
Mortgage backed securities and collateralized mortgage obligations - residential		160,318		5,999		73,797		7,284		234,115		13,283
Corporate bonds		49,993		1,115		14,070		931		64,063		2,046
Small Business Administration - guaranteed participation securities		28,086		1,095		-		-		28,086		1,095
Other		585		15		-		-		585		15

Total	$	262,705		9,488		126,203		9,870		388,908		19,358

	December 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 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

There were no allowance for credit losses recorded for securities available for sale during the three months ended March 31, 2022.

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, 2022 and 2021 are as follows:

	Three months ended March 31,
(dollars in thousands)	2022		2021

Proceeds from sales	$	-		-
Proceeds from calls/paydowns		17,923		36,820
Proceeds from maturities		5,000		55
Gross realized gains		-		-
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, 2022
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	9,183		383		16		9,550

Total held to maturity	$	9,183		383		16		9,550

	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

The following table distributes the debt securities included in the held to maturity portfolio as of March 31, 2022, 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	$	9,183		9,550
	$	9,183		9,550

All held to maturity securities are held at cost on the financial statements. As of March 31, 2022 and December 31, 2021 held to maturity securities with a fair value of $2.6 million and $442 thousand had an unrecognized loss of less than 12 months of $16 thousand and one thousand, respectively.

There were no sales or transfers of held to maturity securities during the three months ended March 31, 2022 and 2021.

There were no allowance for credit losses recorded for held to maturity securities during the three months ended March 31, 2022. There were no securities on non-accrual status and all securities were performing in accordance with contractual terms.

Debt Securities

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 through the provision for credit losses. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes.

The Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2022. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as it’s historically low turnover in the portfolio.

As of March 31, 2022, 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, 2022.

Mortgage backed securities and collateralized mortgage obligations – residential: At March 31, 2022, 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, 2022.

Corporate Bonds & Other: At March 31, 2022, corporate and other 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, 2022.

Small Business Administration (SBA) - guaranteed participation securities: At March 31, 2022, all of the SBA securities held by the Company were issued and guaranteed by U.S. Small Business Administration. 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, 2022.