SECURITIES

12 Months Ended

Dec. 31, 2020

SECURITIES [Abstract]

SECURITIES

NOTE 3 – SECURITIES

Securities available for sale consist of the following at December 31:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
2020
U.S. agency	$	10,456	$	305	$	13	$	10,748
U.S. agency residential mortgage-backed		340,224		4,951		593		344,582
U.S. agency commercial mortgage-backed		6,869		326		-		7,195
Private label mortgage-backed		41,429		1,539		139		42,829
Other asset backed		252,596		1,796		211		254,181
Obligations of states and political subdivisions		315,795		8,676		178		324,293
Corporate		82,307		3,807		97		86,017
Trust preferred		1,971		-		173		1,798
Foreign government		500		16		-		516
Total	$	1,052,147	$	21,416	$	1,404	$	1,072,159

2019
U.S. agency	$	14,591	$	89	$	19	$	14,661
U.S. agency residential mortgage-backed		226,130		1,910		278		227,762
U.S. agency commercial mortgage-backed		10,671		113		28		10,756
Private label mortgage-backed		39,248		544		99		39,693
Other asset backed		94,158		103		375		93,886
Obligations of states and political subdivisions		94,499		1,724		121		96,102
Corporate		31,904		1,296		5		33,195
Trust preferred		1,968		-		125		1,843
Foreign government		499		3		-		502
Total	$	513,668	$	5,782	$	1,050	$	518,400

At December 31, 2020 we have entered into a pay-fixed interest rate swap to protect a portion of the fair value of certain securities available for sale. The fair value adjustment to securities available for sale was an unrealized loss of $0.015 million at December 31, 2020.  See note 16 - Derivative Financial Instruments.

Total OTTI recognized in accumulated other comprehensive income (loss) for securities available for sale was zero at both December 31, 2020 and 2019, respectively.

Our investments’ gross unrealized losses and fair values aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position, at December 31 follows:

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
2020
U.S. agency	$	1,469	$	3	$	2,329	$	10	$	3,798	$	13
U.S. agency residential mortgage-backed		96,839		592		83		1		96,922		593
Private label mortgage-backed		11,838		95		2,050		44		13,888		139
Other asset backed		7,142		25		21,197		186		28,339		211
Obligations of states and political subdivisions		28,957		177		800		1		29,757		178
Corporate		1,924		97		-		-		1,924		97
Trust preferred		-		-		1,798		173		1,798		173
Total	$	148,169	$	989	$	28,257	$	415	$	176,426	$	1,404

2019
U.S. agency	$	2,782	$	8	$	2,712	$	11	$	5,494	$	19
U.S. agency residential mortgage-backed		56,377		126		13,551		152		69,928		278
U.S. agency commercial mortgage-backed		3,284		24		659		4		3,943		28
Private label mortgage-backed		16,387		55		343		44		16,730		99
Other asset backed		34,027		233		13,839		142		47,866		375
Obligations of states and political subdivisions		15,666		84		5,396		37		21,062		121
Corporate		2,125		5		-		-		2,125		5
Trust preferred		-		-		1,843		125		1,843		125
Total	$	130,648	$	535	$	38,343	$	515	$	168,991	$	1,050

Our portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review, management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether we intend to sell, or it is more likely than not that we will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet the aforementioned recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income (loss).

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at December 31, 2020, we had 25 U.S. agency, and 37 U.S. agency residential mortgage-backed securities whose fair value is less than amortized cost. The  unrealized losses are largely attributed to widening spreads to Treasury bond since acquisition.

Private label mortgage backed, other asset backed and corporate securities — at December 31, 2020, we had 20 private label mortgage backed, 33 other asset backed and four corporate securities whose fair value is less than amortized cost. Unrealized losses are primarily due to credit spread since their acquisition.

Two private label mortgage-backed securities (discussed further below) were reviewed for other than temporary impairment (‘‘OTTI’’) utilizing a cash flow projection. The cash flow analysis forecasts cash flow from the underlying loans in each transaction and then applies these cash flows to the bonds in the securitization.

Obligations of states and political subdivisions — at December 31, 2020, we had 27 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads since acquisition.

Trust preferred securities — at December 31, 2020, we had two trust preferred securities whose fair value is less than amortized cost. Both of our trust preferred securities are single issue securities issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. One of the securities is rated by a major rating agency as investment grade while the other one is non-rated. The non-rated issue is a relatively small bank and was never rated. The issuer of this non-rated trust preferred security, which had a total amortized cost of $1.0 million and total fair value of $0.87 million as of December 31, 2020, continues to have satisfactory credit metrics and make interest payments.

As management does not intend to liquidate any of the securities discussed above and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines discussed above (other than certain declines related to the two private label mortgage-backed securities currently being reviewed for OTTI) are deemed to be other than temporary.

We recorded zero credit related OTTI charges in the Consolidated Statements of Operations on securities available for sale during 2020, 2019, and 2018.

At December 31, 2020, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Total
	(In thousands)
As of December 31, 2020
Fair value	$	373	$	505	$	878
Amortized cost		350		326		676
Non-credit unrealized loss		-		-		-
Unrealized gain		23		179		202
Cumulative credit related OTTI		757		457		1,214

Both of these securities are receiving principal and interest payments similar to principal reductions in the underlying collateral and have unrealized gains at December 31, 2020. The original amortized cost (current amortized cost excluding cumulative credit related OTTI) for each of these securities has been permanently adjusted downward for previously recorded credit related OTTI. The unrealized loss (based on original amortized cost) for these securities is now less than previously recorded credit related OTTI amounts.

A roll forward of credit losses recognized in earnings on securities available for sale for the years ending December 31 follow:

	2020		2019			2018
	(In thousands)
	$	1,214	$	1,594		$	1,594
Additions to credit losses on securities for which no previous OTTI was recognized		-		-			-
Increases to credit losses on securities for which OTTI was previously recognized		-		-			-
Reduction(1)		-		(380	)		-
Total	$	1,214	$	1,214		$	1,594

(1) During 2019 one security with previously recorded OTTI was settled and balance is now zero.

The amortized cost and fair value of securities available for sale at December 31, 2020, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	21,244	$	21,412
Maturing after one year but within five years		79,837		82,725
Maturing after five years but within ten years		76,454		80,060
Maturing after ten years		233,494		239,175
		411,029		423,372
U.S. agency residential mortgage-backed		340,224		344,582
U.S. agency commercial mortgage-backed		6,869		7,195
Private label mortgage-backed		41,429		42,829
Other asset backed		252,596		254,181
Total	$	1,052,147	$	1,072,159

The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

A summary of proceeds from the sale of securities available for sale and gains and losses for the years ended December 31 follow:

			Realized
	Proceeds		Gains (1)		Losses
	(In thousands)
2020	$	38,095	$	271	$	4
2019		68,716		248		108
2018		48,736		192		136

(1) 2018 excludes a $0.144 million gain on the sale of 1,000 VISA Class B shares.

Certain preferred stocks which were all sold during 2019 had been classified as equity securities at fair value in our Consolidated Statement of Financial Condition. During 2019 and 2018, we recognized gains (losses) on these preferred stocks of $0.17 million and $(0.06) million, respectively, that are included in net gains on securities in the Consolidated Statements of Operations. Zero and $(0.06) million of these amounts relate to gains (losses) recognized on preferred stock still held at each respective year end.

Securities available for sale with a book value of $14.0 million and $8.7 million at December 31, 2020 and 2019, respectively, were pledged to secure borrowings, derivatives, public deposits and for other purposes as required by law. There were no investment obligations of state and political subdivisions that were payable from or secured by the same source of revenue or taxing authority that exceeded 10% of consolidated total shareholders’ equity  at  December 31, 2020 or 2019.