SECURITIES

3 Months Ended

Mar. 31, 2020

SECURITIES

SECURITIES

NOTE 2. SECURITIES

Information related to the fair value and amortized cost of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is provided in the tables below.

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gain		Losses		Value
March 31, 2020
Mortgage-backed securities: residential	$	280,674	$	12,766	$	(170)	$	293,270
Mortgage-backed securities: commercial		41,003		811		0		41,814
State and municipal securities		272,205		17,068		(32)		289,241
Total	$	593,882	$	30,645	$	(202)	$	624,325
December 31, 2019
Mortgage-backed securities: residential	$	283,817	$	4,751	$	(387)	$	288,181
Mortgage-backed securities: commercial		36,712		262		(2)		36,972
State and municipal securities		270,480		12,828		(228)		283,080
Total	$	591,009	$	17,841	$	(617)	$	608,233

Information regarding the fair value and amortized cost of available-for-sale debt securities by maturity as of March 31, 2020 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.

	Amortized		Fair
(dollars in thousands)	Cost		Value
Due in one year or less	$	3,924	$	3,946
Due after one year through five years		15,371		15,741
Due after five years through ten years		27,257		28,584
Due after ten years		225,653		240,970
		272,205		289,241
Mortgage-backed securities		321,677		335,084
Total debt securities	$	593,882	$	624,325

Securities proceeds, gross gains and gross losses are presented below.

	Three months ended March 31,
(dollars in thousands)	2020		2019
Sales of securities available-for-sale
Proceeds	$	0	$	13,693
Gross gains		0		70
Gross losses		0		(47)
Number of securities		0		17

In accordance with ASU No. 2017-08, purchase premiums for callable securities are amortized to the earliest call date and premiums on non-callable securities as well as discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

Securities with carrying values of $214.9 million and $59.3 million were pledged as of March 31, 2020 and December 31, 2019, respectively, as collateral for borrowings from the Federal Home Loan Bank and for other purposes as permitted or required by law.

Information regarding securities with unrealized losses as of March 31, 2020 and December 31, 2019 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2020
Mortgage-backed securities: residential	$	3,021	$	69	$	5,134	$	101	$	8,155	$	170
Mortgage-backed securities: commercial		2,214		0		0		0		2,214		0
State and municipal securities		4,509		32		0		0		4,509		32
Total temporarily impaired	$	9,744	$	101	$	5,134	$	101	$	14,878	$	202
December 31, 2019
Mortgage-backed securities: residential	$	23,436	$	112	$	14,174	$	275	$	37,610	$	387
Mortgage-backed securities: commercial		4,591		2		0		0		4,591		2
State and municipal securities		14,188		228		0		0		14,188		228
Total temporarily impaired	$	42,215	$	342	$	14,174	$	275	$	56,389	$	617

The total number of securities with unrealized losses as of March 31, 2020 and December 31, 2019 is presented below.

	Less than	12 months
	12 months	or more	Total
March 31, 2020
Mortgage-backed securities: residential	1	2	3
Mortgage-backed securities: commercial	1	0	1
State and municipal securities	4	0	4
Total temporarily impaired	6	2	8
December 31, 2019
Mortgage-backed securities: residential	7	6	13
Mortgage-backed securities: commercial	1	0	1
State and municipal securities	11	0	11
Total temporarily impaired	19	6	25

The following factors are considered in determining whether or not the impairment of these securities is other-than-temporary. In making this determination, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer, as well as the underlying fundamentals of the relevant market and the outlook for such market in the near future. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. As of March 31, 2020 and December 31, 2019, all of the securities in the Company’s portfolio were backed by the U.S. government, government agencies, government sponsored entities or were A-rated or better, except for certain non-local or local municipal securities, which are not rated. For the government, government agency, government-sponsored entity and municipal securities, management did not believe that there would be credit losses or that full principal would not be received. Management considers the unrealized losses on these securities to be primarily interest rate driven and does not expect material losses given current market conditions unless the securities are sold. However, at this time management does not have the intent to sell, and it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost basis.