The Company classifies its securities as either “Held-to-Maturity” or “Available-for-Sale” at the time of purchase. Securities are accounted for on a trade date basis. Debt securities are classified as Held-to-Maturity when the Company has the ability and positive intent to hold the securities to maturity. Securities classified as Held-to-Maturity are carried at cost adjusted for amortization of premium and accretion of discount to maturity.

Debt securities not classified as Held-to-Maturity are included in the Available-for-Sale category and are carried at fair value. The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive (loss) income (AOCI) in the consolidated balance sheets and consolidated statements of changes in stockholders’ equity. Management’s decision to sell Available-for-Sale securities is based on changes in economic conditions, controlling the sources and applications of funds, terms, availability of and yield of alternative investments, interest rate risk and the need for liquidity.

Equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in income. Equity securities without readily determinable fair values are recorded at cost less impairment, if any.

The cost of debt securities classified as Held-to-Maturity or Available-for-Sale is adjusted for amortization of premiums to the earliest call date and accretion of discounts to expected maturity. Such amortization and accretion, as well as interest and dividends, are included in interest and dividend income from securities. Realized gains and losses are included in net securities gains and losses. The cost of securities sold, redeemed or matured is based on the specific identification method.

The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as “Available-For-Sale” were as follows at June 30, 2022 and December 31, 2021:

Securities Available-for-Sale with an aggregate fair value of $288,785,000 at June 30, 2022 and $401,861,000 at December 31, 2021, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $236,643,000 at June 30, 2022 and $318,074,000 at December 31, 2021.

The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at June 30, 2022. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

¹	Mortgage-backed securities are allocated for maturity reporting at their original maturity date.

There were no aggregate securities with a single issuer (excluding the U.S. Government and U.S. Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at June 30, 2022. The quality rating of the obligations of state and political subdivisions are generally investment grade, as rated by Moody’s,

Standard and Poor’s or Fitch. The typical exceptions are local issues which are not rated, but are secured by the full faith and credit obligations of the communities that issued these securities.

There were no proceeds from sales of investments in Debt Securities Available-For-Sale for the three months ended June 30, 2022 and 2021. Therefore, there were no gains or losses realized during these periods. There were no impairment losses realized on Debt Securities Available-For-Sale during the three months ended June 30, 2022 or 2021.

There were no proceeds from sales of investments in Debt Securities Available-For-Sale for the six months ended June 30, 2022 and 2021. Therefore , there were no gains or losses realized during these periods. There were no impairment losses realized on Debt Securities Available-For-Sale during the six months ended June 30, 2022 or 2021.

At June 30, 2022 and December 31, 2021, the Company had $1,661,000 and $1,962,000, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the six months ended June 30, 2022 and 2021:


(Dollars in thousands)	Six months ended		Six months ended
	June 30, 2022		June 30, 2021
Net (losses) and gains recognized during the period on equity securities	$	(158)	$	143
Less: Net gains recognized during the period on equity securities sold during the period		27		—
Net (losses) and gains recognized during the reporting period on equity securities still held at the reporting date	$	(131)	$	143

There were no proceeds from sales of investments in Held-to-Maturity debt securities during the six months ended June 30, 2022 or 2021. Therefore, there were no gains or losses realized during these periods.

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. Securities classified as Available-for-Sale or Held-to-Maturity are generally evaluated for OTTI under FASB ASC 320, Investments - Debt and Equity Securities. In determining OTTI under the FASB ASC 320 model, 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 entity 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 an 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 on debt securities, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, 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 an entity 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 less any current-period loss, the OTTI 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 the realized loss is recognized as impairment charges on securities on the consolidated statements of income. The amount of the total OTTI related to the other factors shall be recognized in other comprehensive (loss) income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the security.

The Company and its investment advisors monitor the entire portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months. Based on the factors described above, management did not consider any securities to be other-than-temporarily impaired at June 30, 2022 or December 31, 2021.

The summary below shows the gross unrealized losses and fair value of the Company’s debt securities. Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of June 30, 2022 and December 31, 2021:

June 30, 2022

(Dollars in thousands)

Less Than 12 Months

12 Months or More

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Available-for-Sale:

Value

Loss

Value

Loss

Value

Loss

U.S. Treasury securities

18,958

(1,270)

—

18,958

(1,270)

Obligations of U.S. Government Agencies and Sponsored Agencies:

Mortgage-backed

83,061

(6,799)

18,270

(2,420)

101,331

(9,219)

Other

201

(1)

5,463

(52)

5,664

(53)

Other mortgage-backed debt securities

31,323

(1,646)

7,234

(613)

38,557

(2,259)

Obligations of state and political subdivisions

100,845

(9,382)

9,718

(2,385)

110,563

(11,767)

Asset backed securities

24,945

(445)

6,415

(560)

31,360

(1,005)

Corporate debt securities

31,256

(1,324)

5,590

(160)

36,846

(1,484)

Total

290,589

(20,867)

52,690

(6,190)

343,279

(27,057)

December 31, 2021


(Dollars in thousands)	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale:	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury securities	$	7,729	$	(96)	$	—	$	—	$	7,729	$	(96)
Obligations of U.S. Government Agencies and Sponsored Agencies:
Mortgage-backed		66,195		(1,271)		11,697		(417)		77,892		(1,688)
Other		—		—		6,687		(65)		6,687		(65)
Other mortgage-backed debt securities		11,036		(225)		7,362		(205)		18,398		(430)
Obligations of state and political subdivisions		25,867		(362)		3,931		(192)		29,798		(554)
Asset backed securities		11,232		(49)		6,315		(107)		17,547		(156)
Corporate debt securities		19,485		(315)		3,445		(55)		22,930		(370)
Total	$	141,544	$	(2,318)	$	39,437	$	(1,041)	$	180,981	$	(3,359)

The Company invests in various forms of agency debt including residential and commercial mortgage-backed securities and callable debt. The mortgage-backed agency securities are issued by Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”) or Small Business Administration (“SBA”). The other mortgage-backed securities consist of private (non-agency) residential and commercial mortgage backed securities. The municipal securities consist of general obligations and revenue bonds. Asset backed securities consist of bonds backed by consumer loans. Corporate debt securities consist of senior debt and subordinated debt holdings.

The fair market value of the above securities is influenced by market interest rates, prepayment speeds on mortgage securities, bid-offer spreads in the market place and credit premiums for various types of agency debt. These factors change continuously and therefore the market value of these securities may be higher or lower than the Company’s carrying value at any measurement date. Management does not believe any of their 153 debt securities with a less than one year unrealized loss position, or any of their 31 debt securities with a one year or greater unrealized loss position as of June 30, 2022, represent an other-than-temporary impairment, as the unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities. The Company expects to collect all principal and interest payments defined under the original terms as all contracted payments on securities in the portfolio are current as of June 30, 2022.