Investment Securities

6 Months Ended

Jun. 30, 2022

Investment Securities

Investment Securities

Note 2. Investment Securities

Investment securities available for sale are as follows:

	June 30, 2022
	Dollars in Thousands
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Obligations of U.S. Government agencies and corporations	$	10,234	$	—	$	1,009	$	9,225
Obligations of States and political subdivisions		29,133		38		1,964		27,207
Mortgage-backed securities		108,024		—		11,011		97,013
Subordinated debt investments		1,991		1		17		1,975
	$	149,382	$	39	$	14,001	$	135,420

	December 31, 2021
	Dollars in Thousands
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Obligations of U.S. Government agencies and corporations	$	6,547	$	46	$	142	$	6,451
Obligations of States and political subdivisions		29,792		1,397		63		31,126
Mortgage-backed securities		83,213		279		1,089		82,403
Subordinated debt investments		1,990		51		—		2,041
	$	121,542	$	1,773	$	1,294	$	122,021

Gross unrealized losses and fair values, aggregated by investment category and length of time that individual investment securities have been in a continuous unrealized loss position, at June 30, 2022 and December 31, 2021, are as follows:

	June 30, 2022
	Dollars in Thousands
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
Obligations of U.S. Government agencies and corporations	$	6,707	$	523	$	2,519	$	486	$	9,226	$	1,009
Obligations of States and political subdivisions		13,835		1,830		376		134		14,211		1,964
Mortgage-backed securities		86,319		7,527		20,222		3,484		106,541		11,011
Subordinated debt investments		733		17		—		—		733		17
Total investment securities with unrealized losses	$	107,594	$	9,897	$	23,117	$	4,104	$	130,711	$	14,001

	December 31, 2021
	Dollars in Thousands
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
Obligations of U.S. Government agencies and corporations	$	1,289	$	35	$	2,397	$	107	$	3,686	$	142
Obligations of States and political subdivisions		2,473		63		—		—		2,473		63
Mortgage-backed securities		59,236		744		11,349		345		70,585		1,089
Total investment securities with unrealized losses	$	62,998	$	842	$	13,746	$	452	$	76,744	$	1,294

For individual investment securities classified as either available for sale or held to maturity, the Company must determine whether a decline in fair value below the amortized cost basis is other than temporary. In estimating OTTI losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. If the decline in fair value is considered to be other than temporary, the cost basis of the individual investment security shall be written down to the fair value as a new cost basis and the amount of the write-down shall be included in earnings (that is, accounted for as a realized loss).

At June 30, 2022, there were sixty mortgage-backed investment securities (“MBS”), eight agency investment securities, two subordinated debt investment securities and fifty-three municipal investment securities that have been in a continuous unrealized loss position for less than twelve months. At June 30, 2022, there were nine MBS investment securities, three agency investment securities and one municipal investment security that had been in a continuous unrealized loss position for more than twelve months. Management found no evidence of OTTI on any of these investment securities and believes that the unrealized losses are due to fluctuations in fair values resulting from changes in market interest rates and are considered temporary. As of June 30, 2022, management also believes it has the ability and intent to hold the investment securities for a period of time sufficient for a recovery of cost.

During the three and six months ended June 30, 2022, the Company did not sell any investment securities. During the six months ended June 30, 2021, the Company sold ten investment securities, resulting in a gain of $14 thousand. There were no sales of investment securities during the three months ended June 30, 2021. During the three months ended June 30, 2022, there were no investment securities that either matured or were called, and during the six

months ended June 30, 2022, one investment security either matured or was called, resulting in no gain or loss for the period. During the three and six months ended June 30, 2021, four and seven investment securities either matured or were called, respectively, resulting in a gain of $6 thousand for both periods.

The Company has pledged certain investment securities as collateral for qualified customers’ deposit accounts at June 30, 2022 and December 31, 2021. The amortized cost and fair value of these pledged investment securities was $10.7 million and $9.5 million, respectively, at June 30, 2022. The amortized cost and fair value of these pledged investment securities was $11.1 million and $11.2 million, respectively, at December 31, 2021.

The Company realized a loss of $62 thousand and $151 thousand on equity securities during the three and six months ended June 30, 2022, respectively. The Company realized a gain of $5 thousand and a loss of $29 thousand on equity securities during the three and six month periods ended June 30, 2021, respectively. These gains and losses are included in “Other expenses” in the Consolidated Statements of Income.

Contractual maturities of investment securities at June 30, 2022 are shown below. Actual maturities may differ from contractual maturities because debtors may have the right to call or prepay obligations with or without call or prepayment penalties. MBS primarily reflect investments in various Pass-through and Participation Certificates issued by the Federal National Mortgage Association and the Government National Mortgage Association. Repayment of MBS is affected by the contractual repayment terms of the underlying mortgages collateralizing these obligations and the current level of interest rates.

The following is a summary of maturities, calls, or repricing of investment securities available for sale:

	June 30, 2022
	Securities Available for Sale
	Dollars in Thousands
		Amortized		Fair
		Cost		Value
Due in one year or less	$	2	$	2
Due after one year through five years		5,977		5,962
Due after five years through ten years		47,406		45,320
Due after ten years or more		95,997		84,136
	$	149,382	$	135,420