Investment Securities

9 Months Ended

Sep. 30, 2022

Investment Securities

Investment Securities

Note 2. Investment Securities

Investment securities available for sale are as follows:

	September 30, 2022
	Dollars in Thousands
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Obligations of U.S. Government agencies and corporations	$	15,167	$	—	$	1,665	$	13,502
Obligations of States and political subdivisions		29,094		—		3,475		25,619
Mortgage-backed securities		104,383		—		14,444		89,939
Subordinated debt investments		2,467		—		62		2,405
	$	151,111	$	—	$	19,646	$	131,465

	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 September 30, 2022 and December 31, 2021, are as follows:

	September 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	$	11,175	$	988	$	2,327	$	677	$	13,502	$	1,665
Obligations of States and political subdivisions		24,728		3,085		891		390		25,619		3,475
Mortgage-backed securities		46,727		5,025		43,209		9,419		89,936		14,444
Subordinated debt investments		2,155		62		—		—		2,155		62
Total investment securities with unrealized losses	$	84,785	$	9,160	$	46,427	$	10,486	$	131,212	$	19,646

	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 September 30, 2022, there were fifty-four mortgage-backed investment securities (“MBS”), thirteen agency investment securities, four subordinated debt investment securities and fifty-six municipal investment securities that have been in a continuous unrealized loss position for less than twelve months. At September 30, 2022, there were seventeen MBS investment securities, three agency investment securities and four municipal investment securities 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 September 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 nine months ended September 30, 2022, the Company sold one investment security, resulting in a loss of $5 thousand. During the three and nine months ended September 30, 2021, the Company sold four and fourteen investment securities, respectively, resulting in a gain of $3 thousand and $17 thousand, respectively.

During the three months ended September 30, 2022, there were no calls or maturities on investment securities. During the nine months ended September 30, 2022, two investment securities either matured or were called, resulting in no gain or loss for the period. During the three and nine months ended September 30, 2021, three and ten investment securities were either matured or were called, respectively, resulting in a gain of $0 and $5 thousand, respectively.

The Company has pledged certain investment securities as collateral for qualified customers’ deposit accounts at September 30, 2022 and December 31, 2021. The amortized cost and fair value of these pledged investment securities was $10.6 million and $8.9 million, respectively, at September 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 $75 thousand and $226 thousand on equity securities during the three and nine months ended September 30, 2022, respectively. The Company realized a loss of $9 thousand and $38 thousand on equity securities during the three and nine month periods ended September 30, 2021, respectively. These losses are included in “Other expenses” in the Consolidated Statements of Income.

Contractual maturities of investment securities at September 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:

	September 30, 2022
	Securities Available for Sale
	Dollars in Thousands
		Amortized		Fair
		Cost		Value
Due in one year or less	$	1	$	1
Due after one year through five years		11,076		10,743
Due after five years through ten years		46,869		42,922
Due after ten years or more		93,165		77,799
	$	151,111	$	131,465