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Investment Securities
 12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Investment Securities INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and the fair value of the Company’s available for sale and held to maturity investment securities are as follows:
 
 
December 31, 2019
 
December 31, 2018
(in thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
 
$
135,361

 
$
722

 
$
(436
)
 
$
135,647

 
$
143,495

 
$
—

 
$
(2,568
)
 
$
140,927

Mortgage-backed securities, residential
 
500,245

 
3,185

 
(1,551
)
 
501,879

 
434,208

 
779

 
(8,843
)
 
426,144

Mortgage-backed securities, multifamily
 
48,675

 
633

 
(123
)
 
49,185

 
21,087

 
67

 
(204
)
 
20,950

Obligations of states and political subdivisions
 
58,979

 
1,077

 
(35
)
 
60,021

 
45,951

 
140

 
(586
)
 
45,505

Debt securities
 
9,000

 
168

 
—

 
9,168

 
5,000

 
92

 
—

 
5,092

Total
 
$
752,260

 
$
5,785

 
$
(2,145
)
 
$
755,900

 
$
649,741

 
$
1,078

 
$
(12,201
)
 
$
638,618


 
 
December 31, 2019
 
December 31, 2018
(in thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
 
$
31,335

 
$
182

 
$
(8
)
 
$
31,509

 
$
33,025

 
$
—

 
$
(677
)
 
$
32,348

Mortgage-backed securities, residential
 
76,229

 
734

 
(176
)
 
76,787

 
75,859

 
169

 
(1,838
)
 
74,190

Mortgage-backed securities, multifamily
 
1,750

 
4

 
(2
)
 
1,752

 
1,853

 
—

 
(35
)
 
1,818

Obligations of states and political subdivisions
 
12,161

 
195

 
—

 
12,356

 
37,909

 
113

 
(328
)
 
37,694

Debt securities
 
2,500

 
—

 
—

 
2,500

 
5,000

 
—

 
(118
)
 
4,882

Total
 
$
123,975

 
$
1,115

 
$
(186
)
 
$
124,904

 
$
153,646

 
$
282

 
$
(2,996
)
 
$
150,932


During the fourth quarter of 2019, the Company early adopted ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments, and reclassified securities with a book value of $20.8 million and an unrealized gain of $291,000 from held to maturity to securities available for sale. ASU 2019-04 makes clarifications and corrections to the application of the guidance contained in each of the amended topics.
The following table lists contractual maturities of investment securities classified as available for sale and held to maturity at December 31, 2019. 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.
 
 
Available for Sale
 
Held to Maturity
(in thousands)
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
29,733

 
$
29,786

 
$
7,321

 
$
7,328

Due after one year through five years
 
105,745

 
106,611

 
31,102

 
31,425

Due after five years through ten years
 
52,534

 
53,385

 
6,815

 
6,852

Due after ten years
 
15,328

 
15,054

 
758

 
760

 
 
203,340

 
204,836

 
45,996

 
46,365

Mortgage-backed securities
 
548,920

 
551,064

 
77,979

 
78,539

Total securities
 
$
752,260

 
$
755,900

 
$
123,975

 
$
124,904


The following table shows proceeds from sales of securities, gross gains and gross losses on sales and calls of securities for the periods indicated:
 
 
Years Ended December 31,
(in thousands)
 
2019
 
2018
 
2017
Sale proceeds
 
$
—

 
$
—

 
$
4,500

Gross gains
 
—

 
—

 
2,539

Gross losses
 
—

 
—

 
(15
)

Gains or losses on sales of securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.
Securities with a carrying value of approximately $581.1 million and $476.3 million at December 31, 2019 and 2018, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.
The following tables indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2019 and 2018:
December 31, 2019
 
Less than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
 
$
11,625

 
$
39

 
$
41,617

 
$
397

 
11

 
$
53,242

 
$
436

Mortgage-backed securities, residential
 
125,782

 
561

 
99,489

 
990

 
86

 
225,271

 
1,551

Mortgage-backed securities, multifamily
 
7,651

 
118

 
4,878

 
5

 
3

 
12,529

 
123

Obligations of states and political subdivisions
 
373

 
2

 
6,559

 
33

 
5

 
6,932

 
35

Total
 
$
145,431

 
$
720

 
$
152,543

 
$
1,425

 
105

 
$
297,974

 
$
2,145

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
 
$
3,195

 
$
6

 
$
5,102

 
$
2

 
2

 
$
8,297

 
$
8

Mortgage-backed securities, residential
 
12,462

 
46

 
10,592

 
130

 
16

 
23,054

 
176

Mortgage-backed securities, multifamily
 
—

 
—

 
998

 
2

 
1

 
998

 
2

Total
 
$
15,657

 
$
52

 
$
16,692

 
$
134

 
19

 
$
32,349

 
$
186

December 31, 2018
 
Less than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
 
$
20,588

 
$
216

 
$
120,338

 
$
2,352

 
27

 
$
140,926

 
$
2,568

Mortgage-backed securities, residential
 
10,119

 
58

 
316,851

 
8,785

 
139

 
326,970

 
8,843

Mortgage-backed securities, multifamily
 
1,977

 
2

 
12,911

 
202

 
4

 
14,888

 
204

Obligations of states and political subdivisions
 
1,289

 
2

 
26,522

 
584

 
50

 
27,811

 
586

Total
 
$
33,973

 
$
278

 
$
476,622

 
$
11,923

 
220

 
$
510,595

 
$
12,201

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
 
$
—

 
$
—

 
$
32,348

 
$
677

 
6

 
$
32,348

 
$
677

Mortgage-backed securities, residential
 
8,325

 
59

 
53,761

 
1,779

 
36

 
62,086

 
1,838

Mortgage-backed securities, multifamily
 
—

 
—

 
1,818

 
35

 
2

 
1,818

 
35

Obligations of states and political subdivisions
 
1,764

 
8

 
15,580

 
320

 
27

 
17,344

 
328

Debt securities
 
3,882

 
118

 
—

 
—

 
1

 
3,882

 
118

Total
 
$
13,971

 
$
185

 
$
103,507

 
$
2,811

 
72

 
$
117,478

 
$
2,996


Management has evaluated the securities in the above table and has concluded that none of the securities with unrealized losses has impairments that are other-than-temporary. Fair value below cost is solely due to interest rate movements and is deemed temporary.
Investment securities, including the mortgage-backed securities and corporate securities, are evaluated on a periodic basis to determine if factors are identified that would require further analysis. In evaluating the Company’s securities, management considers the following items:
•
The Company’s ability and intent to hold the securities, including an evaluation of the need to sell the security to meet certain liquidity measures, or whether the Company has sufficient levels of cash to hold the identified security in order to recover the entire amortized cost of the security;
•
The financial condition of the underlying issuer;
•
The credit ratings of the underlying issuer and if any changes in the credit rating have occurred;
•
The length of time the security’s fair value has been less than amortized cost; and
•
Adverse conditions related to the security or its issuer if the issuer has failed to make scheduled payments or other factors.
If the above factors indicate an additional analysis is required, management will perform a discounted cash flow analysis evaluating the security.
Equity securities at fair value
The Company has an equity securities portfolio, which consists of investments in other financial institutions for market appreciation purposes and investments in Community Reinvestment funds. The market value of these investments was $16.5 million and $15.9 million as of December 31, 2019 and 2018, respectively. Upon implementation of Accounting Standards Update 2016-01 - Financial Instruments ("ASU 2016-01"), the Company made a cumulative adjustment of $2.0 million from other comprehensive income to retained earnings as of January 1, 2018. For the year ended December 31, 2019, the Company recorded proceeds from sales of equity securities of $1.3 million. In the twelve months ended December 31, 2019, the Company recorded $496,000 in market value gains on equity securities in noninterest income as compared to market value losses on equity securities of $583,000 during 2018.
As of December 31, 2019, the equity investments in other financial institutions and Community Reinvestment funds had a market value of $1.7 million and $14.8 million, respectively. The Community Reinvestment funds include $3.5 million that are primarily invested in community development loans that are guaranteed by the Small Business Administration ("SBA"). Because the funds are primarily guaranteed by the federal government there are minimal changes in market value between accounting periods. These funds can be redeemed within 60 days notice at the net asset value less unpaid management fees with the approval of the fund manager. As of December 31, 2019, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.
The Community Reinvestment funds include $11.3 million as of December 31, 2019, that are primarily invested in government guaranteed loans, mortgage-backed securities, small business loans and other instruments supporting affordable housing and economic development. The Company may redeem these funds at the net asset value calculated at the end of the current business day less any unpaid management fees. There are no restrictions on redemptions for the holdings in these investments other than the notice required by the fund manager. There are no unfunded commitments related to this investment.