Investment Securities

12 Months Ended

Dec. 31, 2021

Investment Securities

Investment Securities

NOTE 5 Investment Securities

The following tables present amortized cost, gross unrealized gains and losses, and fair value of the available-for-sale investment securities and the amortized cost, net unrealized gains, carrying value, gross unrealized gains and losses of held-to-maturity investment as of December 31, 2021 and 2020 are as follows:

	December 31, 2021
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	5,028	$	75	$	—	$	5,103
Mortgage backed securities
Residential agency		717,781		1,213		(11,837)		707,157
Commercial		88,362		2,674		(123)		90,913
Asset backed securities		52		2		—		54
Corporate bonds		49,035		1,398		(11)		50,422
Total available-for-sale investment securities		860,258		5,362		(11,971)		853,649
Held-to-maturity
Obligations of state and political agencies		144,543		1,110		(349)		145,304
Mortgage backed securities
Residential agency		207,518		—		(3,145)		204,373
Total held-to-maturity investment securities		352,061		1,110		(3,494)		349,677
Total investment securities	$	1,212,319	$	6,472	$	(15,465)	$	1,203,326

	December 31, 2020
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	5,926	$	—	$	(19)	$	5,907
Obligations of state and political agencies		148,491		5,282		—		153,773
Mortgage backed securities
Residential agency		303,760		3,395		(436)		306,719
Commercial		89,300		5,678		—		94,978
Asset backed securities		109		6		—		115
Corporate bonds		30,552		388		(90)		30,850
Total available-for-sale investment securities	$	578,138	$	14,749	$	(545)	$	592,342

On April 1, 2021, the Company transferred its state and political agencies debt securities portfolio, with a fair value of $149.2 million and a net unrealized gain of $1.3 million, from available-for-sale to held-to-maturity.

The amortized cost and estimated fair value of investment securities at December 31, 2021, by contractual maturity are as follows:

	Held-to-maturity				Available-for-sale
	Carrying		Fair		Amortized		Fair
(dollars in thousands)	Value		Value		Cost		Value
Due within one year or less	$	4,819	$	4,817	$	2	$	2
Due after one year through five years		34,896		34,769		2,809		2,883
Due after five years through ten years		74,002		74,581		96,263		99,243
Due after 10 years		238,344		235,510		761,184		751,521
Total investment securities	$	352,061	$	349,677	$	860,258	$	853,649

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities with a total carrying value of $192.8 million and $160.8 million, were pledged at December 31, 2021 and 2020, respectively, to secure public deposits and for other purposes required or permitted by law.

Proceeds from the sale of available-for-sale securities for the years ended December 31, 2021, 2020, and 2019 are displayed in the table below:

	Year ended
	December 31,
(dollars in thousands)	2021		2020		2019
Proceeds	$	13,189	$	75,647	$	32,565
Realized gains		114		2,737		357
Realized losses		—		—		(22)

Information pertaining to investment securities with gross unrealized losses that are not deemed to be other-than-temporarily impaired at December 31, 2021 and 2020 aggregated by investment category and length of time that individual investment securities have been in a continuous loss position, follows:

	December 31, 2021
	Less than 12 Months				Over 12 Months				Total
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(dollars in thousands)	Losses		Value		Losses		Value		Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage backed securities
Residential agency		(10,156)		554,811		(1,681)		55,082		(11,837)		609,893
Commercial		(123)		17,470		—		—		(123)		17,470
Asset backed securities		—		—		—		2		—		2
Corporate bonds		(11)		5,989		—		—		(11)		5,989
Total available-for-sale investment securities		(10,290)		578,270		(1,681)		55,084		(11,971)		633,354
Held-to-maturity
Obligations of state and political agencies		(349)		53,210		—		—		(349)		53,210
Mortgage backed securities
Residential agency		(3,145)		204,373		—		—		(3,145)		204,373
Total held-to-maturity investment securities		(3,494)		257,583		—		—		(3,494)		257,583
Total investment securities	$	(13,784)	$	835,853	$	(1,681)	$	55,084	$	(15,465)	$	890,937

	December 31, 2020
	Less than 12 Months				Over 12 Months				Total
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(dollars in thousands)	Losses		Value		Losses		Value		Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	(10)	$	4,509	$	(9)	$	1,309	$	(19)	$	5,818
Obligations of state and political agencies		—		—		—		—		—		—
Mortgage backed securities
Residential agency		(432)		68,494		(4)		2,356		(436)		70,850
Commercial		—		—		—		—		—		—
Asset backed securities		—		—		—		2		—		2
Corporate bonds		(90)		16,454		—		—		(90)		16,454
Total available-for-sale investment securities	$	(532)	$	89,457	$	(13)	$	3,667	$	(545)	$	93,124

For all of the above investment securities, the unrealized losses were generally due to changes in interest rates and unrealized losses are considered to be temporary as the fair value is expected to recover as the securities approach maturity. The Company evaluates securities for other-than-temporary impairment, or OTTI, on a quarterly basis, at a minimum, and more frequently when economic or market concerns warrant such evaluation. In estimating OTTI losses, consideration is given to the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities, considers external credit ratings and recent downgrades and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value.

For the years ended December 31, 2021 and 2020, the Company did not believe any OTTI existed and therefore did not recognize any OTTI losses on its investment securities.

As of December 31, 2021 and 2020, the carrying value of the Company’s Federal Reserve Bank stock and FHLB stock was as follows:

	December 31,		December 31,
(dollars in thousands)	2021		2020
Federal Reserve	$	2,675	$	2,675
FHLB		3,806		3,090

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

Visa Class B Restricted Shares

In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of December 31, 2021, the conversion ratio was 1.6181. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (11,204 Class A equivalents) that the Company owned as of December 31, 2021 and 2020, were carried at a zero cost basis.