At September 30, 2020, the Company had $1.10 billion and $446.6 million in available for sale debt securities and held to maturity debt securities, respectively. Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, regulatory actions, changes in the business environment or any changes in the competitive marketplace could have an adverse effect on the Company’s investment portfolio. The total number of available for sale and held to maturity debt securities in an unrealized loss position at September 30, 2020 totaled 68, compared with 85 at December 31, 2019.

On January 1, 2020, the Company adopted CECL which replaces the incurred loss methodology with an expected loss methodology. The Company did not record an allowance for credit losses on available for sale debt securities as this portfolio consisted primarily of debt securities explicitly or implicitly backed by the U.S. Government for which credit risk is deemed immaterial. The impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolio as well as the economic conditions at future reporting periods. The Company recorded a $70,000 increase to the allowance for credit losses on held to maturity debt securities with a corresponding cumulative effect adjustment to decrease retained earnings by $52,000, net of income taxes. (See Adoption of CECL table below for additional detail.)

Management measures expected credit losses on held to maturity debt securities on a collective basis by security type. Management classifies the held to maturity debt securities portfolio into the following security types:

All of the agency obligations held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The majority of the state and municipal, and corporate obligations carry no lower than A ratings from the rating agencies at September 30, 2020 and the Company had one security rated with a triple-B by Moody’s Investors Service.

The Company adopted CECL using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2020. As a result, the amortized cost basis remains the same before and after the effective date of CECL.


	September 30, 2020
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value


Agency obligations	$	1,081	4	(1)	1,084
Mortgage-backed securities	903,628		31,407	(864)	934,171
Asset-backed securities	53,018		877	(27)	53,868
State and municipal obligations	69,931		918	(331)	70,518
Corporate obligations	40,216		589	(55)	40,750

	$	1,067,874	33,795	(1,278)	1,100,391


	December 31, 2019
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value



Mortgage-backed securities	$	936,196	12,367	(1,133)	947,430
State and municipal obligations	3,907		172	—	4,079
Corporate obligations	25,032		393	(15)	25,410

	$	965,135	12,932	(1,148)	976,919

The amortized cost and fair value of available for sale debt securities at September 30, 2020, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	September 30, 2020
	Amortized cost		Fair value
Due in one year or less	$	—	—
Due after one year through five years	5,679		5,792
Due after five years through ten years	38,089		38,737
Due after ten years	66,379		66,739
	$	110,147	111,268

Investments which pay principal on a periodic basis totaling $957.7 million at amortized cost and $989.1 million at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.


	September 30, 2020
	Less than 12 months			12 months or longer		Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses

Agency obligations	$	478	(1)	—	—	478	(1)
Mortgage-backed securities	84,276		(835)	8,489	(29)	92,765	(864)
Asset-backed securities	7,624		(27)	—	—	7,624	(27)
State and municipal obligations	34,033		(331)	—	—	34,033	(331)
Corporate obligations	6,938		(11)	1,981	(44)	8,919	(55)
	$	133,349	(1,205)	10,470	(73)	143,819	(1,278)


	December 31, 2019
	Less than 12 months			12 months or longer		Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses



Mortgage-backed securities	$	136,270	(629)	46,819	(504)	183,089	(1,133)

Corporate obligations	2,013		(15)	—	—	2,013	(15)
	$	138,283	(644)	46,819	(504)	185,102	(1,148)

The number of available for sale debt securities in an unrealized loss position at September 30, 2020 totaled 55, compared with 50 at December 31, 2019. The increase in the number of securities in an unrealized loss position at September 30, 2020 was due to available for sale debt securities that were brought over from the SB One acquisition. At September 30, 2020, there was one private label mortgage-backed security in an unrealized loss position, with an amortized cost of $17,000 and an unrealized loss of $2,000.

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit losses and the estimated fair value for held to maturity debt securities at September 30, 2020 and December 31, 2019 (in thousands):


	September 30, 2020
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Allowance for credit losses	Fair value
Agency obligations	$	9,100	4	(16)	—	9,088
Mortgage-backed securities	75		2	—	—	77
State and municipal obligations	428,532		21,018	(35)	(67)	449,448
Corporate obligations	8,960		133	(4)	(9)	9,080
	$	446,667	21,157	(55)	(76)	467,693


	December 31, 2019
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Allowance for credit losses	Fair value
Agency obligations	$	6,599	11	(9)	—	6,601
Mortgage-backed securities	118		4	—	—	122
State and municipal obligations	437,074		14,394	(115)	—	451,353
Corporate obligations	9,838		58	(6)	—	9,890
	$	453,629	14,467	(130)	—	467,966

The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period. There were no sales of securities from the held to maturity debt securities portfolio for the three and nine months ended September 30, 2020 and 2019. For the three and nine months ended September 30, 2020, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $13.7 million and $39.5 million, respectively. As to these calls of securities, for the three months ended September 30, 2020, there were no gross gains and no gross losses. For the nine months ended September 30, 2020, there were gross gains of $55,000 and no gross losses. For the three and nine months ended September 30, 2019, proceeds from calls of securities in the held to maturity debt securities portfolio totaled $14.4 million and $26.6 million, respectively. As to these calls of securities, there were no of gross gains and no gross losses for the three and nine months ended September 30, 2019.

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at September 30, 2020 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	September 30, 2020
	Amortized cost		Fair value
Due in one year or less	$	22,685	22,792
Due after one year through five years	130,032		134,202
Due after five years through ten years	221,305		234,041
Due after ten years	72,569		76,658
	$	446,591	467,693

Mortgage-backed securities totaling $75,000 at amortized cost and $77,000 at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments. Additionally, allowance for credit losses totaling $76,000 is excluded from the table above.


	January 1, 2020
	As reported under CECL		Prior to CECL	Impact of CECL adoption
Held to Maturity Debt Securities
Allowance for credit losses on corporate securities	$	6	—	6
Allowance for credit losses on municipal securities	64		—	64
Allowance for credit losses on held to maturity debt securities	$	70	—	70


	September 30, 2020 Unrealized Losses
	Less than 12 months			12 months or longer		Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses
Agency obligations	$	3,985	(16)	—	—	3,985	(16)
State and municipal obligations	3,552		(18)	406	(17)	3,958	(35)
Corporate obligations	1,577		(4)	—	—	1,577	(4)
	$	9,114	(38)	406	(17)	9,520	(55)


	December 31, 2019 Unrealized Losses
	Less than 12 months			12 months or longer		Total
	Fair value		Gross unrealized losses	Fair value	Gross unrealized losses	Fair value	Gross unrealized losses
Agency obligations	$	3,601	(9)	—	—	3,601	(9)
State and municipal obligations	7,675		(42)	2,093	(73)	9,768	(115)
Corporate obligations	3,254		(6)	—	—	3,254	(6)
	$	14,530	(57)	2,093	(73)	16,623	(130)

The number of held to maturity debt securities in an unrealized loss position at September 30, 2020 totaled 13, compared with 35 at December 31, 2019. The decrease in the number of securities in an unrealized loss position at September 30, 2020, was due to lower current market interest rates compared to prevailing market rates at December 31, 2019.


	September 30, 2020
Total Portfolio	AAA		AA	A	BBB	Not Rated	Total
Agency obligations	$	9,100	—	—	—	—	9,100
Mortgage-backed securities	75		—	—	—	—	75
State and municipal obligations	50,128		313,053	54,217	1,115	10,019	428,532
Corporate obligations	—		2,719	5,816	400	25	8,960
	$	59,303	315,772	60,033	1,515	10,044	446,667

	December 31, 2019
Total Portfolio	AAA		AA	A	BBB	Not Rated	Total
Agency obligations	$	6,599	—	—	—	—	6,599
Mortgage-backed securities	118		—	—	—	—	118
State and municipal obligations	49,316		330,322	56,317	1,119	—	437,074
Corporate obligations	—		3,128	6,335	350	25	9,838
	$	56,033	333,450	62,652	1,469	25	453,629

Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. At September 30, 2020, the held to maturity debt securities portfolio was comprised of 13% rated AAA, 71% rated AA, 13% rated A, and less than 2% either below an A rating or not rated by Moody’s Investors Service or Standard and Poor’s. Securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.