INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

3. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, fair value and related ACL on AFS debt securities are as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		ACL
June 30, 2020
Available-for-sale:
Debt securities:
States and political subdivisions	$	136,597	$	4,882	$	(11)	$	141,468	$	—
Corporate securities	29,221		531		—		29,752		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	36,802		25		(473)		36,354		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	692,989		21,516		(28)		714,477		—
Commercial - U.S. Government agencies and sponsored entities	77,743		2,926		(4)		80,665		—
Residential - Non-government agencies	30,697		1,389		—		32,086		—
Commercial - Non-government agencies	131,679		2,290		(177)		133,792		—
Total available-for-sale securities	$	1,135,728	$	33,559	$	(693)	$	1,168,594	$	—

The amortized cost, gross unrealized gains and losses and fair value of AFS debt securities are as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2019
Available-for-sale:
Debt securities:
States and political subdivisions	$	119,755	$	2,303	$	(40)	$	122,018
Corporate securities	30,277		252		—		30,529
U.S. Treasury obligations and direct obligations of U.S Government agencies	40,769		10		(398)		40,381
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	673,918		6,003		(2,099)		677,822
Commercial - U.S. Government agencies and sponsored entities	80,773		1,198		(746)		81,225
Residential - Non-government agencies	36,377		830		(16)		37,191
Commercial - Non-government agencies	134,676		3,141		—		137,817
Total available-for-sale securities	$	1,116,545	$	13,737	$	(3,299)	$	1,126,983

The amortized cost and fair value of our equity investment securities is as follows:


(dollars in thousands)	Amortized Cost		Fair Value
June 30, 2020
Equity securities	$	1,064	$	1,209

December 31, 2019
Equity securities	935		1,127

On January 1, 2019 in connection with the adoption of ASU 2017-12, the Company transferred all of its HTM investment securities with an amortized cost of $148.5 million and fair value of $144.3 million to its AFS investment securities portfolio.

The amortized cost and estimated fair value of our AFS debt securities at June 30, 2020 are shown below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.


	June 30, 2020
(dollars in thousands)	Amortized Cost		Fair Value






Available-for-sale:
Due in one year or less	$	44,455	$	44,638
Due after one year through five years	43,905		44,632
Due after five years through ten years	69,693		72,675
Due after ten years	44,567		45,629

Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	692,989		714,477
Commercial - U.S. Government agencies and sponsored entities	77,743		80,665
Residential - Non-government agencies	30,697		32,086
Commercial - Non-government agencies	131,679		133,792

Total available-for-sale securities	$	1,135,728	$	1,168,594

We did not sell any available-for-sale securities during the three and six months ended June 30, 2020 and June 30, 2019.

Investment securities of $597.4 million and $719.8 million at June 30, 2020 and December 31, 2019, respectively, were pledged to secure public funds on deposit and other short-term borrowings.

At June 30, 2020 and December 31, 2019, there were no holdings of investment securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

There were a total of 25 and 81 AFS debt securities which were in an unrealized loss position, without an ACL, at June 30, 2020 and December 31, 2019, respectively. The following tables summarize AFS debt securities which were in an unrealized loss position at June 30, 2020 and December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position.


	Less Than 12 Months						12 Months or Longer						Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2020
Debt securities:
States and political subdivisions	$	3,631	$	(11)	$	—	$	—	$	3,631	$	(11)
Corporate securities	—		—		—		—		—		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	10,867		(187)		18,458		(286)		29,325		(473)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	4,505		(28)		—		—		4,505		(28)
Residential - Non-government agencies	—		—		—		—		—		—
Commercial - U.S. Government agencies and sponsored entities	1,781		(4)		—		—		1,781		(4)
Commercial - Non-government agencies	26,729		(177)		—		—		26,729		(177)
Total temporarily impaired securities	$	47,513	$	(407)	$	18,458	$	(286)	$	65,971	$	(693)


	Less Than 12 Months						12 Months or Longer						Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2019
Debt securities:
States and political subdivisions	$	1,754	$	(9)	$	801	$	(31)	$	2,555	$	(40)
Corporate securities	—		—		—		—		—		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	18,882		(143)		19,031		(255)		37,913		(398)
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities	54,335		(283)		214,295		(1,816)		268,630		(2,099)
Residential - Non-government agencies	8,206		(16)		—		—		8,206		(16)
Commercial - U.S. Government-sponsored entities	32,067		(746)		—		—		32,067		(746)

Total temporarily impaired securities	$	115,244	$	(1,197)	$	234,127	$	(2,102)	$	349,371	$	(3,299)

The Company has evaluated its AFS investment securities that are in an unrealized loss position and has determined that the unrealized losses on the Company's investment securities are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the credit and financial markets since purchase. Investment securities in an unrealized loss position are evaluated on at least a quarterly basis, and include evaluating the changes in the investment securities' ratings issued by rating agencies and changes in the financial condition of the issuer. For mortgage-related securities, delinquency and loss information with respect to the underlying collateral, changes in levels of subordination for the Company's particular position within the repayment structure, and remaining credit enhancement as compared to projected credit losses of the security are also evaluated. All of the investment securities in an unrealized loss position continue to be rated investment grade by one or more major rating agencies. Because we have no intent to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell such securities before recovery of its amortized cost basis, the Company has not recorded an ACL and unrealized losses on these securities and have not been recognized into income.

Visa and MasterCard Class B Common Stock

As of June 30, 2020, the Company owns 34,631 shares of Class B common stock of Visa, Inc. ("Visa"). These shares were received in 2008 as part of Visa's initial public offering ("IPO"). These shares are transferable only under limited circumstances until they can be converted into shares of the publicly traded Class A common stock. This conversion will not occur until the resolution of certain litigation, which is indemnified by Visa members. Since its IPO, Visa has funded a litigation reserve to settle these litigation claims. At its discretion, Visa may continue to increase the litigation reserve based upon a change in the conversion ratio of each member bank’s restricted Class B common stock to unrestricted Class A common stock. Due to the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the Company has determined that the Visa Class B common stock does not have a readily determinable fair value and chooses to carry the shares on the Company's consolidated balance sheets at zero cost basis.

During the first quarter of 2019, the Company converted the 11,170 shares of Class B common stock of MasterCard, Inc. ("MasterCard") it received during their initial public offering to an equal number of Class A common stock and sold the shares for $2.6 million. The shares were carried on the Company's consolidated balance sheets at zero cost basis and the proceeds received were recorded as a gain in other operating income - other in the Company's consolidated statements of income. The Company no longer owns any shares of MasterCard Class B common stock.