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Investment Securities Available-for-Sale

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available-for-Sale

Note 3. Investment Securities Available-for-Sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:

						Gross				Gross				Estimated
March 31, 2019		Amortized				Unrealized				Unrealized				Fair
(dollars in thousands)		Cost				Gains				Losses				Value
U. S. agency securities		$	240,675			$	435			$	2,091			$	239,019
Residential mortgage backed securities			479,162				3,027				4,286				477,903
Municipal bonds			44,929				684				80				45,533
Corporate bonds			9,503				66				13				9,556
Other equity investments			218				—				—				218
		$	774,487			$	4,212			$	6,470			$	772,229

						Gross				Gross				Estimated
December 31, 2018		Amortized				Unrealized				Unrealized				Fair
(dollars in thousands)		Cost				Gains				Losses				Value
U. S. agency securities		$	260,150			$	228			$	4,033			$	256,345
Residential mortgage backed securities			477,949				1,575				7,293				472,231
Municipal bonds			45,814				439				484				45,769
Corporate bonds			9,503				79				6				9,576
Other equity investments			218				—				—				218
		$	793,634			$	2,321			$	11,816			$	784,139

In addition, at March 31, 2019 and December 31, 2018 the Company held $35.0 million and $23.5 million, respectively, in equity securities in a combination of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.

Gross unrealized losses and fair value by length of time that the individual available-for-sale securities have been in a continuous unrealized loss position are as follows:

						Less than								12 Months
						12 Months								or Greater								Total
						Estimated								Estimated								Estimated
March 31, 2019		Number of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(dollars in thousands)		Securities				Value				Losses				Value				Losses				Value				Losses
U. S. agency securities			56			$	51,185			$	325			$	157,658			$	1,766			$	208,843			$	2,091
Residential mortgage backed securities			140				22,026				123				226,380				4,163				248,406				4,286
Municipal bonds			6				—				—				13,974				80				13,974				80
Corporate bonds			1				1,488				13				—				—				1,488				13
			203			$	74,699			$	461			$	398,012			$	6,009			$	472,711			$	6,470

						Less than								12 Months
						12 Months								or Greater								Total
						Estimated								Estimated								Estimated
December 31, 2018		Number of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(dollars in thousands)		Securities				Value				Losses				Value				Losses				Value				Losses
U. S. agency securities			58			$	72,679			$	533			$	144,636			$	3,500			$	217,315			$	4,033
Residential mortgage backed securities			151				61,199				527				225,995				6,766				287,194				7,293
Municipal bonds			11				4,299				50				17,041				434				21,340				484
Corporate bonds			1				1,494				6				—				—				1,494				6
			221			$	139,671			$	1,116			$	387,672			$	10,700			$	527,343			$	11,816

The unrealized losses that exist are generally the result of changes in market interest rates and interest spread relationships since original purchases. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is relatively short at 3.3 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not believe that the investment securities that were in an unrealized loss position as of March 31, 2019 represent an other-than-temporary impairment. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of investments available-for-sale at March 31, 2019 and December 31, 2018 by contractual maturity are shown in the table below. Expected maturities for residential mortgage backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		March 31, 2019								December 31, 2018
		Amortized				Estimated				Amortized				Estimated
(dollars in thousands)		Cost				Fair Value				Cost				Fair Value
U. S. agency securities maturing:
One year or less		$	119,133			$	118,203			$	128,148			$	125,545
After one year through five years			113,513				112,943				119,856				118,883
Five years through ten years			8,029				7,873				12,146				11,917
Residential mortgage backed securities			479,162				477,903				477,949				472,231
Municipal bonds maturing:
One year or less			8,085				8,131				8,097				8,167
After one year through five years			14,203				14,372				15,025				15,081
Five years through ten years			21,576				21,866				21,626				21,385
After ten years			1,065				1,164				1,066				1,136
Corporate bonds maturing:
After one year through five years			8,003				8,056				8,003				8,076
After ten years			1,500				1,500				1,500				1,500
Other equity investments			218				218				218				218
		$	774,487			$	772,229			$	793,634			$	784,139

For the three months ended March 31, 2019, gross realized gains on sales of investments securities were $912 thousand and there were no gross realized losses on sales of investment securities. For the three months ended March 31, 2018, gross realized gains on sales of investments securities were $67 thousand and gross realized losses on sales of investment securities were $25 thousand.

Proceeds from sales and calls of investment securities for the three months ended March 31, 2019 were $22.8 million compared to $17.3 million for the same period in 2018.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at March 31, 2019 and December 31, 2018 was $522.0 million and $528.2 million, respectively, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of March 31, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders’ equity.