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Investment Securities

3 Months Ended

Mar. 31, 2021

Investment Securities

Investment Securities

NOTE 3 Investment Securities

The following tables present amortized cost, gross unrealized gain and losses, and fair value of the available-for-sale investment securities as of March 31, 2021 and December 31, 2020:


		March 31, 2021
		Amortized			Unrealized			Unrealized			Fair
(dollars in thousands)		Cost			Gains			Losses			Value
U.S. Treasury and agencies		$	5,704		$	—		$	(21)		$	5,683
Obligations of state and political agencies			147,926			2,710			(1,445)			149,191
Mortgage backed securities
Residential agency			529,717			2,146			(10,268)			521,595
Commercial			85,060			2,650			(13)			87,697
Asset backed securities			91			5			—			96
Corporate bonds			30,545			707			(417)			30,835
Total available-for-sale investment securities		$	799,043		$	8,218		$	(12,164)		$	795,097


		December 31, 2020
		Amortized			Unrealized			Unrealized			Fair
(dollars in thousands)		Cost			Gains			Losses			Value
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

The following tables present unrealized losses and fair values for available-for-sale investment securities as of March 31, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


		March 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
U.S. Treasury and agencies		$	—		$	—		$	(21)		$	5,650		$	(21)		$	5,650
Obligations of state and political agencies			(1,445)			51,463			—			—			(1,445)			51,463
Mortgage backed securities
Residential agency			(10,268)			380,454			—			—			(10,268)			380,454
Commercial			(13)			9,026			—			—			(13)			9,026
Asset backed securities			—			—			—			2			—			2
Corporate bonds			(417)			13,583			—			—			(417)			13,583
Total available-for-sale investment securities		$	(12,143)		$	454,526		$	(21)		$	5,652		$	(12,164)		$	460,178


		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
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 were considered to be temporary as the fair value is expected to recover as the securities approach their maturity dates. 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 three months ended March 31, 2021 and 2020, the Company did not recognize OTTI losses on its investment securities.

The following table presents amortized cost and estimated fair value of the available-for-sale investment securities as of March 31, 2021, by contractual maturity:


		Amortized			Fair
(dollars in thousands)		Cost			Value
Due within one year or less		$	5,480		$	5,506
Due after one year through five years			32,626			33,180
Due after five years through ten years			150,987			153,408
Due after 10 years			609,950			603,003
Total available-for-sale investment securities		$	799,043		$	795,097

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 $177.5 million and $160.8 million were pledged as of March 31, 2021 and December 31, 2020, respectively, to secure public deposits and for other purposes required or permitted by law.

Proceeds from the sale or call of available-for-sale investment securities, for the three months ended March 31, 2021 and 2020, are displayed in the table below:


		Three months ended
		March 31,
(dollars in thousands)		2021			2020
Proceeds		$	13,189		$	4,000
Realized gains			114			—
Realized losses			—			—

As of March 31, 2021 and December 31, 2020, the carrying value of the Company’s Federal Reserve stock and Federal Home Loan Bank of Des Moines, or FHLB, stock was as follows:


		March 31,			December 31,
(dollars in thousands)		2021			2020
Federal Reserve		$	2,675		$	2,675
FHLB			3,864			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. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. 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 March 31, 2021, the conversion ratio was 1.6228. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (11,236 Class A equivalents) that the Company owned as of March 31, 2021 and December 31, 2020, are carried at a zero cost basis.