XML 21 R11.htm IDEA: XBRL DOCUMENT

Investment securities

9 Months Ended

Sep. 30, 2020

Investment securities

Investment securities

4. Investment securities:

The amortized cost and fair value of investment securities aggregated by investment category at September 30, 2020 and December 31, 2019 are summarized as follows:


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
September 30, 2020		Cost			Gains			Losses			Value
Available-for-sale:
U.S. Treasury securities		$	21,476		$	529					$	22,005
U.S. government-sponsored enterprises			72,876			1,411						74,287
State and municipals:
Taxable			31,657			1,871						33,528
Tax-exempt			31,357			2,554						33,911
Residential mortgage-backed securities:
U.S. government agencies			4,104			133		$	1			4,236
U.S. government-sponsored enterprises			63,101			2,766			38			65,829
Commercial mortgage-backed securities:
U.S. government-sponsored enterprises			12,638			970						13,608
Total		$	237,209		$	10,234		$	39		$	247,404
Held-to-maturity:
Tax-exempt state and municipals		$	6,850		$	298		$			$	7,148
Residential mortgage-backed securities:
U.S. government agencies			23									23
U.S. government-sponsored enterprises			424			16						440
Total		$	7,297		$	314		$			$	7,611


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2019		Cost			Gains			Losses			Value
Available-for-sale:
U.S. Treasury securities		$	23,966		$	162					$	24,128
U.S. government-sponsored enterprises			87,156			181		$	227			87,110
State and municipals:
Taxable			35,418			295			815			34,898
Tax-exempt			59,127			1,056			20			60,163
Residential mortgage-backed securities:
U.S. government agencies			8,368			112			10			8,470
U.S. government-sponsored enterprises			101,914			1,011			77			102,848
Commercial mortgage-backed securities:
U.S. government-sponsored enterprises			12,694			171			4			12,861
Total		$	328,643		$	2,988		$	1,153		$	330,478
Held-to-maturity:
Tax-exempt state and municipals		$	6,852		$	208		$			$	7,060
Residential mortgage-backed securities:
U.S. government agencies			31									31
U.S. government-sponsored enterprises			773			25						798
Total		$	7,656		$	233		$			$	7,889

Equity Securities

Our equity securities portfolio consists of stock of two other financial institutions. At September 30, 2020 and December 31, 2019, we had $341 and $423 respectively, in equity securities recorded at fair value. At September 30, 2020, the fair

value of our equity portfolio exceeded the cost basis by $64. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30 2020 (in thousands):



Three Months Ended September 30,			2020			2019
Net gain recognized during the period on equity securities		$	2		$	14
Less: Net gain (loss) recognized during the period on equity securities sold during the period
Unrealized gain recognized during the reporting period on equity securities still held at the reporting date		$	2		$	14


For the Nine Months Ended September 30,			2020			2019
Net gain (loss) recognized during the period on equity securities		$	(82)		$	6
Less: Net gain (loss) recognized during the period on equity securities sold during the period
Unrealized gain (loss) recognized during the reporting period on equity securities still held at the reporting date		$	(82)		$	6

Restricted Investment In Stock

Restricted investment in stock includes Federal Home Loan Bank (“FHLB”) stock with a carrying cost of $5,503 and $10,159 at September 30, 2020 and December 31, 2019, respectively, Atlantic Community Bankers Bank (“ACBB”) stock with a carrying cost of $42, and VISA Class B stock with a carrying cost of $0 at September 30, 2020 and December 31, 2019, are included in other assets in the consolidated balance sheets. FHLB and ACBB stock was issued as a requirement to facilitate participation in borrowing and other banking services. The investment in FHLB stock may fluctuate, as it is based on the member bank’s use of FHLB’s services. The decrease in FHLB stock from December 31, 2019 is due to a decrease in short term borrowings at FHLB.

The Company owns 44,982 shares of Visa Class B stock, which was necessary to participate in Visa services in support of the Company’s credit card, debit card, and related payment programs (permissible activities under banking regulations) as a member institution. Following the resolution of Visa’s litigation, shares of Visa’s Class B stock will be converted to Visa Class A shares using a conversion factor (1.6228 as of September 30, 2020), which is periodically adjusted to reflect VISA’s ongoing litigation costs. There is a very limited market for this stock, as only current owners of Class B shares are permitted to transact in Class B stock. Due to the lack of orderly trades and public information of such trades, Visa Class B stock has no readily determinable fair value.

These restricted investments are carried at cost and evaluated for other-than-temporary impairment (“OTTI”) periodically. As of September 30, 2020, there was no OTTI associated with these investments.

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as available-for-sale at September 30, 2020, is summarized as follows:


		Fair
September 30, 2020		Value
Within one year		$	38,267
After one but within five years			62,060
After five but within ten years			18,900
After ten years			41,142
			160,369
Mortgage-backed and other amortizing securities			87,035
Total		$	247,404

The maturity distribution of the amortized cost and fair value, of debt securities classified as held-to-maturity at September 30, 2020, is summarized as follows:


		Amortized			Fair
September 30, 2020		Cost			Value
After five but within ten years		$	324		$	346
After ten years			6,526			6,802
			6,850			7,148
Mortgage-backed securities			447			463
Total		$	7,297		$	7,611

Securities with a carrying value of $123,259 and $157,047 at September 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits and certain other deposits as required or permitted by law.

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a case-by-case basis. At September 30, 2020 and December 31, 2019, there were no significant concentrations of credit risk from any one issuer, with the exception of U.S. government agencies and sponsored enterprises, that exceeded 10.0 percent of stockholders’ equity.

The fair value and gross unrealized losses of investment securities with unrealized losses for which an OTTI has not been recognized at September 30, 2020 and December 31, 2019, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:


		Less Than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
September 30, 2020		Value			Losses			Value			Losses			Value			Losses
Residential mortgage-backed securities:
U.S. government agencies								$	59		$	1		$	59		$	1
U.S. government-sponsored enterprises		$	2,589		$	35			384			3			2,973			38
Total		$	2,589		$	35		$	443		$	4		$	3,032		$	39


		Less Than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
December 31, 2019		Value			Losses			Value			Losses			Value			Losses
U.S. government-sponsored enterprises		$	13,695		$	149		$	36,070		$	78		$	49,765		$	227
State and municipals:
Taxable			23,929			815									23,929			815
Tax-exempt			2,684			19			1,098			1			3,782			20
Residential mortgage-backed securities:
U.S. government agencies			992			1			2,362			9			3,354			10
U.S. government-sponsored enterprises			36,939			51			3,751			30			40,690			81
Total		$	78,239		$	1,035		$	43,281		$	118		$	121,520		$	1,153

Management, from a credit risk perspective, has taken action to identify and assess its COVID-19 related credit exposures based on asset class. No specific COVID-19 related credit impairment was identified within our investment securities portfolio, including our municipal securities, during the third quarter of 2020. The Company had eight mortgage-backed securities that were in unrealized loss positions at September 30, 2020. Of these securities, four were in a continuous unrealized loss position for twelve months or more. Management does not consider the unrealized losses on the debt securities, as a result of changes in interest rates, to be OTTI based on historical evidence that indicates the cost of these securities is recoverable within a reasonable period of time in relation to normal cyclical changes in the market rates of interest. Moreover, because there has been no material change in the credit quality of the issuers or other events or circumstances that may cause a significant adverse impact on the fair value of these securities, and management does not intend to sell these securities and it is unlikely that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the unrealized losses to be OTTI at September 30, 2020. There was no OTTI recognized for the three or nine months ended September 30, 2020 and 2019.