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Investment Securities
 6 Months Ended
Jun. 30, 2022
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

Note 3—Investment Securities

 

The amortized cost and estimated fair values of investment securities are summarized below:

 

AVAILABLE-FOR-SALE:

 

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
June 30, 2022                    
US Treasury securities  $60,454   $—   $(3,131)  $57,323 
Government Sponsored Enterprises   2,500    —    (311)   2,189 
Mortgage-backed securities   256,725    29    (12,933)   243,821 
Small Business Administration pools   25,830    148    (415)   25,563 
State and local government        —    —    — 
Corporate and other securities   8,773    47    (462)   8,358 
Total  $354,282   $224   $(17,252)  $337,254 
                     
       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
December 31, 2021                    
US Treasury securities  $15,736   $—   $300   $15,436 
Government Sponsored Enterprises   2,499    2    —    2,501 
Mortgage-backed securities   398,125    3,596    3,992    397,729 
Small Business Administration pools   30,835    505    67    31,273 
State and local government   105,469    4,918    539    109,848 
Corporate and other securities   8,024    157    129    8,052 
Total  $560,688   $9,178   $5,027   $564,839 

HELD-TO-MATURITY:

 

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
(Dollars in thousands)  Cost   Gains   Losses   Fair Value 
June 30, 2022                    
US Treasury securities  $—   $—   $—   $— 
Government Sponsored Enterprises   —    —    —    — 
Mortgage-backed securities   131,209    18    (2,698)   128,529 
Small Business Administration pools   —    —    —    — 
State and local government   102,521    12    (1,864)   100,669 
Corporate and other securities   —    —    —    — 
Total  $233,730   $30   $(4,562)  $229,198 

 

There were no investment securities listed as held-to-maturity as of December 31, 2021.

 

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held-to-maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $16.6 million ($13.1 million net of tax) at June 30, 2022.

 

During the six months ended June 30, 2022 and 2021, the Company did not receive any proceeds from the sale of investment securities available-for-sale. For the six months ended June 30, 2022, and 2021 there were no gross realized gains from the sale of investment securities available-for-sale and no gross realized losses.

 

At June 30, 2022, corporate and other securities available-for-sale included the following at fair value: corporate fixed-to-float bonds at $8.3 million, mutual funds at $10.7 thousand, and foreign debt of $10.0 thousand. As required by Accounting Standards Update (“ASU”) 2016-01-Financial Instruments-Overall (Subtopic 825-10), the Company measured its equity investments at fair value with changes in the fair value recognized through net income. For the six months ended June 30, 2022 and 2021, a $0.9 thousand loss and a $1.7 thousand gain were recognized on a mutual fund, respectively. At December 31, 2021, corporate and other securities available-for-sale included the following at fair value: corporate fixed-to-float bonds at $8.0 million, mutual fund at $11.6 thousand and foreign debt of $10.0 thousand. Other investments, at cost, include Federal Home Loan Bank (“FHLB”) stock in the amount of $792.1 thousand and corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $136.7 thousand at June 30, 2022. The Company held $698.4 thousand of FHLB stock and $1.0 million in corporate stock, and a venture capital fund in the amount of $86.7 thousand at December 31, 2021.

 

The following tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at June 30, 2022 and December 31, 2021.

 

(Dollars in thousands)  Less than 12 months   12 months or more   Total 
June 30, 2022  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Available-for-sale securities:  Value   Loss   Value   Loss   Value   Loss 
                         
US Treasury Securities  $52,212   $2,364   $5,111   $767   $57,323   $3,131 
Government Sponsored Enterprise   2,189    311    —    —    2,189    311 
Mortgage-backed securities   136,130    7,569    87,525    5,364    223,655    12,933 
Small Business Administration pools   11,738    367    2,488    48    14,226    415 
State and local government   —    —    —    —    —    — 
Corporate and other securities   3,413    344    882    118    4,295    462 
Total  $205,682   $10,955   $96,006   $6,297   $301,688   $17,252 
(Dollars in thousands)  Less than 12 months   12 months or more   Total 
December 31, 2021  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Available-for-sale securities:  Value   Loss   Value   Loss   Value   Loss 
                         
US Treasury Securities  $14,479   $264   $958   $36   $15,437   $300 
Mortgage-backed securities   200,238    3,156    48,570    836    248,808    3,992 
Small Business Administration pools   7,232    67    —    —    7,232    67 
State and local government   21,261    539    —    —    21,261    539 
Corporate and other securities   3,621    129    —    —    3,621    129 
Total  $246,831   $4,155   $49,528   $872   $296,359   $5,027 

 

                               
(Dollars in thousands)  Less than 12 months   12 months or more   Total 
June 30, 2022  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Held-to-maturity securities:  Value   Loss   Value   Loss   Value   Loss 
                         
US Treasury Securities  $—   $—   $—   $—   $—   $— 
Government Sponsored Enterprise   —    —    —    —    —    — 
Mortgage-backed securities   106,897    2,127    19,346    571    126,243    2,698 
Small Business Administration pools   —    —    —    —    —    — 
State and local government   94,196    1,783    2,621    81    96,817    1,864 
Corporate and other securities   —    —    —    —    —    — 
Total  $201,093   $3,910   $21,967   $652   $223,060   $4,562 

 

Government Sponsored Enterprise, Mortgage-Backed Securities: The Company owned mortgage-backed securities (“MBSs”), including collateralized mortgage obligations (“CMOs”), issued by government sponsored enterprises (“GSEs”) with an amortized cost of 413.8 million and $429.0 million and approximate fair value of $397.9 million and $429.0 million at June 30, 2022 and December 31, 2021, respectively. The total amortized cost of $413.8 million and approximate fair value of $397.9 million includes $282.6 million amortized cost and $269.4 million fair value in available-for-sale and $131.2 million amortized cost and 128.5 million fair value in held-to-maturity at June 30, 2022. Unrealized losses on certain of these investments are not considered to be “other than temporary,” and the Company has the intent and ability to hold these until they mature or recover the current book value. The contractual cash flows of the investments are guaranteed by the GSEs. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before a recovery of its amortized cost, which may be maturity, the Company does not consider the investments to be other-than-temporarily impaired at June 30, 2022.

 

Non-agency Mortgage Backed Securities: The Company held private label mortgage-backed securities (“PLMBSs”), including CMOs, at June 30, 2022 with an amortized cost of $41.5 thousand and approximate fair value of $41.7 thousand. The Company held PLMBSs, including CMOs, at December 31, 2021 with an amortized cost of $48.2 thousand and approximate fair value of $46.4 thousand. Management monitors each of these securities on a quarterly basis to identify any deterioration in the credit quality, collateral values and credit support underlying the investments. The Company does not consider these securities to be other-than-temporarily impaired at June 30, 2022.

State and Local Governments and Other: Management monitors these securities on a quarterly basis to identify any deterioration in the credit quality. Included in the monitoring is a review of the credit rating, a financial analysis and certain demographic data on the underlying issuer. The Company does not consider these securities to be other-than-temporarily impaired at June 30, 2022.

 

The following sets forth the amortized cost and fair value of investment securities at June 30, 2022 by contractual maturity. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. MBSs are based on average life at estimated prepayment speeds.

 

   Available-for-sale 
June 30, 2022  Amortized   Fair 
(Dollars in thousands)  Cost   Value 
Due in one year or less  $6,832   $6,522 
Due after one year through five years   175,177    169,707 
Due after five years through ten years   147,310    137,015 
Due after ten years   24,962    24,011 
Total  $354,282   $337,254 

 

   Held-to-maturity 
June 30, 2022  Amortized   Fair 
(Dollars in thousands)  Cost   Value 
Due in one year or less  $12,393   $12,344 
Due after one year through five years   67,028    65,640 
Due after five years through ten years   117,800    115,672 
Due after ten years   36,509    35,542 
Total  $233,730   $229,198