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Investment Securities
 9 Months Ended
Sep. 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 
September 30, 2022                    
US Treasury securities  $60,502   $—   $(4,779)  $55,723 
Government Sponsored Enterprises   2,500    —    (404)   2,096 
Mortgage-backed securities   269,609    13    (19,514)   250,109 
Small Business Administration pools   22,950    56    (727)   22,279 
State and local government        —    —    — 
Corporate and other securities   8,773    —    (632)   8,143 
Total  $364,334   $69   $(26,056)  $338,350 
                     
       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 
September 30, 2022                    
US Treasury securities  $—   $—   $—   $— 
Government Sponsored Enterprises   —    —    —    — 
Mortgage-backed securities   126,365    —    (8,663)   117,702 
Small Business Administration pools   —    —    —    — 
State and local government   106,936    —    (7,691)   99,245 
Corporate and other securities   —    —    —    — 
Total  $233,301   $—   $(16,354)  $216,947 

 

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 $16.1 million ($12.7 million net of tax) at September 30, 2022.

 

During the nine months ended September 30, 2022 and 2021, the Company did not receive any proceeds from the sale of investment securities available-for-sale. For the nine months ended September 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 September 30, 2022, corporate and other securities available-for-sale included the following at fair value: corporate fixed-to-float bonds at $8.1 million, mutual funds at $11.6 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 nine months ended September 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 funds 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 September 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 September 30, 2022 and December 31, 2021.

                         
(Dollars in thousands)  Less than 12 months   12 months or more   Total 
September 30, 2022  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Available-for-sale securities:  Value   Loss   Value   Loss   Value   Loss 
                         
US Treasury Securities  $42,805   $1,940   $12,919   $2,839   $55,724   $4,779 
Government Sponsored Enterprise   2,096    404    —    —    2,096    404 
Mortgage-backed securities   104,236    6,523    144,072    12,992    248,308    19,515 
Small Business Administration pools   16,139    649    3,053    77    19,192    726 
State and local government   —    —    —    —    —    — 
Corporate and other securities   2,189    93    3,211    539    5,400    632 
Total  $167,465   $9,609   $163,255   $16,447   $330,720   $26,056 
                               
(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 
September 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   107,682    7,719    10,019    944    117,701    8,663 
Small Business Administration pools   —    —    —    —    —    — 
State and local government   95,701    7,200    3,544    491    99,245    7,691 
Corporate and other securities   —    —    —    —    —    — 
Total  $203,383   $14,919   $13,563   $1,435   $216,946   $16,354 

 

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 $418.9 million and $429.0 million and approximate fair value of $390.0 million and $429.0 million at September 30, 2022 and December 31, 2021, respectively. The total amortized cost of $418.9 million and approximate fair value of $390.0 million includes $292.6 million amortized cost and $272.3 million fair value in available-for-sale and $126.3 million amortized cost and $117.7 million fair value in held-to-maturity at September 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 September 30, 2022.

 

Non-agency Mortgage Backed Securities: The Company held private label mortgage-backed securities (“PLMBSs”), including CMOs, at September 30, 2022 with an amortized cost of $39.8 thousand and approximate fair value of $40.2 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 September 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 September 30, 2022.

 

The following sets forth the amortized cost and fair value of investment securities at September 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 
September 30, 2022  Amortized   Fair 
(Dollars in thousands)  Cost   Value 
Due in one year or less  $3,846   $3,838 
Due after one year through five years   165,838    157,528 
Due after five years through ten years   170,365    155,694 
Due after ten years   24,285    21,290 
Total  $364,334   $338,350 
           
   Held-to-maturity 
September 30, 2022  Amortized   Fair 
(Dollars in thousands)  Cost   Value 
Due in one year or less  $8,683   $8,617 
Due after one year through five years   48,765    46,457 
Due after five years through ten years   137,408    127,399 
Due after ten years   38,445    34,474 
Total  $233,301   $216,947