Investments

3 Months Ended

Mar. 31, 2022

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of March 31, 2022 and December 31, 2021 are as follows:



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2022	cost		gains		losses		value
U.S. Treasury	$	84,725	$	—	$	(5,713)	$	79,012
Municipal		205,912		811		(10,920)		195,803
Corporate		25,300		69		(639)		24,730
Agency mortgage & asset-backed		174,496		117		(6,208)		168,405
Non-Agency mortgage & asset-backed		44,668		11		(1,152)		43,527
Total	$	535,101	$	1,008	$	(24,632)	$	511,477



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2021	cost		gains		losses		value
U.S. Treasury	$	84,896	$	88	$	(698)	$	84,286
Municipal		206,501		7,148		(1,422)		212,227
Corporate		24,794		333		(188)		24,939
Agency mortgage & asset-backed		178,614		1,157		(2,086)		177,685
Non-Agency mortgage & asset-backed		30,912		34		(272)		30,674
Total	$	525,717	$	8,760	$	(4,666)	$	529,811

At March 31, 2022 and December 31, 2021, the fair value of debt securities pledged to secure public funds and trust deposits totaled $153.8 million and $160.3 million, respectively. The Bank has no investment in a single issuer that exceeds 10% of shareholders’ equity, except for securities issued by the U.S. Treasury and U.S. government sponsored entities.

The amortized cost and estimated fair value of debt securities at March 31, 2022, by contractual maturity are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.



(Dollars in thousands)	Amortized ‎cost		Fair ‎value
Due in one year or less	$	1,667	$	1,682
Due after one year through five years		8,933		8,848
Due after five years through ten years		144,994		137,312
Due after ten years		160,343		151,703
		315,937		299,545
Mortgage & asset-backed		219,164		211,932
	$	535,101	$	511,477

Impairment:

The debt securities portfolio contained 464 securities with $442.0 million of temporarily impaired fair value and $24.6 million in unrealized losses at March 31, 2022. The total unrealized loss position has increased $20.0 million since year-end 2021.

For securities with an unrealized loss, Management applies a systematic methodology in order to perform an assessment of the potential for other-than-temporary impairment. In the case of debt securities, investments considered for other-than-temporary impairment: (1) had a specified maturity or repricing date; (2) were generally expected to be redeemed at par; and (3) were expected to achieve a recovery in market value within a reasonable period of time. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The municipal bond portfolio, which has the largest unrealized loss, is well diversified geographically (203 issuers) and is comprised primarily of general obligation bonds (63%). Many municipal bonds have credit enhancements in the form of private bond insurance or other credit support. The largest geographic municipal bond exposure is in the states of Texas (14%), California (11%), Pennsylvania (11%), and Michigan (10%). The average rating of the municipal portfolio from Moody’s is AA. No municipal bonds are rated below investment grade. The impairment identified on debt securities and subject to assessment at March 31, 2022, was deemed to be temporary and required no further adjustments to the financial statements, unless otherwise noted.

The following table reflects temporary impairment in the AFS portfolio, aggregated by investment category, length of time that individual securities have been in a continuous unrealized loss position and the number of securities in each category as of March 31, 2022 and December 31, 2021:



	March 31, 2022
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count

U.S. Treasury	$	79,012	$	(5,713)	28	$	—	$	—	—	$	79,012	$	(5,713)	28
Municipal		143,337		(8,389)	158		18,653		(2,531)	21		161,990		(10,920)	179
Corporate		13,989		(420)	27		3,781		(219)	7		17,770		(639)	34
Agency mortgage & asset-backed		124,484		(4,592)	165		26,240		(1,616)	28		150,724		(6,208)	193
Non-Agency mortgage & asset-backed		28,847		(981)	25		3,698		(171)	5		32,545		(1,152)	30
Total temporarily impaired	$	389,669	$	(20,095)	403	$	52,372	$	(4,537)	61	$	442,041	$	(24,632)	464



	December 31, 2021
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count

U.S. Treasury	$	76,383	$	(698)	21	$	—	$	—	—	$	76,383	$	(698)	21
Municipal		38,997		(910)	44		15,404		(512)	16		54,401		(1,422)	60
Corporate		8,954		(132)	17		1,694		(56)	3		10,648		(188)	20
Agency mortgage & asset-backed		96,923		(1,669)	94		15,991		(417)	18		112,914		(2,086)	112
Non-Agency mortgage & asset-backed		15,215		(215)	11		1,964		(57)	3		17,179		(272)	14
Total temporarily impaired	$	236,472	$	(3,624)	187	$	35,053	$	(1,042)	40	$	271,525	$	(4,666)	227

The following table represents the cumulative credit losses on debt securities recognized in earnings for:



	Three Months Ended
(Dollars in thousands)	March 31,
	2022		2021
Balance of cumulative credit-related OTTI at January 1	$	257	$	272
Decreases for previously recognized credit losses on securities that paid off		—		(15)
Balance of credit-related OTTI at March 31	$	257	$	257

Equity Securities at Fair Value

The Corporation owns one equity investment with a readily determinable fair value. At March 31, 2022 and December 31, 2021, this investment was reported at fair value of $492 thousand and $481 thousand, respectively, with changes in value reported through income.