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Investments
 9 Months Ended
Sep. 30, 2022
Schedule of Investments [Abstract]  
Investments

3. Investments

 

A summary of investment securities available-for-sale is as follows:

 

   As of September 30, 2022 
       Gross   Gross     
   Amortized   unrealized   unrealized   Estimated 
(Dollars in thousands)  cost   gains   losses   fair value 
                 
U. S. treasury securities  $136,007   $-   $(8,562)  $127,445 
U. S. federal agency obligations   5,013    -    (34)   4,979 
Municipal obligations, tax exempt   136,969    1    (8,578)   128,392 
Municipal obligations, taxable   68,007    3    (6,051)   61,959 
Agency mortgage-backed securities   179,129    -    (17,798)   161,331 
Total available-for-sale  $525,125   $4   $(41,023)  $484,106 

 

   As of December 31, 2021 
       Gross   Gross     
   Amortized   unrealized   unrealized   Estimated 
(Dollars in thousands)  cost   gains   losses   fair value 
                 
U. S. treasury securities  $43,098   $-   $(423)  $42,675 
U. S. federal agency obligations   17,165    67    (37)   17,195 
Municipal obligations, tax exempt   133,558    4,488    (62)   137,984 
Municipal obligations, taxable   39,011    1,171    (136)   40,046 
Agency mortgage-backed securities   142,747    1,339    (1,269)   142,817 
Total available-for-sale  $375,579   $7,065   $(1,927)  $380,717 

 

 

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of September 30, 2022 and December 31, 2021. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

 

       As of September 30, 2022 
(Dollars in thousands)   Less than 12 months   12 months or longer   Total 
   No. of   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
   securities   value   losses   value   losses   value   losses 
U.S. treasury securities   69   $102,410   $(6,212)  $25,035   $(2,350)  $127,445   $(8,562)
U.S. federal agency obligations   2    1,987    (16)   2,992    (18)   4,979    (34)
Municipal obligations, tax exempt   313    114,043    (7,697)   10,652    (881)   124,695    (8,578)
Municipal obligations, taxable   106    54,065    (5,436)   4,615    (615)   58,680    (6,051)
Agency mortgage-backed securities   99    98,434    (8,648)   62,898    (9,150)   161,332    (17,798)
Total   589   $370,939   $(28,009)  $106,192   $(13,014)  $477,131   $(41,023)

 

       As of December 31, 2021 
(Dollars in thousands)   Less than 12 months   12 months or longer   Total 
   No. of   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
   securities   value   losses   value   losses   value   losses 
U.S. treasury securities   28   $42,675   $(423)  $-   $        -   $42,675   $(423)
U.S. federal agency obligations   6    12,073    (30)   3,048    (7)   15,121    (37)
Municipal obligations, tax exempt   37    12,411    (46)   1,879    (16)   14,290    (62)
Municipal obligations, taxable   13    8,802    (136)   -    -    8,802    (136)
Agency mortgage-backed securities   28    95,028    (1,269)   -    -    95,028    (1,269)
Total   112    170,989    (1,904)   4,927    (23)   175,916    (1,927)

 

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of its cost basis, the Company believed that the U.S. treasury securities identified in the table above were temporarily impaired as of September 30, 2022 and December 31, 2021.

 

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the U.S. federal agency obligations identified in the tables above were temporarily impaired as of September 30, 2022 and December 31, 2021.

 

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of September 30, 2022, the Company did not intend to sell and it was more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of September 30, 2022 and December 31, 2021.

 

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association. The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the table above were temporarily impaired as of September 30, 2022 and December 31, 2021.

 

 

The table below sets forth amortized cost and fair value of investment securities at September 30, 2022. The table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

 

(Dollars in thousands)  Amortized   Estimated 
   cost   fair value 
Due in less than one year  $21,372   $21,137 
Due after one year but within five years   314,893    291,955 
Due after five years but within ten years   137,350    124,921 
Due after ten years   51,510    46,093 
Total  $525,125   $484,106 

 

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities were as follows for the periods indicated:

 

   2022   2021   2022   2021 
(Dollars in thousands)  Three months ended
September 30,		   Nine months ended
September 30,		 
   2022   2021   2022   2021 
                 
Sales proceeds  $11,210   $1,400   $11,210   $16,623 
                     
Realized gains  $-   $30   $-   $1,138 
Realized losses   (353)   -    (353)   - 
Net realized (losses) gains  $(353)  $30   $(353)  $1,138 

 

Securities with carrying values of $329.6 million and $331.7 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at September 30, 2022 and December 31, 2021, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.