Investment Securities |
Note D—Investment Securities
The amortized cost, gross unrealized gains and losses and fair values of the Company’s investment securities classified as available-for-sale and held-to-maturity are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
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Available-for-sale
|
|
December 31, 2019
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Fair
|
|
|
cost
|
|
gains
|
|
losses
|
|
value
|
U.S. Government agency securities
|
|
$ 52,415
|
|
$ 672
|
|
$ (177)
|
|
$ 52,910
|
Asset-backed securities *
|
|
244,751
|
|
132
|
|
(534)
|
|
244,349
|
Tax-exempt obligations of states and political subdivisions
|
|
5,174
|
|
144
|
|
-
|
|
5,318
|
Taxable obligations of states and political subdivisions
|
|
58,258
|
|
1,992
|
|
-
|
|
60,250
|
Residential mortgage-backed securities
|
|
335,068
|
|
2,629
|
|
(1,101)
|
|
336,596
|
Collateralized mortgage obligation securities
|
|
221,109
|
|
1,826
|
|
(208)
|
|
222,727
|
Commercial mortgage-backed securities
|
|
394,852
|
|
3,836
|
|
(146)
|
|
398,542
|
|
|
$ 1,311,627
|
|
$ 11,231
|
|
$ (2,166)
|
|
$ 1,320,692
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
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|
|
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Gross
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Gross
|
|
|
|
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Amortized
|
|
unrealized
|
|
unrealized
|
|
Fair
|
* Asset-backed securities as shown above
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|
cost
|
|
gains
|
|
losses
|
|
value
|
Federally insured student loan securities
|
|
$ 33,852
|
|
$ 10
|
|
$ (323)
|
|
$ 33,539
|
Collateralized loan obligation securities
|
|
210,899
|
|
122
|
|
(211)
|
|
210,810
|
|
|
$ 244,751
|
|
$ 132
|
|
$ (534)
|
|
$ 244,349
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
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|
December 31, 2019
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Fair
|
|
|
cost
|
|
gains
|
|
losses
|
|
value
|
Other debt securities - single issuers
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|
$ 9,219
|
|
$ -
|
|
$ (2,067)
|
|
$ 7,152
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Other debt securities - pooled
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75,168
|
|
682
|
|
-
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75,850
|
|
|
$ 84,387
|
|
$ 682
|
|
$ (2,067)
|
|
$ 83,002
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|
|
|
|
|
|
|
|
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Available-for-sale
|
|
December 31, 2018
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|
|
|
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Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Fair
|
|
|
cost
|
|
gains
|
|
losses
|
|
value
|
U.S. Government agency securities
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|
$ 54,095
|
|
$ 146
|
|
$ (879)
|
|
$ 53,362
|
Asset-backed securities *
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|
189,850
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|
104
|
|
(1,352)
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|
188,602
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Tax-exempt obligations of states and political subdivisions
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|
7,546
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|
50
|
|
(45)
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|
7,551
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Taxable obligations of states and political subdivisions
|
|
60,152
|
|
803
|
|
(520)
|
|
60,435
|
Residential mortgage-backed securities
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|
377,199
|
|
648
|
|
(8,106)
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|
369,741
|
Collateralized mortgage obligation securities
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|
265,914
|
|
287
|
|
(3,994)
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|
262,207
|
Commercial mortgage-backed securities
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|
300,143
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|
190
|
|
(5,907)
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|
294,426
|
|
|
$ 1,254,899
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|
$ 2,228
|
|
$ (20,803)
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|
$ 1,236,324
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
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Gross
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Gross
|
|
|
|
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Amortized
|
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unrealized
|
|
unrealized
|
|
Fair
|
* Asset-backed securities as shown above
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|
cost
|
|
gains
|
|
losses
|
|
value
|
Federally insured student loan securities
|
|
$ 59,705
|
|
$ 87
|
|
$ (283)
|
|
$ 59,509
|
Collateralized loan obligation securities
|
|
125,045
|
|
-
|
|
(1,069)
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|
123,976
|
Other
|
|
5,100
|
|
17
|
|
-
|
|
5,117
|
|
|
$ 189,850
|
|
$ 104
|
|
$ (1,352)
|
|
$ 188,602
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
December 31, 2018
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Fair
|
|
|
cost
|
|
gains
|
|
losses
|
|
value
|
Other debt securities - single issuers
|
|
$ 9,168
|
|
$ -
|
|
$ (1,890)
|
|
$ 7,278
|
Other debt securities - pooled
|
|
75,264
|
|
849
|
|
-
|
|
76,113
|
|
|
$ 84,432
|
|
$ 849
|
|
$ (1,890)
|
|
$ 83,391
|
The amortized cost and fair value of the Company’s investment securities at December 31, 2019, by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
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|
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Available-for-sale
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Held-to-maturity
|
|
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Amortized
|
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Fair
|
|
Amortized
|
|
Fair
|
|
|
cost
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|
value
|
|
cost
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|
value
|
Due before one year
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|
$ 6,853
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|
$ 6,856
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|
$ -
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|
$ -
|
Due after one year through five years
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|
83,690
|
|
85,246
|
|
-
|
|
-
|
Due after five years through ten years
|
|
236,008
|
|
239,505
|
|
-
|
|
-
|
Due after ten years
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|
985,076
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|
989,085
|
|
84,387
|
|
83,002
|
|
|
$ 1,311,627
|
|
$ 1,320,692
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|
$ 84,387
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|
$ 83,002
|
At December 31, 2019 and 2018, investment securities with a fair value of approximately $262.0 million and $116.0 million, respectively, were pledged to FHLB to secure a line of credit. At December 31, 2019 and 2018, investment securities with a fair value of approximately $0 and $169.5 million were pledged to secure a line of credit with the FRB. The Company also pledged the majority of its loans to the FRB for that line of credit which it has never used. The amount of loans pledged varies and since the Bank does not utilize this line the collateral may be unpledged at any time. The line is maintained consistent with the Bank’s liquidity policy which maximizes potential liquidity. Gross gains on sales of securities were $0, $41,000 and $2.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. Gross losses on sales of securities were $0, $0 and $429,000 for the years ended December 31, 2019, 2018 and 2017, respectively.
Investment securities fair values are based on a fair market value supplied by a third-party market data provider when available. If not available, prices provided by securities dealers with expertise in the securities being evaluated may also be utilized. When such market information is not available, fair values are based on the present value of cash flows, which discounts expected cash flows from principal and interest using yield to maturity at the measurement date. The Company periodically reviews its investment portfolio to determine whether unrealized losses are other than temporary, based on evaluations of the creditworthiness of the issuers/guarantors as well as the underlying collateral if applicable, in addition to the continuing performance of the securities. The Company did not recognize any other-than-temporary impairment charges in 2019, 2018 and 2017.
Investments in FHLB and Atlantic Central Bankers Bank stock are recorded at cost and amounted to $5.3 million at December 31, 2019 and $1.1 million at December 31, 2018.
The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2019 (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
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|
|
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Less than 12 months
|
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12 months or longer
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|
Total
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|
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Number of securities
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
Description of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency securities
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|
5
|
|
$ 12,214
|
|
$ (44)
|
|
$ 3,986
|
|
$ (133)
|
|
$ 16,200
|
|
$ (177)
|
Asset-backed securities
|
|
28
|
|
115,909
|
|
(275)
|
|
56,427
|
|
(260)
|
|
172,336
|
|
(535)
|
Residential mortgage-backed securities
|
|
64
|
|
58,682
|
|
(114)
|
|
73,311
|
|
(987)
|
|
131,993
|
|
(1,101)
|
Collateralized mortgage obligation securities
|
|
22
|
|
37,387
|
|
(85)
|
|
18,136
|
|
(123)
|
|
55,523
|
|
(208)
|
Commercial mortgage-backed securities
|
|
4
|
|
35,095
|
|
(129)
|
|
3,162
|
|
(16)
|
|
38,257
|
|
(145)
|
Total temporarily impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment securities
|
|
123
|
|
$ 259,287
|
|
$ (647)
|
|
$ 155,022
|
|
$ (1,519)
|
|
$ 414,309
|
|
$ (2,166)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
Number of securities
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
Description of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single issuers
|
|
1
|
|
$ -
|
|
$ -
|
|
$ 7,152
|
|
$ (2,067)
|
|
$ 7,152
|
|
$ (2,067)
|
Total temporarily impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment securities
|
|
1
|
|
$ -
|
|
$ -
|
|
$ 7,152
|
|
$ (2,067)
|
|
$ 7,152
|
|
$ (2,067)
|
The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
Number of securities
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
Description of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency securities
|
|
10
|
|
$ 679
|
|
$ (2)
|
|
$ 41,719
|
|
$ (877)
|
|
$ 42,398
|
|
$ (879)
|
Asset-backed securities
|
|
26
|
|
148,753
|
|
(1,230)
|
|
11,506
|
|
(122)
|
|
160,259
|
|
(1,352)
|
Tax-exempt obligations of states and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
political subdivisions
|
|
3
|
|
-
|
|
-
|
|
3,625
|
|
(45)
|
|
3,625
|
|
(45)
|
Taxable obligations of states and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
political subdivisions
|
|
22
|
|
4,492
|
|
(19)
|
|
35,599
|
|
(501)
|
|
40,091
|
|
(520)
|
Residential mortgage-backed securities
|
|
118
|
|
17,168
|
|
(49)
|
|
302,407
|
|
(8,057)
|
|
319,575
|
|
(8,106)
|
Collateralized mortgage obligation securities
|
|
44
|
|
1,522
|
|
(3)
|
|
193,355
|
|
(3,991)
|
|
194,877
|
|
(3,994)
|
Commercial mortgage-backed securities
|
|
26
|
|
121,860
|
|
(2,020)
|
|
151,453
|
|
(3,887)
|
|
273,313
|
|
(5,907)
|
Total temporarily impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment securities
|
|
249
|
|
$ 294,474
|
|
$ (3,323)
|
|
$ 739,664
|
|
$ (17,480)
|
|
$ 1,034,138
|
|
$ (20,803)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
Number of securities
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
|
Fair Value
|
|
Unrealized losses
|
Description of Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single issuers
|
|
1
|
|
$ -
|
|
$ -
|
|
$ 7,278
|
|
$ (1,890)
|
|
$ 7,278
|
|
$ (1,890)
|
Total temporarily impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment securities
|
|
1
|
|
$ -
|
|
$ -
|
|
$ 7,278
|
|
$ (1,890)
|
|
$ 7,278
|
|
$ (1,890)
|
The Company owns one single issuer trust preferred security issued by an insurance company. The security is not rated by any bond rating service. At December 31, 2019, it had a book value of $9.2 million and a fair value of $7.2 million. The Company has evaluated the securities in the above tables as of December 31, 2019 and has concluded that none of these securities has impairment that is other-than-temporary. The Company evaluates whether an other than temporary impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral and (e) the payment structure of the security. If other than temporary impairment is determined, the Company estimates expected future cash flows to determine the credit loss amount with a quantitative and qualitative process that incorporates information received from third-party sources and internal assumptions and judgments regarding the future performance of the security. Based upon this evaluation, the Company concluded that most of the securities that are in an unrealized loss position are in a loss position because of changes in interest rates after the securities were purchased. The securities that have been in an unrealized loss position for 12 months or longer include other securities whose market values are sensitive to interest rates. The Company’s unrealized loss for the debt securities, which includes one single issuer trust preferred security, is primarily related to general market conditions and the resultant lack of liquidity in the market. The severity of the temporary impairments in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis for each investment is performed at the security level. As a result of its review, the Company concluded that other-than-temporary impairment did not exist due to the Company’s ability and intention to hold these securities to recover their amortized cost basis.
|