Quarterly report pursuant to Section 13 or 15(d)

Securities

v3.19.3
Securities
 9 Months Ended
Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Securities Securities

The following is a summary of securities available for sale as of the dates indicated: 
 
Amortized Cost
 
Gross Unrealized Gain
 
Gross Unrealized Loss
 
Estimated Fair Value
 
(in thousands)
September 30, 2019
 
 
 
 
 
 
 
U.S. Treasury securities
$
39,877

 
$
292

 
$
—

 
$
40,169

U.S. government agency and sponsored agency obligations:
 
 
 
 
 
 
 
Mortgage-backed securities
395,486

 
4,224

 
(236
)
 
399,474

Collateralized mortgage obligations
164,267

 
1,216

 
(484
)
 
164,999

Debt securities
16,974

 
208

 
(9
)
 
17,173

Total U.S. government agency and sponsored agency obligations
576,727

 
5,648

 
(729
)
 
581,646

Total securities available for sale
$
616,604

 
$
5,940

 
$
(729
)
 
$
621,815

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
U.S. Treasury securities
$
39,768

 
$
69

 
$
(7
)
 
$
39,830

U.S. government agency and sponsored agency obligations:
 
 
 
 
 
 
 
Mortgage-backed securities
300,957

 
61

 
(5,984
)
 
295,034

Collateralized mortgage obligations
124,550

 
74

 
(2,332
)
 
122,292

Debt securities
7,499

 
—

 
(97
)
 
7,402

Total U.S. government agency and sponsored agency obligations
433,006

 
135

 
(8,413
)
 
424,728

Municipal bonds-tax exempt
110,670

 
197

 
(517
)
 
110,350

Total securities available for sale
$
583,444

 
$
401

 
$
(8,937
)
 
$
574,908


The amortized cost and estimated fair value of securities as of September 30, 2019, by contractual or expected maturity, are shown below. Collateralized mortgage obligations are included in the table shown below based on their expected maturities. All other securities are included based on their contractual maturities.
 
Available for Sale
 
Amortized Cost
 
Estimated Fair Value
 
(in thousands)
Within one year
$
33,218

 
$
33,329

Over one year through five years
155,626

 
156,521

Over five years through ten years
210,178

 
212,575

Over ten years
217,582

 
219,390

Total
$
616,604

 
$
621,815


Gross unrealized losses on securities available for sale, the estimated fair value of the related securities and the number of securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows as of September 30, 2019 and December 31, 2018:
 
Holding Period
 
Less Than 12 Months
 
12 Months or More
 
Total
 
Gross Unrealized Loss
 
Estimated Fair Value
 
Number of Securities
 
Gross Unrealized Loss
 
Estimated Fair Value
 
Number of Securities
 
Gross Unrealized Loss
 
Estimated Fair Value
 
Number of Securities
 
(in thousands, except number of securities)
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency and sponsored agency obligations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
$
(65
)
 
$
34,927

 
17

 
$
(171
)
 
$
19,712

 
14

 
$
(236
)
 
$
54,639

 
31

Collateralized mortgage obligations
(60
)
 
16,173

 
5

 
(424
)
 
44,584

 
37

 
(484
)

60,757


42

Debt securities
(1
)
 
1,499

 
1

 
(8
)
 
2,991

 
1

 
(9
)

4,490


2

Total U.S. government agency and sponsored agency obligations
(126
)
 
52,599

 
23

 
(603
)
 
67,287

 
52

 
(729
)
 
119,886

 
75

Total
$
(126
)
 
$
52,599

 
23

 
$
(603
)
 
$
67,287

 
52

 
$
(729
)
 
$
119,886

 
75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
(7
)
 
$
14,797

 
2

 
$
—

 
$
—

 
$
—

 
$
(7
)
 
$
14,797

 
2

U.S. government agency and sponsored agency obligations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
(226
)
 
41,527

 
10

 
(5,758
)
 
244,550

 
106

 
$
(5,984
)
 
$
286,077

 
116

Collateralized mortgage obligations
(59
)
 
13,732

 
3

 
(2,273
)
 
92,532

 
49

 
(2,332
)
 
106,264

 
52

Debt securities
—

 
—

 
—

 
(97
)
 
7,402

 
3

 
(97
)
 
7,402

 
3

Total U.S. government agency and sponsored agency obligations
(285
)
 
55,259

 
13

 
(8,128
)
 
344,484

 
158

 
(8,413
)
 
399,743

 
171

Municipal bonds-tax exempt
(29
)
 
8,196

 
5

 
(488
)
 
65,644

 
30

 
(517
)
 
73,840

 
35

Total
$
(321
)
 
$
78,252

 
20

 
$
(8,616
)
 
$
410,128

 
188

 
$
(8,937
)
 
$
488,380

 
208



All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of September 30, 2019 and December 31, 2018 had investment grade ratings upon purchase. The issuers of these securities have not established any cause for default on these securities and the various rating agencies have reaffirmed these securities’ long-term investment grade status as of September 30, 2019 and December 31, 2018. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated.

The Company does not intend to sell these securities and it is more likely than not that it will not be required to sell the investments before the recovery of their amortized cost basis. Therefore, in management’s opinion, all securities that have been in a continuous unrealized loss position for the past 12 months or longer as of September 30, 2019 and December 31, 2018 were not other-than-temporarily impaired, and therefore, no impairment charges as of September 30, 2019 and December 31, 2018 were warranted.

Realized gains and losses on sales of securities and proceeds from sales of securities were as follows for the periods indicated:
 
Three Months Ended  September 30,
 
Nine Months Ended  September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Gross realized gains on sales of securities
$
—

 
$
19

 
$
1,359

 
$
87

Gross realized losses on sales of securities
—

 
—

 
(64
)
 
(957
)
Net realized gains (losses) on sales of securities
$
—

 
$
19

 
$
1,295

 
$
(870
)
 
 
 
 
 
 
 
 
Proceeds from sales of securities
$
—

 
$
3,426

 
$
113,306

 
$
34,751


In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825). This new guidance, among other provisions, amends accounting related to the classification and measurement of investments in equity securities. We adopted this guidance, as required, in the first quarter of 2018. ASU 2016-01 requires the amounts reported in accumulated other comprehensive income
for equity securities that exist as of the date of adoption previously classified as available-for-sale be reclassified to retained earnings. The Company reduced the balance of securities by $529,000 as of January 1, 2018, representing the loss related to our mutual fund equity securities, which resulted in a net reduction of retained earnings of $382,000 and an increase of $147,000 in net deferred tax assets based on the transition requirements of this standard.

During the three months ended September 30, 2019, there were no securities sales transactions. During the three months ended September 30, 2018, there was $19,000 in net gain in earnings resulting from the sale of securities. A net unrealized gain of $21,000 related to these securities had previously been recorded in accumulated other comprehensive income as of the beginning of the period in 2018. There was no sale of such securities during the nine months ended September 30, 2019.

During the nine months ended September 30, 2019, there was $1.3 million in net gains in earnings resulting from the sale of securities which had $586,000 in previously recorded unrealized gains in accumulated other comprehensive income. During the nine months ended September 30, 2018, there was a $870,000 net loss in earnings resulting from the sale of securities.

In the first and second quarters of 2019, we sold all of our tax-exempt municipal bonds with a gross realized gain of $1.4 million. In the first quarter of 2018, we sold all of our mutual fund equity securities with gross realized losses of $957,000.

Securities available for sale with market values of $30.2 million and $29.9 million as of September 30, 2019 and December 31, 2018, respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.