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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39036

ALERUS FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

45-0375407

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification No.)

organization)

401 Demers Avenue

Grand Forks, ND

58201

(Address of principal executive offices)

(Zip Code)

(701) 795-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class

    

Trading symbol

    

Name of each exchange on which registered

Common Stock, par value $1.00 per share

ALRS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No 

The number of shares of the registrant’s common stock outstanding at April 30, 2022 was 17,288,575.

Alerus Financial Corporation and Subsidiaries

Table of Contents

Page

Part 1:

FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

1

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

1

Consolidated Statements of Income for the three months ended March 31, 2022 and 2021

2

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021

3

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021

4

Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

5

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

54

Item 4.

Controls and Procedures

56

Part 2:

OTHER INFORMATION

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

58

Signatures

59

PART 1. FINANCIAL INFORMATION

Item 1 - Consolidated Financial Statements

Alerus Financial Corporation and Subsidiaries

Consolidated Balance Sheets

    

March 31, 

    

December 31, 

(dollars in thousands, except share and per share data)

    

2022

    

2021

Assets

 

(Unaudited)

 

(Audited)

Cash and cash equivalents

$

132,832

$

242,311

Investment securities

 

  

 

  

Available-for-sale, at fair value

 

866,333

 

853,649

Held-to-maturity, at carrying value

 

340,150

 

352,061

Loans held for sale

 

21,864

 

46,490

Loans

 

1,818,042

 

1,758,020

Allowance for loan losses

 

(31,713)

 

(31,572)

Net loans

 

1,786,329

 

1,726,448

Land, premises and equipment, net

 

17,619

 

18,370

Operating lease right-of-use assets

 

3,360

 

3,727

Accrued interest receivable

 

8,516

 

8,537

Bank-owned life insurance

 

33,358

 

33,156

Goodwill

 

31,490

 

31,490

Other intangible assets

 

19,197

 

20,250

Servicing rights

 

1,771

 

1,880

Deferred income taxes, net

 

23,517

 

11,614

Other assets

 

49,863

 

42,708

Total assets

$

3,336,199

$

3,392,691

Liabilities and Stockholders’ Equity

 

  

 

  

Deposits

 

  

 

  

Noninterest-bearing

$

831,558

$

938,840

Interest-bearing

 

2,060,709

 

1,981,711

Total deposits

 

2,892,267

 

2,920,551

Long-term debt

 

58,902

 

58,933

Operating lease liabilities

 

3,850

 

4,275

Accrued expenses and other liabilities

 

52,675

 

49,529

Total liabilities

 

3,007,694

 

3,033,288

Stockholders’ equity

 

  

 

  

Preferred stock, $1 par value, 2,000,000 shares authorized: 0 issued and outstanding

Common stock, $1 par value, 30,000,000 shares authorized: 17,288,575 and 17,212,588 issued and outstanding

 

17,289

 

17,213

Additional paid-in capital

 

92,573

 

92,878

Retained earnings

 

260,967

 

253,567

Accumulated other comprehensive income (loss)

 

(42,324)

 

(4,255)

Total stockholders’ equity

 

328,505

 

359,403

Total liabilities and stockholders’ equity

$

3,336,199

$

3,392,691

See accompanying notes to consolidated financial statements (unaudited)

1

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

Three months ended

March 31, 

(dollars and shares in thousands, except per share data)

    

2022

    

2021

Interest Income

Loans, including fees

$

17,292

$

20,567

Investment securities

 

  

 

  

Taxable

 

5,440

 

2,401

Exempt from federal income taxes

 

216

 

236

Other

 

116

 

117

Total interest income

23,064

 

23,321

Interest Expense

 

  

 

  

Deposits

 

829

 

995

Long-term debt

 

562

 

288

Total interest expense

 

1,391

 

1,283

Net interest income

 

21,673

 

22,038

Provision for loan losses

 

 

Net interest income after provision for loan losses

 

21,673

 

22,038

Noninterest Income

 

  

 

  

Retirement and benefit services

 

17,646

 

17,255

Wealth management

 

5,326

 

4,986

Mortgage banking

 

4,931

 

17,132

Service charges on deposit accounts

 

363

 

338

Net gains (losses) on investment securities

 

 

114

Other

 

1,204

 

1,056

Total noninterest income

 

29,470

 

40,881

Noninterest Expense

 

  

 

  

Compensation

 

19,051

 

23,698

Employee taxes and benefits

 

6,162

 

5,813

Occupancy and equipment expense

 

2,051

 

2,231

Business services, software and technology expense

 

4,924

 

4,976

Intangible amortization expense

 

1,053

 

1,151

Professional fees and assessments

 

1,541

 

1,472

Marketing and business development

 

600

 

676

Supplies and postage

 

646

 

531

Travel

 

179

 

26

Mortgage and lending expenses

 

686

 

1,332

Other

 

1,178

 

1,136

Total noninterest expense

 

38,071

 

43,042

Income before income taxes

 

13,072

 

19,877

Income tax expense

 

2,888

 

4,662

Net income

$

10,184

$

15,215

Per Common Share Data

Basic earnings per common share

$

0.58

$

0.87

Diluted earnings per common share

$

0.57

$

0.86

Dividends declared per common share

$

0.16

$

0.15

Average common shares outstanding

 

17,244

 

17,145

Diluted average common shares outstanding

 

17,500

 

17,465

See accompanying notes to consolidated financial statements (unaudited)

2

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

Three months ended

March 31, 

(dollars in thousands)

    

2022

    

2021

Net Income

$

10,184

$

15,215

Other Comprehensive Income (Loss), Net of Tax

 

  

 

  

Unrealized gains (losses) on available-for-sale securities

 

(46,708)

 

(18,036)

Accretion of (gains) losses on debt securities reclassified to held-to-maturity

(4,118)

Reclassification adjustment for losses (gains) realized in income

 

 

(114)

Total other comprehensive income (loss), before tax

 

(50,826)

 

(18,150)

Income tax expense (benefit) related to items of other comprehensive income

 

(12,757)

 

(4,556)

Other comprehensive income (loss), net of tax

 

(38,069)

 

(13,594)

Total comprehensive income (loss)

$

(27,885)

$

1,621

See accompanying notes to consolidated financial statements (unaudited)

3

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three months ended March 31, 2022

Accumulated

Additional

Other

Common

Paid-in

Retained

Comprehensive

(dollars in thousands)

    

Stock

    

Capital

    

Earnings

    

Income (Loss)

    

Total

Balance as of December 31, 2021

$

17,213

$

92,878

$

253,567

$

(4,255)

$

359,403

Net income

 

 

 

10,184

 

 

10,184

Other comprehensive income (loss)

 

 

 

 

(38,069)

 

(38,069)

Common stock repurchased

 

(20)

 

(587)

 

 

 

(607)

Common stock dividends

 

 

 

(2,784)

 

 

(2,784)

Share‑based compensation expense

 

 

378

 

 

 

378

Vesting of restricted stock

 

96

 

(96)

 

 

 

Balance as of March 31, 2022

$

17,289

$

92,573

$

260,967

$

(42,324)

$

328,505

Three months ended March 31, 2021

Accumulated

Additional

Other

Common

Paid-in

Retained

Comprehensive

(dollars in thousands)

    

Stock

    

Capital

    

Earnings

    

Income (Loss)

    

Total

Balance as of December 31, 2020

$

17,125

$

90,237

$

212,163

$

10,638

$

330,163

Net income

 

 

 

15,215

 

 

15,215

Other comprehensive income (loss)

 

 

 

 

(13,594)

 

(13,594)

Common stock repurchased

 

(16)

 

(134)

 

(296)

 

 

(446)

Common stock dividends

 

 

 

(2,602)

 

 

(2,602)

Share‑based compensation expense

 

 

498

 

 

 

498

Vesting of restricted stock

 

81

 

(81)

 

 

 

Balance as of March 31, 2021

$

17,190

$

90,520

$

224,480

$

(2,956)

$

329,234

See accompanying notes to consolidated financial statements (unaudited)

4

Alerus Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

Three months ended

March 31, 

(dollars in thousands)

    

2022

    

2021

Operating Activities

 

  

 

  

Net income

$

10,184

$

15,215

Adjustments to reconcile net income to net cash provided (used) by operating activities

 

  

 

  

Deferred income taxes

 

854

 

264

Depreciation and amortization

 

2,083

 

2,345

Amortization and accretion of premiums/discounts on investment securities

 

1,010

 

794

Amortization of operating lease right-of-use assets

(19)

(8)

Stock-based compensation

 

378

 

498

Increase in value of bank-owned life insurance

 

(202)

 

(193)

Realized loss (gain) on sale of fixed assets

 

(27)

Realized loss (gain) on derivative instruments

 

2

 

(713)

Realized loss (gain) on loans sold

 

(3,097)

 

(14,201)

Realized loss (gain) on sale of foreclosed assets

 

(8)

 

(23)

Realized loss (gain) on sale of investment securities

 

 

(114)

Realized loss (gain) on servicing rights

 

(51)

 

(165)

Net change in:

 

 

Loans held for sale

 

27,638

 

57,823

Accrued interest receivable

 

21

 

391

Other assets

 

(4,818)

 

(2,050)

Accrued expenses and other liabilities

 

872

 

(4,995)

Net cash provided (used) by operating activities

 

34,847

 

54,841

Investing Activities

 

  

 

  

Proceeds from sales or calls of investment securities available-for-sale

 

 

13,189

Proceeds from maturities of investment securities available-for-sale

 

31,665

 

27,307

Purchases of investment securities available-for-sale

 

(95,640)

 

(262,081)

Proceeds from sales or calls of investment securities held-to-maturity

515

Proceeds from maturities of investment securities held-to-maturity

10,851

Net (increase) decrease in loans

 

(59,910)

 

41,391

Purchases of premises and equipment

 

(130)

 

(277)

Proceeds from sales of foreclosed assets

 

57

 

101

Net cash provided (used) by investing activities

 

(112,592)

 

(180,370)

Financing Activities

 

  

 

  

Net increase (decrease) in deposits

 

(28,284)

 

145,580

Repayments of long-term debt

 

(59)

 

(49,748)

Proceeds from the issuance of subordinated debt

50,000

Cash dividends paid on common stock

 

(2,784)

 

(2,602)

Repurchase of common stock

 

(607)

 

(446)

Net cash provided (used) by financing activities

 

(31,734)

 

142,784

Net change in cash and cash equivalents

 

(109,479)

 

17,255

Cash and cash equivalents at beginning of period

 

242,311

 

172,962

Cash and cash equivalents at end of period

$

132,832

$

190,217

See accompanying notes to consolidated financial statements (unaudited)

5

Three months ended

March 31, 

Supplemental Cash Flow Disclosures

    

2022

    

2021

Cash paid for:

 

  

 

  

Interest

$

926

$

1,405

Income taxes

 

12

 

736

Non-cash information

 

  

 

  

Loan collateral transferred to foreclosed assets

 

29

 

154

Unrealized gain (loss) on investment securities available-for-sale

 

(33,951)

 

(13,594)

Accretion of unrealized (gain) loss on investment securities held-to-maturity

(4,118)

See accompanying notes to consolidated financial statements (unaudited)

6

Alerus Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 Significant Accounting Policies

Organization

Alerus Financial Corporation, or the Company, is a financial holding company organized under the laws of the state of Delaware. The Company and its subsidiaries operate as a diversified financial services company headquartered in Grand Forks, North Dakota. Through its subsidiary, Alerus Financial, National Association, or the Bank, the Company provides financial solutions to businesses and consumers through four distinct business lines—banking, retirement and benefit services, wealth management, and mortgage.

Basis of Presentation

The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and conform to practices within the banking industry and include all of the information and disclosures required by generally accepted accounting principles in the United States of America, or GAAP, for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of financial results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the full year or any other period. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2022.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company’s principal operating subsidiary is the Bank.

In the normal course of business, the Company may enter into a transaction with a variable interest entity, or VIE. VIE’s are legal entities whose investors lack the ability to make decisions about the entity’s activities, or whose equity investors do not have the right to receive the residual returns of the entity. The applicable accounting guidance requires the Company to perform ongoing quantitative and qualitative analysis to determine whether it must consolidate any VIE. The Company does not have any ownership interest in, or exert any control, over any VIE, and thus no VIE’s are included in the consolidated financial statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term include the valuation of investment securities, determination of the allowance for loan losses, valuation of reporting units for the purpose of testing goodwill and other intangible assets for impairment, valuation of deferred tax assets, and fair values of financial instruments.

7

Reclassifications

Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity.

Other Information

As of March 31, 2022, the Coronavirus Disease, or COVID-19, pandemic was ongoing. During 2020, the COVID-19 pandemic created disruption in global supply chains, increased rates of unemployment and adversely impacted many industries, including industries related to the collateral underlying certain of our loans, and many of these effects are continuing. Beginning in 2021 and continuing into 2022, the U.S. economy, with certain setbacks, started reopening and wider distribution of vaccines encouraged greater economic activity. Nonetheless, the economic recovery could remain uneven, particularly given uncertainty with respect to the continued distribution and acceptance of the vaccines and their effectiveness with respect to new variants of the virus. Management believes the Company is taking appropriate actions to mitigate, to the extent possible, the negative impact. However, the full impact of COVID-19 is currently unknown and cannot be reasonably estimated as the events are continuing to unfold.

Emerging Growth Company

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if the Company complies with the greater obligations of public companies that are not emerging growth companies, the Company may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as the Company is an emerging growth company. The Company will continue to be an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities under the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on September 12, 2019; (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues; (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”; or (4) the date on which the Company has, during the previous three-year period, issued publicly or privately, more than $1.0 billion in non-convertible debt securities.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to take advantage of the benefits of this extended transition period.

NOTE 2 Recent Accounting Pronouncements

The following FASB Accounting Standards Updates, or ASUs, are divided into pronouncements which have been adopted by the Company since January 1, 2022, and those which are not yet effective and have been evaluated or are currently being evaluated by management as of March 31, 2022.

Adopted Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for the areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15,

8

2020, for public business entities. For private companies and smaller reporting companies, this guidance is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2021. The Company adopted ASU 2019-12, as of January 2022. The new guidance did not have an impact on the Company’s consolidated financial statements.

Pronouncements Not Yet Effective

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires a new impairment model known as the current expected credit loss, or CECL, which significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of financial instruments. The main provisions of ASU 2016-13 include (1) replacing the “incurred cost” approach under GAAP with an “expected loss” model for instruments measured at amortized cost, (2) requiring entities to record an allowance for credit losses related to available-for-sale debt securities rather than a direct write-down of the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (3) a simplified accounting model for purchase credit-impaired debt securities and loans. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326). This update amends the effective date of ASU No. 2016-13 for certain entities, including private companies and smaller reporting companies, until fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. As an emerging growth company, the Company can take advantage of this delay and plans to adopt the standard with the amended effective date. The Company does not plan to early adopt this standard but continues to work on its implementation. The Company continues collecting and retaining loan and credit data and evaluating various loss estimation models. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics, and quality of our loan portfolio, as well as the general economic conditions and forecasts as of the adoption date.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. The Company will consider these clarifications and improvements in determining the appropriate adoption of ASU 2019-04.

In May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, to provide entities with an option to irrevocably elect the fair value option applied on an instrument-by-instrument basis for eligible instruments. In November 2019, the FASB Issued ASU 2019-10, which amends the effective date of this ASU for certain entities, including private companies and smaller reporting companies, until after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company can take advantage of this delay and plans to adopt the standard with the amended effective date. This update is not expected to have a significant impact on the Company’s consolidated financial statements

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This ASU represents changes to clarify or improve the Accounting Standards Codification, or ASC, related to seven topics. The amendments make the ASC easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. Issues 1, 2, 3, 4, and 5 are conforming amendments and for public business entities effective upon the issuance of the standard. Issues 6 and 7 are amendments that affect the guidance in ASU 2016-13. The Company will consider these clarifications and improvements in determining the appropriate adoption of ASU 2016-13.

NOTE 3 Investment Securities

The following tables present amortized cost, gross unrealized gain and losses, and fair value of the available-for-sale investment securities and the amortized cost, net unrealized gains, carrying value, gross unrealized gains and losses and fair value of for held-to-maturity as of March 31, 2022 and December 31, 2021:

9

March 31, 2022

Amortized

Unrealized

Unrealized

Fair

(dollars in thousands)

    

Cost

Gains

Losses

    

Value

Available-for-sale

U.S. Treasury and agencies

$

4,107

$

60

$

$

4,167

Mortgage backed securities

 

  

 

 

 

Residential agency

 

765,363

 

229

 

(54,471)

 

711,121

Commercial

 

85,123

 

185

 

(2,576)

 

82,732

Asset backed securities

 

41

 

1

 

 

42

Corporate bonds

 

69,033

 

531

 

(1,293)

 

68,271

Total available-for-sale investment securities

923,667

1,006

(58,340)

866,333

Held-to-maturity

Obligations of state and political agencies

141,373

 

1

 

(7,594)

 

133,780

Mortgage backed securities

Residential agency

198,777

 

 

(14,731)

 

184,046

Total held-to-maturity investment securities

340,150

1

(22,325)

317,826

Total investment securities

$

1,263,817

$

1,007

$

(80,665)

$

1,184,159

December 31, 2021

Amortized

Unrealized

Unrealized

Fair

(dollars in thousands)

    

Cost

Gains

Losses

    

Value

Available-for-sale

U.S. Treasury and agencies

$

5,028

$

75

$

$

5,103

Mortgage backed securities

 

  

 

 

 

  

Residential agency

 

717,781

 

1,213

 

(11,837)

 

707,157

Commercial

 

88,362

 

2,674

 

(123)

 

90,913

Asset backed securities

 

52

2

 

 

54

Corporate bonds

 

49,035

 

1,398

 

(11)

 

50,422

Total available-for-sale investment securities

860,258

5,362

(11,971)

853,649

Held-to-maturity

Obligations of state and political agencies

144,543

1,110

(349)

145,304

Mortgage backed securities

Residential agency

207,518

(3,145)

204,373

Total held-to-maturity investment securities

352,061

1,110

(3,494)

349,677

Total investment securities

$

1,212,319

$

6,472

$

(15,465)

$

1,203,326

10

Gross unrealized losses on investment securities and the fair value of the related securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022

Less than 12 Months

Over 12 Months

Total

Unrealized

Fair

Unrealized

Fair

Unrealized

Fair

(dollars in thousands)

    

Losses

    

Value

    

Losses

    

Value

    

Losses

    

Value

Available-for-sale

U.S. Treasury and agencies

$

$

$

$

$

$

Mortgage backed securities

 

  

 

  

 

  

 

  

 

  

 

  

Residential agency

 

(30,707)

 

462,087

 

(23,764)

 

219,167

 

(54,471)

 

681,254

Commercial

 

(2,576)

 

70,176

 

 

 

(2,576)

 

70,176

Asset backed securities

 

 

 

 

2

 

 

2

Corporate bonds

 

(1,293)

 

38,240

 

 

 

(1,293)

 

38,240

Total available-for-sale investment securities

(34,576)

570,503

(23,764)

219,169

(58,340)

789,672

Held-to-maturity

Obligations of state and political agencies

(7,594)

131,278

(7,594)

131,278

Mortgage backed securities

Residential agency

(14,731)

184,046

(14,731)

184,046

Total held-to-maturity investment securities

(22,325)

315,324

(22,325)

315,324

Total investment securities

$

(56,901)

$

885,827

$

(23,764)

$

219,169

$

(80,665)

$

1,104,996

December 31, 2021

Less than 12 Months

Over 12 Months

Total

Unrealized

Fair

Unrealized

Fair

Unrealized

Fair

(dollars in thousands)

    

Losses

    

Value

    

Losses

    

Value

    

Losses

    

Value

Available-for-sale