Investment Securities

3 Months Ended

Mar. 31, 2023

Investment Securities [Abstract]

Investment Securities

Note 4 – Investment Securities

On January 1, 2023, the Company adopted ASC 326, which made changes to accounting for available for sale debt securities whereby credit losses should be presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity. In addition, ASC 326 requires an allowance for credit losses to be recorded on held to maturity debt securities measured at amortized cost. All securities information presented as of March 31, 2023 is in accordance with ASC 326. All securities information presented as of December 31, 2022 or a prior date is presented in accordance with previously applicable GAAP. For further discussion on the Corporation’s accounting policies and policy elections related to the accounting standard update refer to Note 2.

The following table summarizes the activity in the ACL on held-to-maturity securities:

	Three Months ended
(Dollars in thousands)	March 31, 2023
Balance, beginning of period	$	—
Other debt securities, provision for credit losses		163
Balance, end of period	$	163

The ACL for held-to-maturity securities was initially determined to be immaterial as of the date of adoption of ASC 326. Upon re-estimation in the current period, ACL was recorded based on the results of our calculation as of March 31, 2023.

The following tables provide information on the amortized cost and estimated fair values of debt securities.

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Available-for-sale securities:
March 31, 2023
U.S. Government agencies	$	21,587	$	5	$	3,283	$	18,309
Mortgage-backed		69,151		1		7,779		61,373
Other debt securities		2,016		—		173		1,843
Total	$	92,754	$	6	$	11,235	$	81,525
December 31, 2022
U.S. Government agencies	$	21,798	$	5	$	3,625	$	18,178
Mortgage-backed		72,183		2		8,666		63,519
Other debt securities		2,018		—		128		1,890
Total	$	95,999	$	7	$	12,419	$	83,587

No available for sale securities were sold during the three months ended March 31, 2023 and 2022.

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Held-to-maturity securities:
March 31, 2023
U.S. Government agencies	$	146,699	$	—	$	11,815	$	134,884
Mortgage-backed		389,924		—		45,379		344,545
States and political subdivisions		1,473		54		13		1,514
Other debt securities		11,000		—		827		10,173
Total	$	549,096	$	54	$	58,034	$	491,116
December 31, 2022
U.S. Government agencies	$	148,097	$	—	$	13,601	$	134,496
Mortgage-backed		398,884		—		50,464		348,420
States and political subdivisions		1,474		35		28		1,481
Other debt securities		11,000		—		770		10,230
Total	$	559,455	$	35	$	64,863	$	494,627

Equity securities with an aggregate fair value of $1.3 million at March 31, 2023 and $1.2 million at December 31, 2022 are presented separately on the balance sheet. The fair value adjustment recorded through earnings totaled $17 thousand for the three months ended March 31, 2023 and $(70) thousand for the three months ended March 31, 2022, respectively.

Credit Quality Information

The Company monitors the credit quality of held-to-maturity securities through credit ratings provided by Standard & Poor’s Rating Services and Moody’s Investor Services. Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end. Investment grade securities are rated BBB- or higher by S&P and Baa3 or higher by Moody’s and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities. There were no speculative grade held-to-maturity securities at March 31, 2023 or December 31, 2022. Held-to-maturity securities that are not rated are agency mortgage-backed securities sponsored by US government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.

The following table shows the amortized cost of held-to-maturity securities based on their lowest publicly available credit rating as of March 31, 2023.

		March 31, 2023
		Investment Grade
(Dollars in thousands)		Aaa		Aa1		A3		Baa1		Baa2		Baa3		NR
U.S. Government agencies	$	137,358	$	—	$	—	$	—	$	—	$	—	$	9,341
Mortgage-backed		—		—		—		—		—		—		389,924
States and political subdivisions		—		1,473		—		—		—		—		—
Other debt securities		—		—		4,000		4,000		500		500		2,000
Total Held-to Maturity Securities	$	137,358	$	1,473	$	4,000	$	4,000	$	500	$	500	$	401,265

The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at March 31, 2023 and December 31, 2022.

	Less than				More than
	12 Months				12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2023
Available-for-sale securities:
U.S. Government agencies	$	1,060	$	6	$	16,833	$	3,277	$	17,893	$	3,283
Mortgage-backed		1,754		32		59,277		7,747		61,031		7,779
Other debt securities		—		—		1,843		173		1,843		173
Total	$	2,814	$	38	$	77,953	$	11,197	$	80,767	$	11,235

	Less than				More than
	12 Months				12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
December 31, 2022
Available-for-sale securities:
U.S. Government agencies	$	1,165	$	4	$	16,585	$	3,588	$	17,750	$	3,592
Mortgage-backed		29,125		2,409		34,167		6,290		63,292		8,699
Other debt securities		1,890		128		—		—		1,890		128
Total	$	32,180	$	2,541	$	50,752	$	9,878	$	82,932	$	12,419
Held-to-maturity securities:
U.S. Government agencies	$	67,332	$	2,786	$	67,163	$	10,815	$	134,495	$	13,601
Mortgage-backed		148,771		9,402		199,649		41,062		348,420		50,464
States and political subdivisions		780		28		—		—		780		28
Other debt securities		8,091		409		2,139		361		10,230		770
Total	$	224,974	$	12,625	$	268,951	$	52,238	$	493,925	$	64,863

There were one hundred fifteen available-for-sale debt securities with a fair value below the amortized cost basis, totaling $11.2 million of aggregate fair value as of March 31, 2023.  The Company concluded that a credit loss does not exist in its available-for-sale securities portfolio as of March 31, 2023, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Company’s mortgage-back securities are issued by either US government agencies or US government sponsored enterprises.  Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the US government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

All held-to-maturity and available for sale securities were current with no securities past due or on nonaccrual as of March 31, 2023.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at March 31, 2023.

	Available for sale				Held to maturity
	Amortized				Amortized
(Dollars in thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	46	$	46	$	1,061	$	1,042
Due after one year through five years		7,004		6,733		118,384		111,443
Due after five years through ten years		40,359		36,068		65,244		59,798
Due after ten years		45,345		38,678		364,407		318,833
Total	$	92,754	$	81,525	$	549,096	$	491,116

The maturity dates for debt securities are determined using contractual maturity dates.