Securities

6 Months Ended

Jun. 30, 2023

Securities [Abstract]

Securities

Note 4. Securities

Available-for-Sale Securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in accumulated other comprehensive income (loss). Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the estimated life of the security. Prepayments are anticipated for mortgage-backed and Small Business Administration (“SBA”) securities. Premiums on callable securities are amortized to their earliest call date.

Held-to-Maturity Securities (“HTM”), which include any security for which the Company has both the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the security’s estimated life. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date.

The amortized cost, gross unrealized gains and losses and fair value of securities AFS and HTM are summarized as follows (in thousands):

	June 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Available-for-sale:	Cost		Gains		Losses		Value
U.S. Treasury	$	240,489	$	—	$	(16,638)	$	223,851
U.S. Government-sponsored enterprises (GSEs)		59,207		1,597		(62)		60,742
Municipal securities		18,974		58		(568)		18,464
Other debt securities		34,435		—		(4,019)		30,416
Mortgage-backed securities (GSEs)		231,873		—		(25,038)		206,835
Total	$	584,978	$	1,655	$	(46,325)	$	540,308

	June 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Held-to-maturity:	Cost		Gains		Losses		Value
U.S. Treasury	$	150,186	$	—	$	(4,252)	$	145,934
U.S. Government-sponsored enterprises (GSEs)		49,944		—		(7,625)		42,319
Municipal securities		53,204		—		(6,984)		46,220
Mortgage-backed securities (GSEs)		30,230		—		(4,199)		26,031
Total	$	283,564	$	—	$	(23,060)	$	260,504

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Available-for-sale:	Cost		Gains		Losses		Value
U.S. Treasury	$	241,506	$	—	$	(17,853)	$	223,653
U.S. Government-sponsored enterprises (GSEs)		1,593		—		(18)		1,575
Municipal securities		19,210		17		(616)		18,611
Other debt securities		32,959		—		(2,408)		30,551
Mortgage-backed securities (GSEs)		233,948		6		(24,451)		209,503
Total	$	529,216	$	23	$	(45,346)	$	483,893

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Held-to-maturity:	Cost		Gains		Losses		Value
U.S. Treasury	$	150,295	$	—	$	(5,613)	$	144,682
U.S. Government-sponsored enterprises (GSEs)		50,539		—		(8,037)		42,502
Municipal securities		53,694		—		(7,550)		46,144
Mortgage-backed securities (GSEs)		31,421		—		(4,136)		27,285
Total	$	285,949	$	—	$	(25,336)	$	260,613

At June 30, 2023 and December 31, 2022, securities with a carrying value totaling approximately $453.0 million and $304.8 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

The amortized cost and estimated fair value of securities at June 30, 2023 by contractual maturity for non-mortgage backed securities 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.

	June 30, 2023
	Amortized		Fair
Available-for-sale:	Cost		Value
Due in one year or less	$	110,826	$	108,173
Due from one year to five years		112,113		102,201
Due from five years to ten years		119,881		113,140
Due after ten years		10,285		9,959
		353,105		333,473
Mortgage-backed securities		231,873		206,835
Total	$	584,978	$	540,308
Held-to-maturity:
Due in one year or less	$	150,186	$	145,933
Due from one year to five years		—		—
Due from five years to ten years		39,007		33,724
Due after ten years		64,141		54,816
		253,334		234,473
Mortgage-backed securities		30,230		26,031
Total	$	283,564	$	260,504

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities AFS and HTM have been in a continuous unrealized loss position (in thousands):

	June 30, 2023
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Available-for-sale:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	3,909	$	(82)	1	$	219,940	$	(16,556)	19	$	223,849	$	(16,638)	20
U.S. Government-sponsored enterprises (GSEs)		17,637		(59)	4		250		(3)	2		17,887		(62)	6
Municipal securities		5,160		(138)	7		8,535		(430)	15		13,695		(568)	22
Other debt securities		5,000		(492)	4		25,416		(3,527)	24		30,416		(4,019)	28
Mortgage-backed securities (GSEs)		36,279		(1,272)	25		170,557		(23,766)	89		206,836		(25,038)	114
Total	$	67,985	$	(2,043)	41	$	424,698	$	(44,282)	149	$	492,683	$	(46,325)	190
	June 30, 2023
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Held-to-maturity:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	—	$	—	—	$	145,933	$	(4,252)	4	$	145,933	$	(4,252)	4
U.S. Government-sponsored enterprises (GSEs)		—		—	—		42,318		(7,625)	13		42,318		(7,625)	13
Municipal securities		—		—	—		46,222		(6,984)	35		46,222		(6,984)	35
Mortgage-backed securities (GSEs)		—		—	—		26,031		(4,199)	5		26,031		(4,199)	5
Total	$	—	$	—	—	$	260,504	$	(23,060)	57	$	260,504	$	(23,060)	57

	December 31, 2022
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Available-for-sale:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	134,414	$	(7,610)	9	$	89,239	$	(10,243)	11	$	223,653	$	(17,853)	20
U.S. Government-sponsored enterprises (GSEs)		1,266		(14)	1		309		(4)	2		1,575		(18)	3
Municipal securities		13,146		(616)	20		—		—	—		13,146		(616)	20
Other debt securities		25,044		(1,866)	20		5,506		(542)	6		30,550		(2,408)	26
Mortgage-backed securities (GSEs)		111,598		(8,968)	86		96,285		(15,483)	28		207,883		(24,451)	114
Total	$	285,468	$	(19,074)	136	$	191,339	$	(26,272)	47	$	476,807	$	(45,346)	183
	December 31, 2022
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Held-to-maturity:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	144,683	$	(5,613)	4	$	—	$	—	—	$	144,683	$	(5,613)	4
U.S. Government-sponsored enterprises (GSEs)	$	13,048	$	(2,503)	3	$	29,451	$	(5,534)	10	$	42,499	$	(8,037)	13
Municipal securities		40,770		(6,387)	28		5,375		(1,163)	7		46,145		(7,550)	35
Mortgage-backed securities (GSEs)		—		—	—		27,285		(4,136)	5		27,285		(4,136)	5
Total	$	198,501	$	(14,503)	35	$	62,111	$	(10,833)	22	$	260,612	$	(25,336)	57

For any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, the Company assesses whether it intends to sell the security, or more likely than not will be required to sell the security before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because the Company currently does not intend to sell those available-for-sale securities that have an unrealized loss at June 30, 2023, and it is not likely that they we will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-down is necessary. In addition, the Company evaluates whether any portion of the decline in fair value of available-for-sale securities is the result of credit deterioration, which would require the recognition of an allowance for credit losses.  The unrealized losses associated with available-for-sale securities at June 30, 2023, are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at June 30, 2023.  Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments.

The unrealized losses in the Company’s held-to-maturity portfolio were caused by changes in the interest rate environment.  The Company has a zero-loss expectation for its U.S. treasury securities in addition to U.S. Government-sponsored enterprises (GSEs) and mortgage-backed securities (GSEs), and accordingly, no allowance for credit losses is estimated for these securities.  The held-to-maturity state and municipal securities are general obligation bonds which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt.  All debt securities in an unrealized loss position as of June 30, 2023, continue to perform as scheduled and we do not believe there is a credit loss or a provision for credit losses is necessary.

The Company utilizes bond credit ratings assigned by third party ratings agencies to monitor the credit quality of debt securities held-to-maturity. At June 30, 2023, all debt securities classified as held-to-maturity were rated AAA or higher by the ratings agencies. Updated credit ratings are obtained as they become available from the ratings agencies.

Allowance for Credit Losses

The Company adopted ASU 2016-13 on January 1, 2023, and based on the analysis of the underlying risk characteristics of its AFS and HTM portfolios, including credit ratings and other qualitative factors, there was no provision for credit

losses related to AFS or HTM securities recorded during the three and six months ended June 30, 2023, because ACL was deemed immaterial.  

Other Investments:

Our other investments consist of restricted non-marketable equity securities that have no readily determinable market value. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of June 30, 2023, the Company determined that there was no impairment on its other investment securities.

The following is the amortized cost and carrying value of other investments (in thousands):

	June 30,		December 31,
	2023		2022
Federal Reserve Bank stock	$	9,808	$	9,783
Federal Home Loan Bank stock		4,238		5,397
First National Bankers Bank stock		350		350
Total	$	14,396	$	15,530