Investment Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Note 4 – Investment Securities

The following tables summarize the amortized cost and fair value of securities available-for-sale and securities held-to-maturity and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive loss at September 30, 2023 and December 31, 2022 (amounts in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2023:
Securities available-for-sale:
Residential mortgage-backed	$	421,870	$	-	$	(72,901	)	$	348,969
U.S. treasury securities		130,778		-		(14,097	)		116,681
U.S. govt. sponsored enterprises		69,586		-		(7,117	)		62,469
State, county, and municipal		73,642		-		(14,227	)		59,415
Corporate debt obligations		17,774		8		(2,691	)		15,091
Total available-for-sale	$	713,650	$	8	$	(111,033	)	$	602,625

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2023:
Securities held-to-maturity:
Residential mortgage-backed	$	65,070	$	-	$	(15,217	)	$	49,853
State, county, and municipal		62,854		-		(15,044	)		47,810
Total held-to-maturity	$	127,924	$	-	$	(30,261	)	$	97,663

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022:
Securities available-for-sale:
Residential mortgage-backed	$	449,348	$	-	$	(59,311	)	$	390,037
U.S. treasury securities		130,971		-		(13,342	)		117,629
U.S. govt. sponsored enterprises		72,889		-		(6,527	)		66,362
State, county, and municipal		87,347		71		(11,555	)		75,863
Corporate debt obligations		17,873		16		(1,893	)		15,996
Total available-for-sale	$	758,428	$	87	$	(92,628	)	$	665,887
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022:
Securities held-to-maturity:
Residential mortgage-backed	$	68,688	$	-	$	(12,624	)	$	56,064
State, county, and municipal		62,893		-		(13,680	)		49,213
Total held-to-maturity	$	131,581	$	-	$	(26,304	)	$	105,277

The Company reassessed classification of certain investments, and effective February 2022, the Company transferred $75 million of residential mortgage-backed securities from available-for-sale to held-to-maturity. The transfer occurred at fair value. The related unrealized loss of $3.4 million included in accumulated other comprehensive loss remained in accumulated other comprehensive loss, to be amortized out of accumulated other comprehensive loss with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

The Company has a zero loss expectation for its HTM securities portfolio, except for U.S. State and Municipal securities, and therefore it is not required to estimate an allowance for credit losses related to these securities. For HTM securities that do not have a zero loss expectation, the allowance for credit losses is based on the security’s amortized cost, excluding interest receivable, and represents the portion of the amortized cost that the Company does not expect to collect over the life of the security. The allowance for credit losses is determined using average industry credit ratings and historical loss experience, and is initially recognized upon acquisition of the securities, and subsequently remeasured on a recurring basis. The Company evaluates available for sale (AFS) debt securities that experienced a decline in fair value below amortized cost for credit impairment. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level, such as credit deterioration of the issuer, explicit or implicit guarantees by the federal government or collateral underlying the security. If it is determined that the decline in fair value was due to credit losses, an allowance for credit losses is recorded, limited to the amount the fair value is less than the amortized cost basis. The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive (loss) income, net of tax. The Company recognizes a credit impairment if the Company has the intent to sell the security, or it is more likely than not that the Bank will be required to sell the security before recovery of its amortized cost.

The following tables summarize securities with unrealized and unrecognized losses as of September 30, 2023 and December 31, 2022 aggregated by major security type and length of time in a continuous unrealized or unrecognized loss position (amounts in thousands):

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2023:
Securities available-for-sale:
Residential mortgage-backed	$	4,274	$	122	$	344,695	$	72,779	$	348,969	$	72,901
U.S. treasury securities		-		-		116,681		14,097		116,681		14,097
U.S. govt. sponsored enterprises		8,482		52		53,987		7,065		62,469		7,117
State, county & municipal		928		72		58,487		14,155		59,415		14,227
Corporate debt obligations		931		22		12,705		2,669		13,636		2,691
Total available-for-sale	$	14,615	$	268	$	586,555	$	110,765	$	601,170	$	111,033
Securities held-to-maturity:
Residential mortgage-backed	$	-	$	-	$	49,853	$	15,217	$	49,853	$	15,217
State, county & municipal		-		-		42,464		15,044		42,464		15,044
Total held-to-maturity	$	-	$	-	$	92,317	$	30,261	$	92,317	$	30,261
December 31, 2022:
Securities available-for-sale:
Residential mortgage-backed	$	133,675	$	15,215	$	253,994	$	44,096	$	387,669	$	59,311
U.S. treasury securities		-		-		117,629		13,342		117,629		13,342
U.S. govt. sponsored enterprises		32,695		2,449		33,523		4,078		66,218		6,527
State, county & municipal		53,744		7,250		17,905		4,305		71,649		11,555
Corporate debt obligations		3,190		310		11,352		1,583		14,542		1,893
Total available-for-sale	$	223,304	$	25,224	$	434,403	$	67,404	$	657,707	$	92,628
Securities held-to-maturity:
Residential mortgage-backed	$	-	$	-	$	56,064	$	12,624	$	56,064	$	12,624
State, county & municipal		10,057		2,706		33,811		10,974		43,868		13,680
Total held-to-maturity	$	10,057	$	2,706	$	89,875	$	23,598	$	99,932	$	26,304

The Company owned a total of 334 securities with unrealized losses of $141.3 million at September 30, 2023. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality. The individual securities are each investment grade securities. The Company considers factors such as the financial condition of the issuer including credit ratings and specific events affecting the operations of the issuer, volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. As such, there is no allowance for credit losses on available for sale or held to maturity securities recognized as of September 30, 2023.

As of September 30, 2023 and December 31, 2022, securities with a carrying value of approximately $339.1 million and $242.3 million, respectively, were pledged to secure public deposits as required by law. At September 30, 2023 and December 31, 2022, the carrying value of securities pledged to secure repurchase agreements was approximately $25.6 million and $16.2 million, respectively.

During the nine months ended September 30, 2023, the Company sold investment securities for proceeds of $15.3 million and realized gains of $5.0 thousand. During the nine months ended September 30, 2022, the Company sold investment securities for proceeds of $168.6 million and realized losses of $2.1 million.

The amortized cost and estimated fair value of debt securities at September 30, 2023 and December 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities for residential mortgage backed securities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. These securities are therefore not presented by maturity classification.

	September 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Securities available-for-sale
Less than 1 year	$	2,500	$	2,386	$	1,055	$	1,054
1 to 5 years		160,094		142,781		141,565		127,459
5 to 10 years		55,082		47,411		77,174		68,737
After 10 years		74,104		61,078		89,286		78,600
		291,780		253,656		309,080		275,850
Residential mortgage-backed securities		421,870		348,969		449,348		390,037
Total available-for-sale	$	713,650	$	602,625	$	758,428	$	665,887

	September 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Securities held-to-maturity
5 to 10 years	$	14,949	$	11,625	$	10,208	$	8,118
After 10 years		47,905		36,185		52,685		41,095
		62,854		47,810		62,893		49,213
Residential mortgage-backed securities		65,070		49,853		68,688		56,064
Total held-to-maturity	$	127,924	$	97,663	$	131,581	$	105,277