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Investment Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Investment SecuritiesThe amortized cost and estimated fair value of securities available-for-sale and held-to-maturity along with gross unrealized gains and losses are summarized as follows:


(dollars in thousands)
September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale:
U.S. treasury securities	$	799	$	—	$	(8)	$	791
U.S. agency securities	4,613		—		(510)		4,103
Asset backed securities	27,250		6		(411)		26,845
State, county & municipal securities	124,882		—		(23,228)		101,654
Corporate debt securities	54,694		—		(7,665)		47,029
Mortgage-backed securities	251,658		—		(32,533)		219,125
Total	$	463,896	$	6	$	(64,355)	$	399,547

September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Held to Maturity:
U.S. treasury securities	$	92,880	$	—	$	(5,483)	$	87,397
U.S. agency securities	16,314		—		(1,975)		14,339
State, county & municipal securities	136,546		—		(22,986)		113,560
Mortgage-backed securities	205,316		—		(35,547)		169,769
Total	$	451,056	$	—	$	(65,991)	$	385,065

December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale:
U.S. treasury securities	$	1,644	$	—	$	(22)	$	1,622
U.S. agency securities	5,035		—		(450)		4,585
Asset backed securities	31,468		—		(1,480)		29,988
State, county & municipal securities	126,119		—		(21,363)		104,756
Corporate debt securities	54,741		164		(5,320)		49,585
Mortgage-backed securities	271,199		9		(29,191)		242,017
Total	$	490,206	$	173	$	(57,826)	$	432,553

December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Held to Maturity:
U.S. treasury securities	$	91,615	$	—	$	(4,149)	$	87,466
U.S. agency securities	16,409		—		(1,838)		14,571
State, county & municipal securities	136,138		32		(19,518)		116,652
Mortgage-backed securities	221,696		—		(29,121)		192,575
Total	$	465,858	$	32	$	(54,626)	$	411,264

The Company elected to exclude accrued interest receivable from the amortized cost basis of available-for-sale and held-to-maturity securities disclosed throughout this note. As of September 30, 2023 and December 31, 2022, accrued interest receivable for available-for-sale and held-to-maturity securities totaled $2.2 million and $2.6 million, and $2.0 million and $1.9 million, respectively, and is included in the "other assets" line item on the Company’s consolidated balance sheet.

The Company transferred certain agency-issued securities from the available-for-sale to held-to-maturity portfolio on January 1, 2022 and September 1, 2022, having a combined book value of approximately $511.0 million and a combined market value of approximately $477.0 million. As of the date of each transfer, the related pre-tax net unrecognized losses of approximately $34.0 million within the accumulated other comprehensive loss balance are being amortized over the remaining term of the securities using the effective interest method. This transfer was completed after careful consideration of the Company’s intent and ability to hold these securities to maturity. Factors used in assessing the ability to hold these securities to maturity were future liquidity needs and sources of funding. The Company has had no other transfers of securities since September 1, 2022.

The amortized cost and fair value of investment securities as of September 30, 2023, by contractual maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain investments because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed separately in the table below.


	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	1,014	$	1,002	$	—	$	—
Due after one year through five years	15,542		14,127		91,725		86,380
Due after five years through ten years	95,886		79,640		75,296		64,377
Due after ten years	99,796		85,653		78,719		64,539
	$	212,238	$	180,422	$	245,740	$	215,296

Mortgage-backed securities	251,658		219,125		205,316		169,769
	$	463,896	$	399,547	$	451,056	$	385,065

Proceeds from the sale of investment securities totaled $44.1 million and $47.2 million for the three and nine month periods ended September 30, 2022, respectively. The sale of investment securities resulted in gross realized gains of $0 and $24,000 for the three and nine months ended September 30, 2022 and gross realized losses of $96,000 for the both the three and nine months ended September 30, 2022.

Investment securities having a carrying value of approximately $394.0 million and $541.8 million were pledged to secure public deposits and for other purposes as of September 30, 2023 and December 31, 2022, respectively.

Information pertaining to available-for-sale securities with gross unrealized losses at September 30, 2023 and December 31, 2022 aggregated by investment category and length of time that individual securities have been in a continuous loss position

is as follows:


	Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2023
U.S. treasury securities	$	—	$	—	$	791	$	(8)	$	791	$	(8)
U.S. agency securities	—		—		4,103		(510)		4,103		(510)
Asset backed securities	5,934		(14)		18,598		(397)		24,532		(411)
State, county & municipal securities	1,457		(276)		100,197		(22,952)		101,654		(23,228)
Corporate debt securities	7,660		(1,632)		39,369		(6,033)		47,029		(7,665)
Mortgage-backed securities	16,088		(424)		203,037		(32,109)		219,125		(32,533)
	$	31,139	$	(2,346)	$	366,095	$	(62,009)	$	397,234	$	(64,355)

December 31, 2022
U.S. treasury securities	$	1,377	$	(17)	$	245	$	(5)	$	1,622	$	(22)
U.S. agency securities	3,221		(257)		1,364		(193)		4,585		(450)
Asset backed securities	10,780		(319)		19,208		(1,161)		29,988		(1,480)
State, county & municipal securities	29,284		(3,629)		75,472		(17,734)		104,756		(21,363)
Corporate debt securities	17,258		(1,463)		30,651		(3,857)		47,909		(5,320)
Mortgage-backed securities	122,031		(7,890)		119,409		(21,301)		241,440		(29,191)
	$	183,951	$	(13,575)	$	246,349	$	(44,251)	$	430,300	$	(57,826)

Information pertaining to held-to-maturity securities with gross unrealized losses at September 30, 2023 and December 31, 2022 aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows:


	Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2023
U.S. treasury securities	$	—	$	—	$	87,397	$	(5,483)	$	87,397	$	(5,483)
U.S. agency securities	—		—		14,339		(1,975)		14,339		(1,975)
State, county & municipal securities	18,041		(1,349)		95,519		(21,637)		113,560		(22,986)

Mortgage-backed securities	—		—		169,769		(35,547)		169,769		(35,547)
	$	18,041	$	(1,349)	$	367,024	$	(64,642)	$	385,065	$	(65,991)

December 31, 2022
U.S. treasury securities	$	—	$	—	$	87,466	$	(4,149)	$	87,466	$	(4,149)
U.S. agency securities	—		—		14,571		(1,838)		14,571		(1,838)
State, county & municipal securities	9,858		(1,392)		105,734		(18,126)		115,592		(19,518)
Mortgage-backed securities	13,580		(729)		178,995		(28,392)		192,575		(29,121)
	$	23,438	$	(2,121)	$	386,766	$	(52,505)	$	410,204	$	(54,626)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent

and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At September 30, 2023, there were 282 available-for-sale securities and 159 held-to-maturity securities that had unrealized losses. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.

The Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326), as amended on January 1, 2023 which included evaluation of expected credit losses on debt securities. As part of the Company's calculated credit losses, the allowance for credit losses on investment securities was determined to be de minimis due to the high credit quality of the portfolio, which includes securities issued or guaranteed by the U.S. Treasury, U.S. Government agencies and high quality municipalities. Therefore, no allowance for credit losses was recorded as of September 30, 2023. See Note 1 for additional details on the allowance for credit losses as it relates to the securities portfolio.