SECURITIES AVAILABLE FOR SALE

9 Months Ended

Sep. 30, 2022

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE

NOTE 2.           SECURITIES AVAILABLE FOR SALE

The following is a summary of securities available for sale (“AFS”):

			Gross		Gross
			Unrealized		Unrealized
(in thousands)	Amortized Cost		Gains		Losses		Fair Value
September 30, 2022
Mortgage-backed securities:
US Government-sponsored enterprises	$	252,369	$	4	$	(36,349)	$	216,024
US Government agency		93,643		11		(10,128)		83,526
Private label		72,484		34		(5,749)		66,769
Obligations of states and political subdivisions thereof		123,350		9,205		(27,903)		104,652
Corporate bonds		91,512		26		(5,757)		85,781
Total securities available for sale	$	633,358	$	9,280	$	(85,886)	$	556,752

			Gross		Gross
			Unrealized		Unrealized
(in thousands)	Amortized Cost		Gains		Losses		Fair Value
December 31, 2021
Mortgage-backed securities:
US Government-sponsored enterprises	$	237,283	$	2,289	$	(3,455)	$	236,117
US Government agency		79,143		1,016		(522)		79,637
Private label		68,691		142		(138)		68,695
Obligations of states and political subdivisions thereof		140,585		1,489		(298)		141,776
Corporate bonds		89,994		2,479		(422)		92,051
Total securities available for sale	$	615,696	$	7,415	$	(4,835)	$	618,276

Credit Quality Information

We monitor the credit quality of available for sale debt securities through credit ratings from various rating agencies and substantial price changes. Credit ratings express opinions about the credit quality of a security and are utilized us to make informed decisions.  Securities are triggered for further review in the quarter if the security has significant fluctuations in ratings, drops below investment grade, or significant pricing changes. For securities without credit ratings, we utilize other financial information indicating the financial health of the underlying municipality, agency, or organization associated with the underlying security.

As of September 30, 2022 and December 31, 2021, we carried no allowance on available for sale debt securities in accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

The amortized cost and estimated fair value of available for sale securities segregated by contractual maturity at September 30, 2022 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.

	Available for sale
(in thousands)	Amortized Cost		Fair Value
Within 1 year	$	195	$	196
Over 1 year to 5 years		30,292		28,426
Over 5 years to 10 years		49,666		55,025
Over 10 years		134,709		106,786
Total bonds and obligations		214,862		190,433
Mortgage-backed securities		418,496		366,319
Total securities available for sale	$	633,358	$	556,752

The following table presents the gains and losses from the sale of AFS securities for the periods presented:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Gross gains on sales of available for sale securities	$	142	$	1,980	$	151	$	2,030
Gross losses on sales of available for sale securities		(98)		(50)		(98)		(50)
Net gains on sale of available for sale securities	$	44	$	1,930	$	53	$	1,980

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(in thousands)	Losses		Value		Losses		Value		Losses		Value
September 30, 2022
Mortgage-backed securities:
US Government-sponsored enterprises	$	18,262	$	139,219	$	18,087	$	76,291	$	36,349	$	215,510
US Government agency		6,591		64,575		3,537		17,021		10,128		81,596
Private label		3,466		35,740		2,283		30,994		5,749		66,734
Obligations of states and political subdivisions thereof		20,425		78,085		7,478		21,373		27,903		99,458
Corporate bonds		3,770		65,251		1,987		16,763		5,757		82,014
Total securities available for sale	$	52,514	$	382,870	$	33,372	$	162,442	$	85,886	$	545,312

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(in thousands)	Losses		Value		Losses		Value		Losses		Value
December 31, 2021
Mortgage-backed securities:
US Government-sponsored enterprises	$	1,589	$	127,780	$	1,866	$	39,717	$	3,455	$	167,497
US Government agency		381		32,628		141		4,548		522		37,176
Private label		133		44,372		5		16		138		44,388
Obligations of states and political subdivisions thereof		187		36,878		111		6,129		298		43,007
Corporate bonds		94		21,358		328		11,922		422		33,280
Total securities available for sale	$	2,384	$	263,016	$	2,451	$	62,332	$	4,835	$	325,348

We expect to recover the amortized cost basis on all securities in our AFS portfolio. Furthermore, we do not intend to sell nor do we anticipate that we will be required to sell any securities in an unrealized loss position as of September 30, 2022, prior to this recovery. Our ability and intent to hold these securities until recovery is supported by our capital and liquidity positions as well as historically low portfolio turnover.

The following summarizes, by investment security type, the impact of securities in an unrealized loss position for greater than 12 months at September 30, 2022:

US Government-sponsored enterprises

489 out of the total 521 securities in our portfolios of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 14.55% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guarantee the contractual cash flows of all of our US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter.

US Government agency

139 out of the total 161 securities in our portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 11.04% of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association guarantees the contractual cash flows of all of our US Government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter.

Private label

33 of the total 35 securities in our portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 7.93% of the amortized cost of securities in unrealized loss positions. We expect to receive all of the future contractual cash flows related to the amortized cost on these securities.

Obligations of states and political subdivisions thereof

68 of the total 83 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 22.06% of the amortized cost of securities in unrealized loss positions. We continually monitor the municipal bond sector of the market carefully and periodically evaluate the appropriate level of exposure to the market. At this time, we feel the bonds in this portfolio carry minimal risk of default, and we are appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter.

Corporate bonds

26 out of the total 31 securities in our portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 7.07% of the amortized cost of bonds in unrealized loss positions. We review the financial strength of all of these bonds, and we have concluded that the amortized cost remains supported by the expected future cash flows of these securities. The most recent review includes all bond issuers and their current credit ratings, financial performance and capitalization.