Investments in Securities

12 Months Ended

Dec. 31, 2023

Investments in Securities

Investments in Securities

Note 2:      Investments in Securities

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 over the security’s estimated life. Prepayments are anticipated for certain mortgage-backed securities. Premiums on callable securities are amortized to their earliest call date.

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 non-interest income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity. Premiums and discounts are amortized and accreted, respectively, to interest income over the estimated life of the security. Prepayments are anticipated for certain mortgage-backed and Small Business Administration (SBA) securities. Premiums on callable securities are amortized to their earliest call date.

During the three months ended March 31, 2022, the Company transferred, at fair value, $226.5 million of securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related net unrealized gross gains were $1.0 million; $775,000 (net of income taxes) remained in accumulated other comprehensive income are being amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer. As of December 31, 2023, the net unrealized gross losses remaining were $65,000; net of income taxes, these unrealized losses were $49,000.

The amortized cost and fair values of securities were as follows:

	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	316,114	$	7	$	35,890	$	280,231
Agency collateralized mortgage obligations		85,989		—		10,043		75,946
States and political subdivisions securities		59,141		527		1,531		58,137
Small Business Administration securities		70,648		—		6,755		63,893
	$	531,892	$	534	$	54,219	$	478,207

	December 31, 2023
					Amortized		Gross		Gross
	Amortized		Fair Value		Carrying		Unrealized		Unrealized		Fair
	Cost		Adjustment		Value		Gains		Losses		Value
	(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	72,495	$	2,436	$	74,931	$	—	$	8,686	$	66,245
Agency collateralized mortgage obligations		116,405		(2,502)		113,903		—		14,662		99,241
States and political subdivisions		6,188		1		6,189		—		482		5,707
	$	195,088	$	(65)	$	195,023	$	—	$	23,830	$	171,193

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	327,266	$	—	$	40,784	$	286,482
Agency collateralized mortgage obligations		90,205		—		11,731		78,474
States and political subdivisions securities		60,667		119		3,291		57,495
Small Business Administration securities		75,076		—		6,935		68,141
	$	553,214	$	119	$	62,741	$	490,592

	December 31, 2022
					Amortized		Gross		Gross
	Amortized		Fair Value		Carrying		Unrealized		Unrealized		Fair
	Cost		Adjustment		Value		Gains		Losses		Value
	(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	73,891	$	3,015	$	76,906	$	—	$	9,820	$	67,086
Agency collateralized mortgage obligations		122,247		(2,885)		119,362		—		14,129		105,233
States and political subdivisions		6,239		(12)		6,227		—		781		5,446
	$	202,377	$	118	$	202,495	$	—	$	24,730	$	177,765

At December 31, 2023, the Company’s available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $190.9 million, FHLMC securities totaling $86.4 million and GNMA securities totaling $2.9 million. At December 31, 2022, available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $196.4 million, FHLMC securities totaling $90.1 million and GNMA securities totaling $78.5 million. At December 31, 2023 and 2022, all of the Company’s agency mortgage-backed securities totaled $280.2 million and $286.5 million, respectively, and had fixed rates of interest.

At December 31, 2023, the Company’s available-for-sale agency collateralized mortgage-backed securities portfolio consisted of FNMA securities totaling $4.1 million, FHLMC securities totaling $66.5 million and GNMA securities totaling $5.3 million. At December 31, 2022, available-for-sale agency collateralized mortgage-backed securities portfolio consisted of FNMA securities

totaling $3.9 million, FHLMC securities totaling $67.8 million and GNMA securities totaling $6.7 million. At December 31, 2023 and 2022, all of the Company’s agency collateralized mortgage-backed securities totaled $75.9 million and $78.4 million, respectively, and had fixed rates of interest.

The amortized cost and fair value of available-for-sale and held-to-maturity securities at December 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Carrying Value		Value
	(In Thousands)
One year or less	$	—	$	—	$	—	$	—
After one through two years		—		—		—		—
After two through three years		—		—		—		—
After three through four years		245		245		—		—
After four through five years		952		981		—		—
After five through fifteen years		9,682		9,634		3,247		2,986
After fifteen years		48,262		47,277		2,942		2,721
Securities not due on a single maturity date		472,751		420,070		188,834		165,486
	$	531,892	$	478,207	$	195,023	$	171,193

The amortized cost and fair values of securities pledged as collateral were as follows at December 31, 2023 and 2022:

	2023				2022
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Public deposits	$	17,412	$	15,225	$	15,402	$	13,489
Collateralized borrowing accounts		123,220		109,660		210,330		186,170
Other		3,815		3,507		4,018		3,764
	$	144,447	$	128,392	$	229,750	$	203,423

Available-for-sale investments in debt securities are reported in the financial statements at their fair value, which was $478.2 million and $490.6 million at December 31, 2023 and 2022, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2023 and 2022, was $456.9 million and $472.0 million, respectively, which is approximately 95.5% and 96.2%, respectively, of the Company’s available-for-sale investment portfolio. A high percentage of the unrealized losses were related to the Company’s mortgage-backed securities, collateralized mortgage obligations and Small Business Administration (SBA) securities, which are issued and guaranteed by U.S. government-sponsored entities and agencies. The Company’s state and political subdivisions securities are investments in insured fixed rate municipal bonds for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities. Held-to-maturity investments in debt securities are reported in the financial statements at their amortized cost, which was $195.0 million and $202.5 million at December 31, 2023 and 2022, respectively. Total fair value of these investments at December 31, 2023 and 2022 was approximately $171.2 million and $177.8 million, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2023 and 2022, was $171.2 million and $177.8 million, which is 100.0% of the Company’s held-to-maturity investment portfolio. Held -to-maturity investment securities are evaluated for potential losses under ASU 2016-13.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these available-for-sale debt securities are not credit related.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023 and 2022:

	2023
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	4,318	$	(9)	$	274,801	$	(35,881)	$	279,119	$	(35,890)
Agency collateralized mortgage obligations		9,080		(216)		66,866		(9,827)		75,946		(10,043)
Small Business Administration securities		7,782		(133)		56,111		(6,622)		63,893		(6,755)
States and political subdivisions securities		—		—		37,969		(1,531)		37,969		(1,531)
	$	21,180	$	(358)	$	435,747	$	(53,861)	$	456,927	$	(54,219)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	—	$	—	$	66,245	$	(8,686)	$	66,245	$	(8,686)
Agency collateralized mortgage obligations		—		—		99,241		(14,662)		99,241		(14,662)
States and political subdivisions securities		—		—		5,707		(482)		5,707		(482)
	$	—	$	—	$	171,193	$	(23,830)	$	171,193	$	(23,830)

	2022
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	221,562	$	(27,597)	$	64,918	$	(13,187)	$	286,480	$	(40,784)
Agency collateralized mortgage obligations		28,537		(3,262)		40,642		(8,469)		69,179		(11,731)
Small Business Administration securities		60,473		(5,224)		7,667		(1,711)		68,140		(6,935)
States and political subdivisions securities		44,455		(2,913)		3,753		(378)		48,208		(3,291)
	$	355,027	$	(38,996)	$	116,980	$	(23,745)	$	472,007	$	(62,741)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	59,218	$	(7,766)	$	7,868	$	(2,054)	$	67,086	$	(9,820)
Agency collateralized mortgage obligations		61,055		(6,411)		44,178		(7,718)		105,233		(14,129)
States and political subdivisions securities		900		(101)		4,546		(680)		5,446		(781)
	$	121,173	$	(14,278)	$	56,592	$	(10,452)	$	177,765	$	(24,730)

Allowance for Credit Losses On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.

Regarding securities issued by state and political subdivisions, management considers the following when evaluating these securities: (i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) updated financial information of the issuer, (v) internal forecasts and (vi) whether such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. These securities are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.