INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2024

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 5: INVESTMENT 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.

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

	June 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	357,905	$	54	$	41,895	$	316,064
Agency collateralized mortgage obligations		126,457		—		10,493		115,964
States and political subdivisions		58,876		126		2,349		56,653
Small Business Administration securities		68,535		—		8,132		60,403
	$	611,773	$	180	$	62,869	$	549,084

	June 30, 2024
					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	$	71,676	$	2,147	$	73,823	$	—	$	9,310	$	64,513
Agency collateralized mortgage obligations		113,547		(2,316)		111,231		—		16,081		95,150
States and political subdivisions		6,162		8		6,170		—		668		5,502
	$	191,385	$	(161)	$	191,224	$	—	$	26,059	$	165,165

	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

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2024, 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		245		245		—		—
After three through four years		969		969		—		—
After four through five years		—		—		—		—
After five through fifteen years		10,689		10,448		3,246		2,889
After fifteen years		46,973		44,991		2,924		2,613
Securities not due on a single maturity date		552,897		492,431		185,054		159,663
	$	611,773	$	549,084	$	191,224	$	165,165

Certain available-for-sale investments in debt securities are reported in the financial statements at an amount less than their amortized cost. Total fair value of these investments at June 30, 2024 and December 31, 2023, was approximately $533.5 million and $456.9 million, respectively, which was approximately 97.2% and 95.5% of the Company’s total available-for-sale investment portfolio at those dates. 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 carrying value at

June 30, 2024 and December 31, 2023, which was $191.2 million and $195.0 million, respectively. Total fair value of these investments at June 30, 2024 and December 31, 2023 was approximately $165.2 million and $171.2 million, respectively. Held-to-maturity investment securities are evaluated for potential credit losses under ASU 2016-13. The Company continually assesses its liquidity sources, both on-balance sheet and off-balance sheet, and believes that at June 30, 2024, it had ample liquidity sources to fund its ongoing operations.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings of issuers, 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 available-for-sale and held-to-maturity securities’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2024 and December 31, 2023:

	June 30, 2024
	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	$	49,031	$	(813)	$	260,805	$	(41,082)	$	309,836	$	(41,895)
Agency collateralized mortgage obligations		41,393		(297)		74,572		(10,196)		115,965		(10,493)
States and political subdivisions securities		10,228		(183)		37,070		(2,166)		47,298		(2,349)
Small Business Administration securities		—		—		60,402		(8,132)		60,402		(8,132)
	$	100,652	$	(1,293)	$	432,849	$	(61,576)	$	533,501	$	(62,869)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities	$	—	$	—	$	64,513	$	(9,310)	$	64,513	$	(9,310)
Agency collateralized mortgage obligations		—		—		95,150		(16,081)		95,150		(16,081)
States and political subdivisions securities		—		—		5,502		(668)		5,502		(668)
	$	—	$	—	$	165,165	$	(26,059)	$	165,165	$	(26,059)

	December 31, 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)
States and political subdivisions securities		7,782		(133)		56,111		(6,622)		63,893		(6,755)
Small Business Administration 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)

There were no sales of available-for-sale securities during the three or six months ended June 30, 2024 and 2023, respectively.

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 as of June 30, 2024 were 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 historically experienced 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 generally highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not historically experienced losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.