Investment Securities

12 Months Ended

Dec. 31, 2024

Note D—Investment Securities

Fair values of available-for-sale securities are based on the fair market values supplied by a third-party market data provider, or where such third-party market data is not available, fair values are based on discounted cash flows. The third-party market data provider uses a pricing matrix which it creates daily, taking into consideration actual trade data, projected prepayments, and when relevant, projected credit defaults and losses.

The amortized cost, gross unrealized gains and losses and fair values of the Company’s investment securities classified as available-for-sale are summarized as follows (dollars in thousands):


Available-for-sale	December 31, 2024
			Gross		Gross			Allowance
	Amortized		unrealized		unrealized			for	Fair
	cost		gains		losses			Credit Losses	value
U.S. Government agency securities	$	31,233	$	—	$	(1,271)	$	—	$	29,962
Asset-backed securities⁽¹⁾		214,346		177		(24)		—		214,499
Tax-exempt obligations of states and political subdivisions		6,860		—		(73)		—		6,787
Taxable obligations of states and political subdivisions		29,267		7		(441)		—		28,833
Residential mortgage-backed securities		438,562		1,137		(6,280)		—		433,419
Collateralized mortgage obligation securities		27,279		—		(1,127)		—		26,152
Commercial mortgage-backed securities		778,857		1,653		(17,302)		—		763,208
	$	1,526,404	$	2,974	$	(26,518)	$	—	$	1,502,860



	December 31, 2024
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
⁽¹⁾Asset-backed securities as shown above	cost		gains		losses		value
Federally insured student loan securities	$	2,440	$	—	$	(2)	$	2,438
Collateralized loan obligation securities		211,906		177		(22)		212,061
	$	214,346	$	177	$	(24)	$	214,499


Available-for-sale	December 31, 2023
			Gross		Gross			Allowance
	Amortized		unrealized		unrealized			for	Fair
	cost		gains		losses			Credit Losses	value
U.S. Government agency securities	$	35,346	$	6	$	(1,466)	$	—	$	33,886
Asset-backed securities⁽¹⁾		327,159		9		(1,815)		—		325,353
Tax-exempt obligations of states and political subdivisions		4,860		39		(48)		—		4,851
Taxable obligations of states and political subdivisions		43,323		15		(952)		—		42,386
Residential mortgage-backed securities		169,882		108		(9,223)		—		160,767
Collateralized mortgage obligation securities		35,575		—		(1,537)		—		34,038
Commercial mortgage-backed securities		157,759		—		(11,506)		—		146,253
Corporate debt securities		10,000		—		—		(10,000)		—
	$	783,904	$	177	$	(26,547)	$	(10,000)	$	747,534


	December 31, 2023
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
⁽¹⁾Asset-backed securities as shown above	cost		gains		losses		value
Federally insured student loan securities	$	6,032	$	—	$	(49)	$	5,983
Collateralized loan obligation securities		321,127		9		(1,766)		319,370
	$	327,159	$	9	$	(1,815)	$	325,353

The amortized cost and fair value of the Company’s investment securities at December 31, 2024, by contractual maturity are shown below (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-sale
	Amortized		Fair
	cost		value
Due before one year	$	51,119	$	50,650
Due after one year through five years		183,022		179,836
Due after five years through ten years		684,504		678,320
Due after ten years		607,759		594,054
	$	1,526,404	$	1,502,860

The Company had no securities pledged against that line at December 31, 2024 and December 31, 2023. There were no gross realized gains on sales of securities for each of the years ended December 31, 2024, 2023 and 2022. Realized losses on securities sales/calls were $2,000, $4,000, and $6,000, respectively, for the years ended December 31, 2024, 2023 and 2022.

Investments in FHLB, ACBB, and FRB stock are recorded at cost and amounted to $15.6 million at December 31, 2024, and $15.6 million at December 31, 2023.

The table below indicates the length of time individual securities had been in continuous unrealized loss positions at December 31, 2024 (dollars in thousands):


Available-for-sale		Less than 12 months				12 months or longer				Total
	Number of securities	Fair Value		Unrealized losses			Fair Value	Unrealized losses		Fair Value		Unrealized losses
Description of Securities
U.S. Government agency securities	18	$	15,384	$	(307)	$	14,578	$	(964)	$	29,962	$	(1,271)
Asset-backed securities	14		35,108		(8)		33,854		(16)		68,962		(24)
Tax-exempt obligations of states and political subdivisions	6		5,664		(36)		1,123		(37)		6,787		(73)
Taxable obligations of states and political subdivisions	18		1,157		(18)		25,734		(423)		26,891		(441)
Residential mortgage-backed securities	155		172,076		(1,156)		37,527		(5,124)		209,603		(6,280)
Collateralized mortgage obligation securities	19		—		—		26,152		(1,127)		26,152		(1,127)
Commercial mortgage-backed securities	37		351,595		(4,402)		166,554		(12,900)		518,149		(17,302)
Total unrealized loss position
investment securities	267	$	580,984	$	(5,927)	$	305,522	$	(20,591)	$	886,506	$	(26,518)

The table below indicates the length of time individual securities had been in continuous unrealized loss positions at December 31, 2023 (dollars in thousands):


Available-for-sale		Less than 12 months				12 months or longer				Total
	Number of securities	Fair Value		Unrealized losses		Fair Value		Unrealized losses		Fair Value		Unrealized losses
Description of Securities
U.S. Government agency securities	15	$	14,945	$	(302)	$	17,697	$	(1,164)	$	32,642	$	(1,466)
Asset-backed securities	53		—		—		314,749		(1,815)		314,749		(1,815)
Tax-exempt obligations of states and political subdivisions	3		997		(3)		1,850		(45)		2,847		(48)
Taxable obligations of states and political subdivisions	25		—		—		39,621		(952)		39,621		(952)
Residential mortgage-backed securities	132		20,884		(491)		126,645		(8,732)		147,529		(9,223)
Collateralized mortgage obligation securities	20		—		—		34,038		(1,537)		34,038		(1,537)
Commercial mortgage-backed securities	40		—		—		146,253		(11,506)		146,253		(11,506)
Total unrealized loss position
investment securities	288	$	36,826	$	(796)	$	680,853	$	(25,751)	$	717,679	$	(26,547)

CECL accounting requires that an ACL be established through a charge to the income statement to recognize credit deterioration. The charge may be reversed should credit improve in the future. Prior accounting required recognition of losses of other-than temporary-impairment, which could not be reversed in future periods. The Company periodically reviews its investment portfolio to determine whether an ACL is warranted, based on evaluations of the creditworthiness of the issuers/guarantors, the underlying collateral if applicable and the continuing performance of the securities. The Company did not recognize credit charges on investment securities in either 2024 or 2022. In 2023, the Company recorded a provision for credit loss on a security as follows.

The Company owned one single issuer trust preferred security issued by an insurance company through the third quarter of 2024, which was purchased in 2006, and owns no other such security or similar security. In the fourth quarter of 2023, the Bank provided for a potential loss for the full amount of the $10.0 million par value of the security through a provision for credit loss of $10.0 million. In the fourth quarter of 2024, the issuer tendered an offer to repurchase these securities which the Company accepted. Accordingly, $1.0 million was recovered which resulted in a reversal of the provision for credit loss in that amount, and a charge-off of the remaining $9.0 million of the security.

The Company has evaluated the securities in the above tables as of December 31, 2024 and has concluded that, except for the trust preferred security discussed above for which the ACL was eliminated in the fourth quarter of 2024, none of these securities required an ACL.

The Company evaluates whether an ACL is required by considering primarily the following factors: (a) the extent to which the fair value is less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral and (e) the payment structure of the security. The Company’s determination of the best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. With the exception of the trust preferred security discussed above and the CRE-2 security discussed in “Note E—Loans”, the Company concluded that the securities that are in an unrealized loss position are in a loss position because of changes in market interest rates after the securities were purchased. The severity of the impact of fair value in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level and the Company intends to hold its investment securities to maturity.