Securities

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

SECURITIES

Equity Securities with Readily Determinable Fair Values

The Company held equity securities with fair values of $5,191,000 and $5,504,000 at December 31, 2022 and 2021, respectively. The gross realized and unrealized gains (losses) recognized on equity securities with readily determinable fair values in noninterest income in the Company’s consolidated statements of income were as follows:


(Dollars in thousands)	2022		2021		2020
Unrealized gains (losses) on equity securities still held at the reporting date	$	(313)	$	(322)	$	389
Realized gains (losses) on equity securities sold during the period	—		—		—
	$	(313)	$	(322)	$	389

Equity Securities Without Readily Determinable Fair Values

The following table summarizes the Company's investments in equity securities without readily determinable fair values:


(Dollars in thousands)	December 31, 2022		December 31, 2021
Equity Securities without readily determinable fair value, at cost	$	39,019	$	14,671
Upward adjustments based on observable price changes, cumulative	10,163		—
Equity Securities without readily determinable fair value, carrying value	$	49,182	$	14,671

Equity securities without readily determinable fair values include Federal Home Loan Bank and other restricted stock, which are reported separately in the Company's consolidated balance sheets, and other investments, which are included in other assets in the Company's consolidated balance sheets.

The gross realized and unrealized gains (losses) recognized on equity securities without readily determinable fair values in noninterest income in the Company’s consolidated statements of income were as follows:


	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Unrealized gains (losses) on equity securities still held at the reporting date	$	10,163	$	—	$	—
Realized gains (losses) on equity securities sold during the period	—		—		—
	$	10,163	$	—	$	—

During the year ended December 31, 2022, the Company adjusted the fair value of an equity security without readily determinable fair value upwards due to an orderly and observable transaction for an identical investment. For further information on this transaction, see Note 8 – Equity Method Investment.

Debt Securities

Debt securities have been classified in the financial statements as available for sale or held to maturity. The following table summarizes the amortized cost, fair value, and allowance for credit losses of debt securities and the corresponding amounts of gross unrealized gains and losses of available for sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities:


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
December 31, 2022
Available for sale securities:
Mortgage-backed securities, residential	$	55,329	$	235	$	(4,931)	$	—	$	50,633
Asset-backed securities	6,389		—		(58)		—		6,331
State and municipal	13,553		1		(116)		—		13,438
CLO Securities	185,068		161		(4,218)		—		181,011
Corporate bonds	1,270		1		(8)		—		1,263
SBA pooled securities	1,910		29		(111)		—		1,828
Total available for sale securities	$	263,519	$	427	$	(9,442)	$	—	$	254,504


(Dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
December 31, 2022
Held to maturity securities:
CLO securities	$	6,521	$	458	$	(1,503)	$	5,476
Allowance for credit losses	(2,444)
Total held to maturity securities, net of ACL	$	4,077


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
December 31, 2021
Available for sale securities:
Mortgage-backed securities, residential	$	36,885	$	720	$	(156)	$	—	$	37,449
Asset-backed securities	6,763		2		(1)		—		6,764
State and municipal	26,309		516		—		—		26,825
CLO Securities	103,579		3,109		(54)		—		106,634
Corporate bonds	1,992		64		—		—		2,056
SBA pooled securities	2,536		162		—		—		2,698
Total available for sale securities	$	178,064	$	4,573	$	(211)	$	—	$	182,426


(Dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
December 31, 2021
Held to maturity securities:
CLO securities	$	7,029	$	—	$	(1,582)	$	5,447
Allowance for credit losses	(2,082)
Total held to maturity securities, net of ACL	$	4,947

The amortized cost and estimated fair value of debt securities at December 31, 2022, 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 Securities				Held to Maturity Securities
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	1,801	$	1,798	$	—	$	—
Due from one year to five years	2,010		1,982		—		—
Due from five years to ten years	53,148		51,897		6,521		5,476
Due after ten years	142,932		140,035		—		—
	199,891		195,712		6,521		5,476
Mortgage-backed securities, residential	55,329		50,633		—		—
Asset-backed securities	6,389		6,331		—		—
SBA pooled securities	1,910		1,828		—		—
	$	263,519	$	254,504	$	6,521	$	5,476

Proceeds from sales of debt securities and the associated gross gains and losses are as follows:


(Dollars in thousands)	2022		2021		2020
Proceeds	$	40,163	$	—	$	70,198
Gross gains	2,514		—		3,233
Gross losses	—		—		(140)
Net gains and losses from calls of securities	(2)		5		133

Debt securities with a carrying amount of approximately $93,813,000 and $72,805,000 at December 31, 2022 and 2021, respectively, were pledged to secure public deposits, customer repurchase agreements, and for other purposes required or permitted by law.

Accrued interest on available for sale securities totaled $2,593,000 and $802,000 at December 31, 2022 and 2021, respectively, and was included in other assets in the Consolidated Balance Sheets.

The following table summarizes available for sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous loss position:


	Less than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2022
Available for sale securities:
Mortgage-backed securities, residential	$	26,030	$	(1,507)	$	15,828	$	(3,424)	$	41,858	$	(4,931)
Asset-backed securities	1,337		(52)		4,994		(6)		6,331		(58)
State and municipal	12,680		(116)		—		—		12,680		(116)
CLO Securities	151,572		(3,407)		19,439		(811)		171,011		(4,218)
Corporate bonds	261		(8)		—		—		261		(8)
SBA pooled securities	1,262		(111)		—		—		1,262		(111)
Total available for sale securities	$	193,142	$	(5,201)	$	40,261	$	(4,241)	$	233,403	$	(9,442)


	Less than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2021
Available for sale securities:
Mortgage-backed securities, residential	20,386		(155)		6		(1)		20,392		(156)
Asset-backed securities	37		—		4,999		(1)		5,036		(1)
State and municipal	30		—		—		—		30		—
CLO Securities	22,707		(54)		—		—		22,707		(54)
Corporate bonds	—		—		—		—		—		—
SBA pooled securities	—		—		—		—		—		—
Total available for sale securities	$	43,160	$	(209)	$	5,005	$	(2)	$	48,165	$	(211)

Management evaluates available for sale debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is 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 security for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2022, the Company had 141 available for sale debt securities in an unrealized loss position without an allowance for credit losses. Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of December 31, 2022, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company’s consolidated statements of income.

The following table presents the activity in the allowance for credit losses for held to maturity debt securities:


(Dollars in thousands)	Year Ended December 31,
Held to Maturity CLO Securities	2022		2021		2020
Allowance for credit losses:
Beginning balance	$	2,082	$	2,026	$	—
Impact of adopting ASC 326	—		—		126
Credit loss expense (benefit)	362		56		1,900
Allowance for credit losses ending balance	$	2,444	$	2,082	$	2,026

The Company’s held to maturity securities are investments in the unrated subordinated notes of collateralized loan obligation funds. These securities are the junior-most in securitization capital structures, and are subject to suspension of distributions if the credit of the underlying loan portfolios deteriorates materially. The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type. At December 31, 2022 and 2021, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call. As of December 31, 2022, $5,051,000 of the Company’s held to maturity securities were classified as nonaccrual.