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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2024

INVESTMENT SECURITIES

INVESTMENT SECURITIES

3. INVESTMENT SECURITIES

Available-for-Sale Debt Securities

The following tables summarize the amortized cost, fair value, and ACLS of AFS debt securities and the corresponding amounts of related gross unrealized gains and losses recognized in AOCI:


					Gross			Gross			Allowance
		Amortized			Unrealized			Unrealized			for			Fair
September 30, 2024 (in thousands)		Cost			Gains			Losses			Credit Losses			Value

U.S. Treasury securities and U.S. Government agencies		$	311,140		$	31		$	(6,774)		$	—		$	304,397
Private label mortgage-backed security			233			1,432			—			—			1,665
Mortgage-backed securities - residential			143,903			361			(9,601)			—			134,663
Collateralized mortgage obligations			20,804			44			(692)			—			20,156
Corporate bonds			2,007			5			—			—			2,012
Trust preferred security			3,846			177			—			—			4,023
Total available-for-sale debt securities		$	481,933		$	2,050		$	(17,067)		$	—		$	466,916


					Gross			Gross			Allowance
		Amortized			Unrealized			Unrealized			for			Fair
December 31, 2023 (in thousands)		Cost			Gains			Losses			Credit Losses			Value

U.S. Treasury securities and U.S. Government agencies		$	421,576		$	—		$	(14,543)		$	—		$	407,033
Private label mortgage-backed security			443			1,330			—			—			1,773
Mortgage-backed securities - residential			167,996			176			(13,462)			—			154,710
Collateralized mortgage obligations			22,698			36			(1,075)			—			21,659
Corporate bonds			2,012			8			—			—			2,020
Trust preferred security			3,800			318			—			—			4,118
Total available-for-sale debt securities		$	618,525		$	1,868		$	(29,080)		$	—		$	591,313

Held-to-Maturity Debt Securities

The following tables summarize the amortized cost, fair value, and ACLS of HTM debt securities and the corresponding amounts of related gross unrecognized gains and losses:


					Gross			Gross						Allowance
		Amortized			Unrecognized			Unrecognized			Fair			for
September 30, 2024 (in thousands)		Cost			Gains			Losses			Value			Credit Losses

U.S. Treasury securities and U.S. Government agencies		$	—		$	—		$	—		$	—		$	—
Mortgage-backed securities - residential			23			1			—			24			—
Collateralized mortgage obligations			5,896			45			(82)			5,859			—
Corporate bonds			4,995			4			—			4,999			(5)
Obligations of state and political subdivisions			—			—			—			—			—
Total held-to-maturity debt securities		$	10,914		$	50		$	(82)		$	10,882		$	(5)


					Gross			Gross						Allowance
		Amortized			Unrecognized			Unrecognized			Fair			for
December 31, 2023 (in thousands)		Cost			Gains			Losses			Value			Credit Losses

U.S. Treasury securities and U.S. Government agencies		$	65,000		$	—		$	(163)		$	64,837		$	—
Mortgage-backed securities - residential			25			—			—			25			—
Collateralized mortgage obligations			6,386			48			(121)			6,313			—
Corporate bonds			4,986			6			—			4,992			(10)
Obligations of state and political subdivisions			—			—			—			—			—
Total held-to-maturity debt securities		$	76,397		$	54		$	(284)		$	76,167		$	(10)

Sales of Available-for-Sale Debt Securities

During the three and nine months ended September 30, 2024 and 2023, there were no material gains or losses on sales or calls of AFS debt securities.

Debt Securities by Contractual Maturity

The amortized cost and fair value of debt securities by contractual maturity as of September 30, 2024 follow. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are detailed separately.


		Available-for-Sale						Held-to-Maturity
		Debt Securities						Debt Securities
		Amortized			Fair			Amortized			Fair
September 30, 2024 (in thousands)		Cost			Value			Cost			Value

Due in one year or less		$	166,174		$	163,666		$	—		$	—
Due from one year to five years			131,973			127,738			4,996			4,999
Due from five years to ten years			15,000			15,005			—			—
Due beyond ten years			3,846			4,023			—			—
Private label mortgage-backed security			233			1,665			—			—
Mortgage-backed securities - residential			143,903			134,663			23			24
Collateralized mortgage obligations			20,804			20,156			5,895			5,859
Total debt securities		$	481,933		$	466,916		$	10,914		$	10,882

Unrealized-Loss Analysis on Debt Securities

The following tables summarize AFS debt securities in an unrealized loss position for which an ACLS had not been recorded as of September 30, 2024 and December 31, 2023, aggregated by investment category and length of time in a continuous unrealized loss position:


		Less than 12 months						12 months or more						Total
					Unrealized						Unrealized						Unrealized
September 30, 2024 (in thousands)		Fair Value			Losses			Fair Value			Losses			Fair Value			Losses

Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies		$	49,622		$	(1,231)		$	179,801		$	(5,543)		$	229,423		$	(6,774)
Mortgage-backed securities - residential			29,809			(3,709)			83,205			(5,892)			113,014			(9,601)
Collateralized mortgage obligations			356			(3)			16,382			(689)			16,738			(692)
Trust preferred security			—			—			—			—			—			—
Total available-for-sale debt securities		$	79,787		$	(4,943)		$	279,388		$	(12,124)		$	359,175		$	(17,067)


		Less than 12 months						12 months or more						Total
					Unrealized						Unrealized						Unrealized
December 31, 2023 (in thousands)		Fair Value			Losses			Fair Value			Losses			Fair Value			Losses

Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies		$	26,707		$	(84)		$	380,326		$	(14,459)		$	407,033		$	(14,543)
Mortgage-backed securities - residential			1,911			(23)			136,180			(13,439)			138,091			(13,462)
Collateralized mortgage obligations			1,668			(52)			17,239			(1,023)			18,907			(1,075)
Trust preferred security			—			—			—			—			—			—
Total available-for-sale debt securities		$	30,286		$	(159)		$	533,745		$	(28,921)		$	564,031		$	(29,080)

As of September 30, 2024, the Bank’s security portfolio consisted of 174 securities, 92 of which were in an unrealized loss position.

As of December 31, 2023, the Bank’s security portfolio consisted of 191 securities, 144 of which were in an unrealized loss position.

As of September 30, 2024 and December 31, 2023, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

Private Label Mortgage-Backed Security

The Bank owns one private label mortgage-backed security with a total carrying value of $1.7 million as of September 30, 2024. This security is mostly backed by “Alternative A” first-lien mortgage loans, but also has an insurance “wrap” or guarantee as an added layer of protection to the security holder. This asset is illiquid, and as such, the Bank determined it to be a Level 3 security in accordance with ASC Topic 820, Fair Value Measurement. Based on this determination, the Bank utilized an income valuation model (“present value model”) approach in determining the fair value of the security. This approach is beneficial for positions that are not traded in active markets or are subject to transfer restrictions, and/or where valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support for this investment.

See additional discussion regarding the Bank’s private label mortgage-backed security under Footnote 10 “Fair Value” in this section of the filing.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

As of September 30, 2024, with the exception of the $1.7 million private label mortgage-backed security, all other mortgage-backed securities and CMOs held by the Bank were issued by U.S. government-sponsored entities and agencies, primarily the FHLMC and FNMA. As of September 30, 2024 and December 31, 2023, there were gross unrealized losses of $10.3 million and $14.5 million related to AFS mortgage-backed securities and CMOs. Because these unrealized losses are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, management does not consider these securities to have credit-related impairment that would require a provision adjustment to the ACLS.

Roll-forward of the Allowance for Credit Losses on Debt Securities

The tables below present a roll-forward for the three and nine months ended September 30, 2024 and 2023 of the ACLS on AFS and HTM debt securities:


			ACLS Roll-forward
			Three Months Ended September 30,
			2024														2023
			Beginning						Charge-						Ending			Beginning						Charge-						Ending
(in thousands)			Balance			Provision			offs			Recoveries			Balance			Balance			Provision			offs			Recoveries			Balance

Available-for-Sale Securities:
Corporate Bonds			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Held-to-Maturity Securities:
Corporate Bonds				4			1			—			—			5			10			—			—			—			10

Total			$	4		$	1		$	—		$	—		$	5		$	10		$	—		$	—		$	—		$	10


			ACLS Roll-forward
			Nine Months Ended September 30,
			2024														2023
			Beginning						Charge-						Ending			Beginning						Charge-						Ending
(in thousands)			Balance			Provision			offs			Recoveries			Balance			Balance			Provision			offs			Recoveries			Balance

Available-for-Sale Securities:
Corporate Bonds			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Held-to-Maturity Securities:
Corporate Bonds				10			(5)			—			—			5			10			—			—			—			10

Total			$	10		$	(5)		$	—		$	—		$	5		$	10		$	—		$	—		$	—		$	10

There were no HTM debt securities on nonaccrual or past due 90 days or more as of September 30, 2024 and December 31, 2023. All of the Company’s HTM corporate bonds were rated investment grade as of September 30, 2024 and December 31, 2023.

There were no HTM debt securities considered collateral dependent as of September 30, 2024 and December 31, 2023.

Accrued interest on AFS debt securities is presented as a component of other assets on the Company’s balance sheet and is excluded from the ACLS. Accrued interest on AFS debt securities totaled $2 million and $2 million as of September 30, 2024 and December 31, 2023. Accrued interest receivable on HTM debt securities totaled $68,000 for the nine months ended and $384,000 as of September 30, 2024 and December 31, 2023.

Pledged Debt Securities

Debt securities pledged to secure public deposits, securities sold under agreements to repurchase, and debt securities held for other purposes, as required or permitted by law, were as follows:


(in thousands)		September 30, 2024			December 31, 2023

Amortized cost		$	82,037		$	106,169
Fair value			80,903			99,530
Carrying amount			80,903			99,530

Equity Securities

The carrying value, gross unrealized gains and losses, and fair value of equity securities with readily determinable fair values were as follows:


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
September 30, 2024 (in thousands)		Cost			Gains			Losses			Value

Freddie Mac preferred stock		$	—		$	239		$	—		$	239
Total equity securities with readily determinable fair values		$	—		$	239		$	—		$	239


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2023 (in thousands)		Cost			Gains			Losses			Value

Freddie Mac preferred stock		$	—		$	174		$	—		$	174
Total equity securities with readily determinable fair values		$	—		$	174		$	—		$	174

For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:


		Gains (Losses) Recognized on Equity Securities
		Three Months Ended September 30, 2024									Three Months Ended September 30, 2023
(in thousands)		Realized			Unrealized			Total			Realized			Unrealized			Total

Freddie Mac preferred stock		$	—		$	42		$	42		$	—		$	16		$	16
Total equity securities with readily determinable fair value		$	—		$	42		$	42		$	—		$	16		$	16


		Gains (Losses) Recognized on Equity Securities
		Nine Months Ended September 30, 2024									Nine Months Ended September 30, 2023
(in thousands)		Realized			Unrealized			Total			Realized			Unrealized			Total

Freddie Mac preferred stock		$	—		$	65		$	65		$	—		$	26		$	26
Total equity securities with readily determinable fair value		$	—		$	65		$	65		$	—		$	26		$	26