XML 21 R11.htm IDEA: XBRL DOCUMENT

SECURITIES

6 Months Ended

Jun. 30, 2023

SECURITIES

SECURITIES

NOTE 3 – SECURITIES

Debt Securities

The amortized cost and fair values of debt securities, with gross unrealized gains and losses and allowance for credit losses, are as follows:


June 30, 2023		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Allowance for Credit Losses			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	169,788		$	—		$	(14,648)		$	—		$	155,140
U.S. government agency			56,833			—			(4,409)			—			52,424
Municipal			273,263			18			(29,226)			—			244,055
Mortgage-backed:
Agency residential			208,470			—			(18,920)			—			189,550
Agency commercial			147,922			3			(17,039)			—			130,886
Corporate			57,632			—			(6,099)			(800)			50,733
Total available-for-sale		$	913,908		$	21		$	(90,341)		$	(800)		$	822,788

June 30, 2023		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			Allowance for Credit Losses

Held-to-maturity:		(dollars in thousands)
U.S. government agency		$	88,436		$	—		$	(9,615)		$	78,821		$	—
Municipal			39,756			147			(422)			39,481			—
Mortgage-backed:
Agency residential			100,685			—			(7,003)			93,682			—
Agency commercial			304,354			—			(46,417)			257,937			—
Total held-to-maturity		$	533,231		$	147		$	(63,457)		$	469,921		$	—


December 31, 2022		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	169,860		$	—		$	(15,345)		$	154,515
U.S. government agency			59,291			—			(4,134)			55,157
Municipal			275,972			46			(32,189)			243,829
Mortgage-backed:
Agency residential			213,676			5			(18,240)			195,441
Agency commercial			150,060			—			(17,172)			132,888
Corporate			65,597			55			(3,958)			61,694
Total available-for-sale		$	934,456		$	106		$	(91,038)		$	843,524

December 31, 2022		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value

Held-to-maturity:		(dollars in thousands)
U.S. government agency		$	88,424		$	—		$	(9,728)		$	78,696
Municipal			42,167			195			(314)			42,048
Mortgage-backed:
Agency residential			102,728			—			(6,470)			96,258
Agency commercial			308,281			—			(46,482)			261,799
Total held-to-maturity		$	541,600		$	195		$	(62,994)		$	478,801

On March 31, 2022, the Company transferred certain debt securities from the available-for-sale category to the held-to-maturity category in order to better reflect the revised intentions of the Company due to possible market value volatility, resulting from a potential rise in interest rates. The following is a summary of the amortized cost and fair value of securities transferred to the held-to-maturity category:


		March 31, 2022
		Amortized
		Cost			Fair Value

		(dollars in thousands)
U.S. government agency		$	78,841		$	71,048
Mortgage-backed:
Agency residential			8,175			7,651
Agency commercial			27,834			25,432
Total		$	114,850		$	104,131

The debt securities were transferred between categories at fair value, with the transfer date fair value becoming the new amortized cost for each security transferred. The unrealized gain (loss), net of tax, at the date of transfer remains a component of accumulated other comprehensive income, but will be amortized over the remaining life of the debt securities as an adjustment of yield in a manner consistent with amortization of any premium or discount. As a result, the amortization of an unrealized gain (loss) reported in accumulated other comprehensive income will offset or mitigate the effect on interest income of the amortization of the premium or discount for that held-to-maturity debt security.

As of June 30, 2023 and December 31, 2022, the Bank had debt securities with a carrying value of $449.6 million and $332.6 million, respectively, which were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.

The amortized cost and fair value of debt securities by contractual maturity, as of June 30, 2023, are shown below. 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						Held-to-Maturity
		Amortized Cost			Fair Value			Amortized Cost			Fair Value

		(dollars in thousands)
Due in 1 year or less		$	34,603		$	33,740		$	2,451		$	2,454
Due after 1 year through 5 years			230,246			215,388			27,401			26,424
Due after 5 years through 10 years			236,936			204,230			92,657			84,186
Due after 10 years			55,731			48,994			5,683			5,238

Mortgage-backed:
Agency residential			208,470			189,550			100,685			93,682
Agency commercial			147,922			130,886			304,354			257,937
Total		$	913,908		$	822,788		$	533,231		$	469,921

The following table presents gross unrealized losses and fair value of debt securities available-for-sale that do not have an associated allowance for credit losses as of June 30, 2023, aggregated by category and length of time that individual debt securities have been in a continuous unrealized loss position:


		Investments in a Continuous Unrealized Loss Position
		Less than 12 Months						12 Months or More						Total
June 30, 2023		Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	—		$	—		$	(14,648)		$	155,140		$	(14,648)		$	155,140
U.S. government agency			(270)			7,973			(4,139)			44,451			(4,409)			52,424
Municipal			(723)			47,645			(28,503)			192,219			(29,226)			239,864
Mortgage-backed:
Agency residential			(1,305)			36,555			(17,615)			152,961			(18,920)			189,516
Agency commercial			(345)			13,093			(16,694)			117,701			(17,039)			130,794
Corporate			(1,994)			17,752			(3,928)			31,957			(5,922)			49,709
Total available-for-sale		$	(4,637)		$	123,018		$	(85,527)		$	694,429		$	(90,164)		$	817,447

The following table presents gross unrealized losses and fair value of debt securities, aggregated by category and length of time that individual debt securities have been in a continuous unrealized loss position, as of December 31, 2022:


		Investments in a Continuous Unrealized Loss Position
		Less than 12 Months						12 Months or More						Total
December 31, 2022		Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	(8,401)		$	92,445		$	(6,944)		$	62,070		$	(15,345)		$	154,515
U.S. government agency			(2,980)			47,370			(1,154)			7,787			(4,134)			55,157
Municipal			(10,906)			149,261			(21,283)			87,794			(32,189)			237,055
Mortgage-backed:
Agency residential			(8,332)			127,288			(9,908)			65,692			(18,240)			192,980
Agency commercial			(4,764)			62,672			(12,408)			70,216			(17,172)			132,888
Corporate			(2,594)			52,190			(1,364)			5,600			(3,958)			57,790
Total available-for-sale			(37,977)			531,226			(53,061)			299,159			(91,038)			830,385
Held-to-maturity:
U.S. government agency			(1,754)			15,751			(7,974)			62,945			(9,728)			78,696
Municipal			(314)			23,433			—			—			(314)			23,433
Mortgage-backed:
Agency residential			(4,039)			78,452			(2,431)			17,806			(6,470)			96,258
Agency commercial			(16,716)			103,298			(29,766)			158,501			(46,482)			261,799
Total held-to-maturity			(22,823)			220,934			(40,171)			239,252			(62,994)			460,186
Total debt securities		$	(60,800)		$	752,160		$	(93,232)		$	538,411		$	(154,032)		$	1,290,571

As of June 30, 2023, there were 587 debt securities in an unrealized loss position for a period of twelve months or more, and 350 debt securities in an unrealized loss position for a period of less than twelve months.

U.S. Treasury, U.S. government agency, and agency mortgage-backed securities are considered to have no risk of credit loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in these portfolios are considered to be primarily driven by changes in market interest rates and other non-credit risks, such as prepayment and liquidity risks.

Municipal securities include approximately 81% general obligation bonds as of June 30, 2023, which have a very low historical default rate due to issuers generally having taxing authority to service the debt. The remainder of the municipal securities are also of high credit quality with ratings of A+/A1 or better. The Company evaluates credit risk through monitoring credit ratings and reviews of available financial data. The changes in fair value in these portfolios are considered to be primarily driven by changes in market interest rates and other non-credit risks, such as call and liquidity risks. The estimated allowance for credit losses for the municipal debt securities held-to-maturity was deemed insignificant.

Corporate securities include investment grade corporate and bank subordinated debt securities. The Company evaluates credit risk through monitoring credit ratings, reviews of available financial data, and sector trends. An $0.8 million allowance for credit losses was recorded as of June 30, 2023, related to one bank subordinated debt security and reflected heightened potential credit risk following the recent failures of other banks. The related provision for credit losses were $0.2 million and $0.6 million during the three and six months ended June 30, 2023, respectively. For the other corporate securities, the changes in fair value in these portfolios are considered to be primarily driven by changes in market interest rates and other non-credit risks, such as call and liquidity risks.

As of June 30, 2023, the Company did not intend to sell the debt securities that are in an unrealized or unrecognized loss position, and it was more likely than not that the Company would recover the amortized cost prior to being required to sell the debt securities.

Accrued interest on debt securities totaled $6.1 million as of June 30, 2023 and is excluded from the estimate of credit losses.

Sales of debt securities were as follows during the three and six months ended June 30:


		Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022

		(dollars in thousands)
Proceeds from sales		$	—		$	—		$	145,844		$	—
Gross realized gains			—			—			—			—
Gross realized losses			—			—			(1,007)			—

Subsequent to June 30, 2023, the Company recognized $0.8 million of net losses on the sale of $39.4 million of debt securities.

Equity Securities

Equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in unrealized gains (losses) on equity securities on the consolidated statements of income. The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer.

The initial cost and carrying values of equity securities, with cumulative net unrealized gains and losses are as follows:


		Readily			No Readily
		Determinable			Determinable
June 30, 2023		Fair Value			Fair Value

		(dollars in thousands)
Initial cost		$	3,142		$	2,578
Cumulative net unrealized gains (losses)			10			(303)
Carrying value		$	3,152		$	2,275


		Readily			No Readily
		Determinable			Determinable
December 31, 2022		Fair Value			Fair Value

		(dollars in thousands)
Initial cost		$	3,142		$	2,142
Cumulative net unrealized gains (losses)			(113)			(165)
Carrying value		$	3,029		$	1,977

As of June 30, 2023, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflect impairments of $0.1 million and downward adjustments based on observable price changes of an identical investment of $0.2 million. As of December 31, 2022, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflect downward adjustments based on observable price changes of an identical investment. There have been no upward adjustments based on observable price changes to equity securities with no readily determinable fair value.

There were no sales of equity securities during the three and six months ended June 30, 2023 and 2022. Unrealized gains (losses) on equity securities were as follows during the three and six months ended June 30, 2023 and 2022:


		Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022

		(dollars in thousands)
Readily determinable fair value		$	7		$	(153)		$	123		$	(340)
No readily determinable fair value			—			—			(138)			—
Unrealized gains (losses) on equity securities		$	7		$	(153)		$	(15)		$	(340)