
	September 30, 2023
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value

Available-for-sale:
U.S. Treasury	$	169,751	$	—	$	(15,357)	$	—	$	154,394
U.S. government agency	55,483		—		(4,768)		—		50,715
Municipal	231,444		1		(36,244)		—		195,201
Mortgage-backed:
Agency residential	197,549		9		(20,508)		—		177,050
Agency commercial	142,920		2		(18,593)		—		124,329
Corporate	57,649		—		(6,175)		—		51,474
Total available-for-sale	$	854,796	$	12	$	(101,645)	$	—	$	753,163

	September 30, 2023
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses

Held-to-maturity:
U.S. government agency	$	88,442	$	—	$	(12,392)	$	76,050	$	—
Municipal	39,344		6		(1,686)		37,664		—
Mortgage-backed:
Agency residential	98,115		—		(9,281)		88,834		—
Agency commercial	301,243		—		(53,478)		247,765		—
Total held-to-maturity	$	527,144	$	6	$	(76,837)	$	450,313	$	—


	December 31, 2022
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Available-for-sale:
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
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Held-to-maturity:
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:

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 September 30, 2023 and December 31, 2022, the Bank had debt securities with a carrying value of $449.2 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 September 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
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Due in 1 year or less	$	34,149	$	33,546	$	2,643	$	2,634
Due after 1 year through 5 years	213,534		197,634		34,215		31,718
Due after 5 years through 10 years	217,279		180,780		85,250		74,459
Due after 10 years	49,365		39,824		5,678		4,903

Mortgage-backed:
Agency residential	197,549		177,050		98,115		88,834
Agency commercial	142,920		124,329		301,243		247,765
Total	$	854,796	$	753,163	$	527,144	$	450,313

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 September 30, 2023, aggregated by category and length of time that individual debt securities have been in a continuous unrealized loss position:


	September 30, 2023
	Investments in a Continuous Unrealized Loss Position
	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value

Available-for-sale:
U.S. Treasury	$	—	$	—	$	(15,357)	$	154,394	$	(15,357)	$	154,394
U.S. government agency	(5)		1,380		(4,763)		49,298		(4,768)		50,678
Municipal	(282)		10,479		(35,962)		183,720		(36,244)		194,199
Mortgage-backed:
Agency residential	(725)		13,924		(19,783)		160,778		(20,508)		174,702
Agency commercial	(86)		3,645		(18,507)		120,593		(18,593)		124,238
Corporate	(443)		6,317		(5,732)		45,156		(6,175)		51,473
Total available-for-sale	$	(1,541)	$	35,745	$	(100,104)	$	713,939	$	(101,645)	$	749,684

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:


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

Available-for-sale:
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

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 79% general obligation bonds as of September 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 issuer financial data, and sector trends. There was no allowance for credit losses on corporate securities recorded as of September 30, 2023. A negative provision for credit losses of $0.8 million was recorded during the three months ended September 30, 2023, reversing the provision for credit losses recognized during the first half of 2023, related to one bank subordinated debt security. The initial provision for credit losses recognized during the first half of 2023 reflected heightened potential credit risk following the recent failures of other banks, but this heightened potential credit risk was reduced after a merger announcement by the issuer of the bank subordinated debt security. As of September 30, 2023, 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 September 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.


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2023		2022		2023		2022

Proceeds from sales	$	39,436	$	—	$	185,280	$	—
Gross realized gains	—		—		—		—
Gross realized losses	(813)		—		(1,820)		—

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.

As of September 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 nine months ended September 30, 2023 and 2022. Unrealized gains (losses) on equity securities were as follows during the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2023		2022		2023		2022

Readily determinable fair value	$	(46)	$	(107)	$	77	$	(447)
No readily determinable fair value	—		—		(138)		—
Unrealized gains (losses) on equity securities	$	(46)	$	(107)	$	(61)	$	(447)