XML 23 R14.htm IDEA: XBRL DOCUMENT

INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2022

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 5: INVESTMENT SECURITIES

Held-to-maturity securities (“HTM”), which include any security for which the Company has both the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income over the security’s estimated life. Prepayments are anticipated for certain mortgage-backed securities. Premiums on callable securities are amortized to their earliest call date.

Available-for-sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in non-interest income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity. Premiums and discounts are amortized and accreted, respectively, to interest income over the estimated life of the security. Prepayments are anticipated for certain mortgage-backed and Small Business Administration (SBA) securities. Premiums on callable securities are amortized to their earliest call date.

During the three months ended March 31, 2022, the Company transferred, at fair value, $226.5 million of securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related net unrealized gross gains were $1.0 million; $775,000 (net of income taxes) remained in accumulated other comprehensive income and will be amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer. As of September 30, 2022, the net unrealized gross gains remaining were $39,000; net of income taxes, these unrealized gains were $30,000.

The amortized cost and fair values of securities were as follows:


		September 30, 2022
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
		Cost			Gains			Losses			Value

		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities		$	331,657		$	—		$	43,402		$	288,255
Agency collateralized mortgage obligations			81,907			—			11,131			70,776
States and political subdivisions			68,089			11			5,771			62,329
Small Business Administration securities			68,148			—			6,701			61,447
		$	549,801		$	11		$	67,005		$	482,807


		September 30, 2022
								Amortized			Gross			Gross
		Amortized			Fair Value			Carrying			Unrealized			Unrealized			Fair
		Cost			Adjustment			Value			Gains			Losses			Value

		(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities		$	74,140		$	3,161		$	77,301		$	—		$	10,353		$	66,948
Agency collateralized mortgage obligations			126,054			(3,107)			122,947			—			14,658			108,289
States and political subdivisions			6,252			(15)			6,237			—			1,063			5,174
		$	206,446		$	39		$	206,485		$	—		$	26,074		$	180,411


		December 31, 2021
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
		Cost			Gains			Losses			Value

		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities		$	219,624		$	10,561		$	744		$	229,441
Agency collateralized mortgage obligations			204,332			2,443			2,498			204,277
States and political subdivisions			38,440			1,618			43			40,015
Small Business Administration securities			26,802			497			—			27,299
		$	489,198		$	15,119		$	3,285		$	501,032

No securities were classified as held-to-maturity at December 31, 2021.

The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 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						Held-to-Maturity
		Amortized			Fair			Amortized			Fair
		Cost			Value			Carrying Value			Value

		(In Thousands)
One year or less		$	—		$	—		$	—		$	—
After one through two years			—			—			—			—
After two through three years			—			—			—			—
After three through four years			—			—			—			—
After four through five years			2,287			2,264			—			—
After five through fifteen years			11,955			11,455			2,577			2,108
After fifteen years			53,847			48,610			3,660			3,066
Securities not due on a single maturity date			481,712			420,478			200,248			175,237
		$	549,801		$	482,807		$	206,485		$	180,411

Certain available-for-sale investments in debt securities are reported in the financial statements at an amount less than their amortized cost. Total fair value of these investments at September 30, 2022 and December 31, 2021, was approximately $481.6 million and $173.9 million, respectively, which was approximately 99.7% and 34.7% of the Company’s total available-for-sale investment portfolio. A high percentage of the unrealized losses were related to the Company’s mortgage-backed securities, collateralized mortgage obligations and Small Business Administration (SBA) securities, which are issued and guaranteed by U.S. government-sponsored entities and agencies. The Company’s state and political subdivisions securities are investments in insured fixed rate municipal bonds for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities. Held-to-maturity investments in debt securities are reported in the financial statements at their amortized cost, which was $206.5 million at September 30, 2022. Total fair value of these investments at September 30, 2022 was approximately $180.4 million. There were no held-to-maturity investment securities at December 31, 2021. Held-to-maturity investment securities are evaluated for potential losses under ASU 2016-13.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes any declines in fair value for these debt securities are temporary.

		September 30, 2022
		Less than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities		Value			Losses			Value			Losses			Value			Losses

		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities		$	281,226		$	(42,158)		$	7,027		$	(1,244)		$	288,253		$	(43,402)
Agency collateralized mortgage obligations			38,814			(4,581)			31,962			(6,550)			70,776			(11,131)
States and political subdivisions securities			59,847			(5,564)			1,236			(207)			61,083			(5,771)
Small Business Administration securities			61,447			(6,701)			—			—			61,447			(6,701)

		$	441,334		$	(59,004)		$	40,225		$	(8,001)		$	481,559		$	(67,005)

		September 30, 2022
		Less than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities		Value			Losses			Value			Losses			Value			Losses

		(In Thousands)
HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities		$	59,095			(8,249)			7,852			(2,104)			66,947			(10,353)
Agency collateralized mortgage obligations			62,540			(6,614)			45,750			(8,044)			108,290			(14,658)
States and political subdivisions securities			1,761			(301)			3,413			(762)			5,174			(1,063)

		$	123,396		$	(15,164)		$	57,015		$	(10,910)		$	180,411		$	(26,074)


		December 31, 2021
		Less than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities		Value			Losses			Value			Losses			Value			Losses

		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities		$	47,769		$	(388)		$	10,583		$	(356)		$	58,352		$	(744)
Agency collateralized mortgage obligations			92,727			(1,588)			16,298			(910)			109,025			(2,498)
States and political subdivisions securities			6,537			(43)			—			—			6,537			(43)

		$	147,033		$	(2,019)		$	26,881		$	(1,266)		$	173,914		$	(3,285)

Available-for-sale securities totaling $5.1 million were sold during the three months ended September 30, 2022, resulting in the recognition of a $31,000 gain during the period. Available-for-sale securities totaling $10.2 million were sold during the nine months ended September 30, 2022, resulting in the recognition of a $38,000 gain during the period. There were no sales of available-for-sale securities during the three or nine months ended September 30, 2021. Gains and losses on sales of securities are determined on the specific-identification method.

Allowance for Credit Losses. On January 1, 2021, the Company began evaluating all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. All of the mortgage-backed, collateralized mortgage, and SBA securities held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company has not experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.

Regarding securities issued by state and political subdivisions, management considers the following when evaluating these securities: (i) current issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) updated financial information of the issuer, (v) internal forecasts and (vi) whether such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. These securities are highly rated by major rating agencies and have a long history of no credit losses. Likewise, the Company historically has not experienced losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.