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Investments in Securities

12 Months Ended

Dec. 31, 2024

Investments in Securities

Investments in Securities

Note 2: Investments in 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 are being amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer. As of December 31, 2024, the net unrealized gross losses remaining were $262,000; net of income taxes, these unrealized losses were $198,000.

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


		December 31, 2024
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
		Cost			Gains			Losses			Value

		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities		$	346,712		$	69		$	40,874		$	305,907
Agency collateralized mortgage obligations			123,395			—			9,771			113,624
States and political subdivisions securities			58,608			69			2,729			55,948
Small Business Administration securities			65,849			—			7,955			57,894
		$	594,564		$	138		$	61,329		$	533,373


		December 31, 2024
								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		$	71,065		$	1,864		$	72,929		$	—		$	8,523		$	64,406
Agency collateralized mortgage obligations			110,493			(2,140)			108,353			—			15,495			92,858
States and political subdivisions			6,137			14			6,151			—			650			5,501
		$	187,695		$	(262)		$	187,433		$	—		$	24,668		$	162,765


		December 31, 2023
					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
		Cost			Gains			Losses			Value

		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities		$	316,114		$	7		$	35,890		$	280,231
Agency collateralized mortgage obligations			85,989			—			10,043			75,946
States and political subdivisions securities			59,141			527			1,531			58,137
Small Business Administration securities			70,648			—			6,755			63,893
		$	531,892		$	534		$	54,219		$	478,207


		December 31, 2023
								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		$	72,495		$	2,436		$	74,931		$	—		$	8,686		$	66,245
Agency collateralized mortgage obligations			116,405			(2,502)			113,903			—			14,662			99,241
States and political subdivisions			6,188			1			6,189			—			482			5,707
		$	195,088		$	(65)		$	195,023		$	—		$	23,830		$	171,193

At December 31, 2024, the Company’s available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $205.6 million, FHLMC securities totaling $98.5 million and GNMA securities totaling $1.8 million. At December 31, 2023, available-for-sale agency mortgage-backed securities portfolio consisted of FNMA securities totaling $190.9 million, FHLMC securities totaling $86.4 million and GNMA securities totaling $2.9 million. At December 31, 2024 and 2023, all of the Company’s available - for - sale agency mortgage-backed securities totaled $305.9 million and $280.2 million, respectively, and had fixed rates of interest.

At December 31, 2024, the Company’s available-for-sale agency collateralized mortgage-backed securities portfolio consisted of FNMA securities totaling $46.0 million, FHLMC securities totaling $63.0 million and GNMA securities totaling $4.6 million. At December 31, 2023, available-for-sale agency collateralized mortgage-backed obligations portfolio consisted of FNMA securities totaling $4.1 million, FHLMC securities totaling $66.5 million and GNMA securities totaling $5.3 million. At December 31, 2024 and 2023, all of the Company’s available - for - sale agency collateralized mortgage-backed obligations totaled $113.6 million and $75.9 million, respectively, and had fixed rates of interest.

The amortized cost and fair value of available-for-sale and held-to-maturity securities at December 31, 2024, 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			245			245			—			—
After three through four years			985			987			—			—
After four through five years			—			—			—			—
After five through fifteen years			10,615			10,313			3,245			2,913
After fifteen years			46,763			44,403			2,906			2,588
Securities not due on a single maturity date			535,956			477,425			181,282			157,264
		$	594,564		$	533,373		$	187,433		$	162,765

The amortized cost and fair values of securities pledged as collateral were as follows at December 31, 2024 and 2023:


		2024						2023
		Amortized			Fair			Amortized			Fair
		Cost			Value			Cost			Value

		(In Thousands)

Public deposits		$	13,880		$	11,801		$	17,412		$	15,225
Collateralized borrowing accounts			86,561			76,871			123,220			109,660
FHLBank borrowing account			91,900			90,544			—			—
Federal Reserve Bank’s Bank Term Funding Program			186,836			161,620			—			—
Other			3,572			3,270			3,815			3,507
		$	382,749		$	344,106		$	144,447		$	128,392

Available-for-sale investments in debt securities are reported in the financial statements at their fair value, which was $533.4 million and $478.2 million at December 31, 2024 and 2023, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2024 and 2023, was $523.9 million and $456.9 million, respectively, which is approximately 98.2% and 95.5%, respectively, of the Company’s 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 $187.4 million and $195.0 million at December 31, 2024 and 2023, respectively. Total fair value of these investments at December 31, 2024 and 2023 was approximately $162.8 million and $171.2 million, respectively. Total fair value of these investments for which the amortized cost exceeded the fair value at December 31, 2024 and 2023, was $162.8 million and $171.2 million, which is 100.0% of the Company’s held-to-maturity investment portfolio.

Held -to-maturity investment securities are evaluated for potential losses under ASU 2016-13. The Company continually assesses its liquidity sources, both on-balance sheet and off-balance sheet, and believes that at December 31, 2024, it had ample liquidity sources to fund its ongoing operations without selling investment securities in its portfolio.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for the Company’s available-for-sale debt securities are not credit related.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and 2023:


		2024
		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		$	45,977		$	(1,008)		$	253,971		$	(39,866)		$	299,948		$	(40,874)
Agency collateralized mortgage obligations			50,720			(890)			62,903			(8,881)			113,623			(9,771)
Small Business Administration securities			7,229			(270)			50,665			(7,685)			57,894			(7,955)
States and political subdivisions securities			14,523			(343)			37,945			(2,386)			52,468			(2,729)
		$	118,449		$	(2,511)		$	405,484		$	(58,818)		$	523,933		$	(61,329)

HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities		$	—		$	—		$	64,406		$	(8,523)		$	64,406		$	(8,523)
Agency collateralized mortgage obligations			—			—			92,858			(15,495)			92,858			(15,495)
States and political subdivisions securities			—			—			5,501			(650)			5,501			(650)
		$	—		$	—		$	162,765		$	(24,668)		$	162,765		$	(24,668)


		2023
		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		$	4,318		$	(9)		$	274,801		$	(35,881)		$	279,119		$	(35,890)
Agency collateralized mortgage obligations			9,080			(216)			66,866			(9,827)			75,946			(10,043)
Small Business Administration securities			7,782			(133)			56,111			(6,622)			63,893			(6,755)
States and political subdivisions securities			—			—			37,969			(1,531)			37,969			(1,531)
		$	21,180		$	(358)		$	435,747		$	(53,861)		$	456,927		$	(54,219)

HELD-TO-MATURITY SECURITIES:
Agency mortgage-backed securities		$	—		$	—		$	66,245		$	(8,686)		$	66,245		$	(8,686)
Agency collateralized mortgage obligations			—			—			99,241			(14,662)			99,241			(14,662)
States and political subdivisions securities			—			—			5,707			(482)			5,707			(482)
		$	—		$	—		$	171,193		$	(23,830)		$	171,193		$	(23,830)

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 has not experienced historical losses on these types of securities. Accordingly, no allowance for credit losses has been recorded for these securities.