INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2022

Investments, Debt and Equity Securities [Abstract]

At September 30, 2022 and December 31, 2021, all investment securities were classified as AFS. The following table summarizes amortized cost and fair value of investment securities, and the corresponding amounts of gross unrealized gains and losses recognized in AOCI, at September 30, 2022 and December 31, 2021:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2022
U.S. Treasury securities	$	20,074	$	—	$	2,959	$	17,115


States and political subdivisions	254,603		125		34,692		220,036
GSE residential MBSs	64,258		—		5,055		59,203
GSE residential CMOs	70,964		—		6,814		64,150
Non-agency CMOs	31,346		—		2,374		28,972



Asset-backed	116,427		—		2,692		113,735
Other	385		—		—		385
Totals	$	558,057	$	125	$	54,586	$	503,596
December 31, 2021
U.S. Treasury securities	$	20,084	$	—	$	382	$	19,702


States and political subdivisions	185,437		8,606		673		193,370
GSE residential MBSs	41,260		44		578		40,726
GSE residential CMOs	66,430		436		944		65,922
Non-agency CMOs	30,676		—		978		29,698



Asset-backed	122,520		401		300		122,621
Other	399		—		—		399
Totals	$	466,806	$	9,487	$	3,855	$	472,438

The following table summarizes investment securities with unrealized losses at September 30, 2022 and December 31, 2021, aggregated by major investment security type and the length of time in a continuous unrealized loss position.


	Less Than 12 Months					12 Months or More					Total
	# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses		# of Securities	Fair Value		Unrealized Losses
September 30, 2022
U.S. Treasury securities	—	$	—	$	—	3	$	17,115	$	2,959	3	$	17,115	$	2,959

States and political subdivisions	54	180,836		27,459		8	23,384		7,233		62	204,220		34,692
GSE residential MBSs	8	37,055		1,919		7	22,148		3,136		15	59,203		5,055
GSE residential CMOs	9	31,506		2,633		7	32,644		4,181		16	64,150		6,814
Non-agency CMOs	3	20,101		871		2	8,871		1,503		5	28,972		2,374



Asset-backed	14	85,529		2,081		3	28,206		611		17	113,735		2,692
Totals	88	$	355,027	$	34,963	30	$	132,368	$	19,623	118	$	487,395	$	54,586
December 31, 2021
U.S. Treasury securities	3	$	19,702	$	382	—	$	—	$	—	3	$	19,702	$	382


States and political subdivisions	12	45,522		673		—	—		—		12	45,522		673
GSE residential MBSs	9	37,899		578		—	—		—		9	37,899		578
GSE residential CMOs	7	41,163		944		—	—		—		7	41,163		944
Non-agency CMOs	3	24,661		978		—	—		—		3	24,661		978



Asset-backed	3	21,245		138		3	34,180		162		6	55,425		300
Totals	37	$	190,192	$	3,693	3	$	34,180	$	162	40	$	224,372	$	3,855

The Company determines whether unrealized losses are temporary in nature in accordance with FASB ASC 320-10, Investments - Overall, (“FASB ASC 320-10”) and FASB ASC 325-40, Investments – Beneficial Interests in Securitized Financial Assets, when applicable. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure.

Management also evaluates other factors and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer.

FASB ASC 320-10 requires the Company to assess if an OTTI exists by considering whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If either of these situations applies, the guidance requires the Company to record an OTTI charge to earnings on debt securities for the difference between the amortized cost basis of the security and the fair value of the security. If neither of these situations applies, the Company is required to assess whether it is expected to recover the entire amortized cost basis of the security. If the Company is not expected to recover the entire amortized cost basis of the security, the guidance requires the Company to bifurcate the identified OTTI into a credit loss component and a component representing loss related to other factors. A discount rate is applied which equals the effective yield of the security. The difference between the present value of the expected flows and the amortized book value is considered a credit loss, which would be recorded through earnings as an OTTI charge. When a market price is not readily available, the market value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from the open market and other sources as appropriate for the security. The difference between the market value and the present value of cash flows expected to be collected is recognized in AOCI on the unaudited condensed consolidated statements of financial condition.

U.S. Treasury Securities. The unrealized losses presented in the table above have been caused by an increase in rates from the time these securities were purchased. Management considers the full faith and credit of the U.S. government in determining whether a security is OTTI. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2022 or December 31, 2021.

States and Political Subdivisions. The unrealized losses presented in the table above have been caused by a rise in interest rates from the time these securities were purchased. Management considers the investment rating, the state of the issuer of the security and other credit support in determining whether the security is OTTI. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2022 or December 31, 2021.

GSE Residential CMOs and GSE Residential MBS. The unrealized losses presented in the table above have been caused by a widening of spreads and a rise in interest rates from the time these securities were purchased. The contractual terms of these securities do not permit the issuer to settle the securities at a price less than its par value basis. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2022 or December 31, 2021.

Non-Agency CMOs. The unrealized losses presented in the table above were caused by a widening of spreads and a rise in interest rates from the time the securities were purchased. Management considers the investment rating and other credit support in determining whether a security is OTTI. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2022 or December 31, 2021.

Asset-backed. The unrealized losses presented in the table above were caused by a widening of spreads and a rise in the interest rates from the time the securities were purchased. Management considers the investment rating and other credit support in determining whether a security is OTTI. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be maturity, the Company does not consider these securities to be OTTI at September 30, 2022 or December 31, 2021.

The following table summarizes amortized cost and fair value of investment securities by contractual maturity at September 30, 2022. 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 shown separately.


	Amortized Cost		Fair Value
Due in one year or less	$	249	$	249
Due after one year through five years	8,440		8,065
Due after five years through ten years	85,918		75,831
Due after ten years	180,455		153,391
CMOs and MBSs	166,568		152,325
Asset-backed	116,427		113,735
Totals	$	558,057	$	503,596

The following table summarizes proceeds from sales of investment securities and gross gains and gross losses for the three and nine months ended September 30, 2022 and 2021:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Proceeds from sale of investment securities	$	—	$	73,319	$	3,075	$	149,038
Gross gains	—		482		25		1,844
Gross losses	14		3		17		1,209

During the three and nine months ended September 30, 2022, the Company recorded net investment security losses of $14 thousand and net investment security gains of $8 thousand, respectively, compared to net gains of $479 thousand and $635 thousand for the three and nine months ended September 30, 2021, respectively. A non-agency CMO was called, which resulted in a loss of $171 thousand for the nine months ended September 30, 2022. During the nine months ended September 30, 2022, the principal balance of $3.1 million of one security was sold for proceeds of $3.1 million compared to 18 securities with a principal balance of $148.4 million that were sold for proceeds of $149.0 million during the nine months ended September 30, 2021. There were four investment securities with a principal balance of $72.8 million sold for proceeds of $73.3 million during the three months ended September 30, 2021, compared to none during the three months ended September 30, 2022. Investment securities with a fair value of $404.1 million and $295.6 million at September 30, 2022 and December 31, 2021, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.