INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2024

Investments, Debt and Equity Securities [Abstract]

At March 31, 2024 and December 31, 2023, all investment securities were classified as AFS. The following table summarizes amortized cost, fair value and ACL of investment securities, and the corresponding amounts of gross unrealized gains and losses recognized in AOCI, and the allowance for credit losses at March 31, 2024 and December 31, 2023:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
March 31, 2024
U.S. Treasury securities	$	20,054	$	—	$	2,385	$	—	$	17,669
U.S. Government Agencies	3,721		138		—		—		3,859

States and political subdivisions	221,121		15		20,268		—		200,868
GSE residential MBSs	61,468		—		3,512		—		57,956
GSE commercial MBSs	4,065		319		—		—		4,384
GSE residential CMOs	98,182		—		6,738		—		91,444

Non-agency CMOs	38,208		238		3,736		—		34,710


Asset-backed	105,216		487		1,804		—		103,899
Other	120		—		—		—		120
Totals	$	552,155	$	1,197	$	38,443	$	—	$	514,909
December 31, 2023
U.S. Treasury securities	$	20,057	$	—	$	2,217	$	—	$	17,840
U.S. Government Agencies	3,994		157		—		—		4,151

States and political subdivisions	221,624		28		18,530		—		203,122
GSE residential MBSs	61,669		—		4,037		—		57,632
GSE commercial MBS	4,387		356		—		—		4,743
GSE residential CMOs	79,284		18		6,200		—		73,102

Non-agency CMOs	48,162		316		3,809		—		44,669


Asset-backed	109,786		442		2,094		—		108,134
Other	126		—		—		—		126
Totals	$	549,089	$	1,317	$	36,887	$	—	$	513,519

The following table summarizes investment securities with unrealized losses at March 31, 2024 and December 31, 2023, 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
March 31, 2024
U.S. Treasury securities	—	$	—	$	—	3	$	17,669	$	2,385	3	$	17,669	$	2,385

States and political subdivisions	3	1,983		65		41	198,128		20,203		44	200,111		20,268
GSE residential MBSs	—	—		—		15	57,956		3,512		15	57,956		3,512
GSE residential CMOs	6	25,516		159		15	60,657		6,579		21	86,173		6,738
Non-agency CMOs	2	3,626		39		5	22,536		3,697		7	26,162		3,736



Asset-backed	—	—		—		15	71,562		1,804		15	71,562		1,804
Totals	11	$	31,125	$	263	94	$	428,508	$	38,180	105	$	459,633	$	38,443
December 31, 2023
U.S. Treasury securities	—	$	—	$	—	3	$	17,840	$	2,217	3	$	17,840	$	2,217


States and political subdivisions	4	2,419		53		40	199,933		18,477		44	202,352		18,530
GSE residential MBSs	—	—		—		15	57,632		4,037		15	57,632		4,037
GSE residential CMOs	4	12,710		186		14	56,765		6,014		18	69,475		6,200
Non-agency CMOs	3	11,531		83		4	16,334		3,726		7	27,865		3,809



Asset-backed	1	865		4		15	74,407		2,090		16	75,272		2,094
Totals	12	$	27,525	$	326	91	$	422,911	$	36,561	103	$	450,436	$	36,887

The Company is required to conduct an impairment evaluation on AFS securities to determine 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 these situations apply, the guidance requires the Company to reduce the security's amortized cost basis down to its fair value through earnings. The Company also evaluates the unrealized losses on AFS securities to determine if a security's decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying issuers, 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 a decline in the fair value of the security due to a credit factor. 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. If this assessment indicates that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. Under the CECL standard, if the present value of the cash flows expected to be collected is less than the amortized cost, an ACL is recorded for the credit loss, which is limited by the amount that the fair value is less than the amortized cost basis. Any additional amount of loss would be due to non-credit factors and is recorded in AOCI, net of taxes. If a credit loss is recognized in earnings, subsequent improvements to the expectation of collectability will be recognized through the ACL. If the fair value of the security increases above its amortized cost, the unrealized gain will be recorded in AOCI, net of taxes, on the unaudited condensed consolidated balance sheets.

The Company did not record an ACL on the AFS securities at March 31, 2024, December 31, 2023 or upon implementation of CECL on January 1, 2023. As of these periods, the Company considers the unrealized losses on the AFS securities to be related to fluctuations in market conditions, primarily interest rates, and not reflective of deterioration in credit. In addition, the Company maintains that it has the intent and ability to hold these AFS securities until the amortized cost is recovered and it is more likely than not that any of AFS securities in an unrealized loss position would not be required to be sold. At March 31, 2024 and December 31, 2023, unrealized losses were higher than prior periods due to market uncertainty resulting from inflation and higher interest rates from the time of the security purchase.

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 declines in fair value are due to credit factors.

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 evaluates the financial performance of the issuers, including the investment rating, the state of the issuer of the security and other support in determining whether declines in fair value are due to credit factors.

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.

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 its evaluation, including delinquencies and credit enhancements, in determining whether declines in fair value are due to credit factors.

Asset-backed. 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 its evaluation, including delinquencies and credit enhancements, in determining whether declines in fair value are due to credit factors.

The Company does not intend to sell the aforementioned investment securities with unrealized losses and it is more likely than not that the Company will not be required to sell them before recovery of their amortized cost basis, which may be maturity. In addition, the unrealized losses are not credit related. Therefore, the Company has concluded that the unrealized losses for these securities do not require an ACL at March 31, 2024.

The following table summarizes amortized cost and fair value of investment securities by contractual maturity at March 31, 2024. Expected maturities may differ from contractual maturities if issuers 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	$	—	$	—
Due after one year through five years	31,400		28,140
Due after five years through ten years	56,101		50,898
Due after ten years	157,515		143,478
CMOs and MBSs	201,923		188,494
Asset-backed	105,216		103,899
Totals	$	552,155	$	514,909

The following table summarizes proceeds from sales of investment securities and gross gains and gross losses for the three months ended March 31, 2024 and 2023:


	Three months ended March 31,
		2024		2023
Proceeds from sale of investment securities		$	—	$	—
Gross gains		—		—
Gross losses		5		8

During the three months ended March 31, 2024 and 2023, the Company recorded investment security losses of $5 thousand and $8 thousand, respectively, from mark-to-market losses on an equity security. During the three months ended March 31, 2024 and 2023, the Company did not sell any investment securities. Investment securities with a fair value of $448.7 million and $439.7 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.