INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2024

Investments, Debt and Equity Securities [Abstract]

At September 30, 2024 and December 31, 2023, all investment securities were classified as AFS. The following table summarizes amortized cost and fair value of investment securities, the corresponding amounts of gross unrealized gains and losses recognized in AOCI and the ACL at September 30, 2024 and December 31, 2023:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
September 30, 2024
U.S. Treasury securities	$	20,047	$	—	$	1,674	$	—	$	18,373
U.S. Government Agencies	3,249		123		—		—		3,372

States and political subdivisions	220,909		301		15,110		—		206,100
GSE residential MBSs	149,806		3,378		2,823		—		150,361
GSE commercial MBSs	9,164		461		1		—		9,624
GSE residential CMOs	314,857		4,349		5,081		—		314,125

Non-agency CMOs	33,698		306		2,772		—		31,232


Asset-backed	92,009		552		1,093		—		91,468
Corporate debt	1,932		43		—		—		1,975
Other	198		—		—		—		198
Totals	$	845,869	$	9,513	$	28,554	$	—	$	826,828
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 MBSs	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 September 30, 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
September 30, 2024
U.S. Treasury securities	—	$	—	$	—	3	$	18,373	$	1,674	3	$	18,373	$	1,674

States and political subdivisions	1	501		6		41	194,611		15,104		42	195,112		15,110
GSE residential MBSs	—	—		—		15	56,909		2,823		15	56,909		2,823
GSE commercial MBS	1	854		1		—	—		—		1	854		1
GSE residential CMOs	11	84,243		326		16	65,610		4,755		27	149,853		5,081
Non-agency CMOs	—	—		—		4	16,353		2,772		4	16,353		2,772



Asset-backed	4	12,512		46		9	45,628		1,047		13	58,140		1,093

Totals	17	$	98,110	$	379	88	$	397,484	$	28,175	105	$	495,594	$	28,554
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

On a quarterly basis, the Company conducts 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 September 30, 2024 and December 31, 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 September 30, 2024 and December 31, 2023, unrealized losses were 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, GSE Residential MBS and GSE Commercial 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 September 30, 2024.

The following table summarizes amortized cost and fair value of investment securities by contractual maturity at September 30, 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	42,426		39,859
Due after five years through ten years	52,115		48,841
Due after ten years	151,794		141,318
CMOs and MBSs	507,525		505,342
Asset-backed	92,009		91,468

Totals	$	845,869	$	826,828

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, 2024 and 2023:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Proceeds from sale of investment securities	$	162,669	$	19,900	$	162,669	$	19,900
Gross gains	271		2		271		2
Gross losses	—		—		17		10

During the three and nine months ended September 30, 2024, the Company recorded net investment security gains of $271 thousand and $254 thousand, respectively, from a security redemption during the third quarter of 2024 resulting in a gain of $181 thousand and mark-to-market activity on an equity security compared to net gains of $2 thousand and net losses of $8 thousand from mark-to-market activity on an equity security for the three and nine months ended September 30, 2023. During the three and nine months ended September 30, 2024, the Company sold investment securities with a principal balance of $162.7 million for no gain or loss. During the three and nine months ended September 30, 2023, the Company sold three U.S. Treasury securities with a principal balance of $19.9 million for a nominal gain. Investment securities with a fair value of $735.5 million and $439.7 million at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public funds and for other purposes as required or permitted by law.