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SECURITIES AVAILABLE FOR SALE

6 Months Ended

Jun. 30, 2023

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE

NOTE 2. SECURITIES AVAILABLE FOR SALE

The following is a summary of securities available for sale (“AFS”):


					Gross			Gross
					Unrealized			Unrealized
(in thousands)		Amortized Cost			Gains			Losses			Fair Value
June 30, 2023
Mortgage-backed securities:
US Government-sponsored enterprises		$	237,839		$	2		$	(34,081)		$	203,760
US Government agency			89,021			4			(12,002)			77,023
Private label			61,679			24			(2,846)			58,857
Obligations of states and political subdivisions thereof			120,024			5,811			(17,495)			108,340
Corporate bonds			101,498			33			(11,333)			90,198
Total securities available for sale		$	610,061		$	5,874		$	(77,757)		$	538,178


					Gross			Gross
					Unrealized			Unrealized
(in thousands)		Amortized Cost			Gains			Losses			Fair Value
December 31, 2022
Mortgage-backed securities:
US Government-sponsored enterprises		$	249,838		$	14		$	(34,825)		$	215,027
US Government agency			93,010			21			(10,765)			82,266
Private label			64,056			34			(3,936)			60,154
Obligations of states and political subdivisions thereof			121,939			7,149			(21,351)			107,737
Corporate bonds			102,505			33			(8,206)			94,332
Total securities available for sale		$	631,348		$	7,251		$	(79,083)		$	559,516

Credit Quality Information

We monitor the credit quality of available for sale debt securities through credit ratings from various rating agencies and substantial price changes. In an effort to make informed decisions, we utilize credit ratings that express opinions about the credit quality of a security. Securities are triggered for further review in the quarter if the security has significant fluctuations in ratings, drops below investment grade, or significant pricing changes. For securities without credit ratings, we utilize other financial information indicating the financial health of the underlying municipality, agency, or organization associated with the underlying security.

As of June 30, 2023 and December 31, 2022, we carried no allowance on available for sale debt securities in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments.

The amortized cost and estimated fair value of available for sale securities segregated by contractual maturity at June 30, 2023 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.


		Available for sale
(in thousands)		Amortized Cost			Fair Value
Within 1 year		$	3,195		$	3,112
Over 1 year to 5 years			36,271			33,518
Over 5 years to 10 years			54,326			52,686
Over 10 years			127,730			109,222
Total bonds and obligations			221,522			198,538
Mortgage-backed securities			388,539			339,640
Total securities available for sale		$	610,061		$	538,178

The following table presents the gains and losses from the sale of AFS securities for the periods presented:


		Three Months Ended						Six Months Ended
		June 30,						June 30,
(in thousands)		2023			2022			2023			2022
Gross gains on sales of available for sale securities		$	—		$	—		$	34		$	9
Gross losses on sales of available for sale securities			—			—			—			—
Net gains on sale of available for sale securities		$	—		$	—		$	34		$	9

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:


		Less Than Twelve Months						Over Twelve Months						Total
		Gross						Gross						Gross
		Unrealized			Fair			Unrealized			Fair			Unrealized			Fair
(in thousands)		Losses			Value			Losses			Value			Losses			Value
June 30, 2023
Mortgage-backed securities:
US Government-sponsored enterprises		$	1,766		$	33,148		$	32,315		$	169,804		$	34,081		$	202,952
US Government agency			1,100			20,772			10,902			54,776			12,002			75,548
Private label			—			26			2,846			58,807			2,846			58,833
Obligations of states and political subdivisions thereof			200			9,792			17,295			95,851			17,495			105,643
Corporate bonds			4,504			31,481			6,829			55,684			11,333			87,165
Total securities available for sale		$	7,570		$	95,219		$	70,187		$	434,922		$	77,757		$	530,141


		Less Than Twelve Months						Over Twelve Months						Total
		Gross						Gross						Gross
		Unrealized			Fair			Unrealized			Fair			Unrealized			Fair
(in thousands)		Losses			Value			Losses			Value			Losses			Value
December 31, 2022
Mortgage-backed securities:
US Government-sponsored enterprises		$	7,005		$	82,483		$	27,820		$	127,745		$	34,825		$	210,228
US Government agency			2,902			42,865			7,863			34,988			10,765			77,853
Private label			841			15,694			3,095			44,396			3,936			60,090
Obligations of states and political subdivisions thereof			7,990			48,799			13,361			55,702			21,351			104,501
Corporate bonds			4,733			65,279			3,473			25,027			8,206			90,306
Total securities available for sale		$	23,471		$	255,120		$	55,612		$	287,858		$	79,083		$	542,978

We expect to recover the amortized cost basis on all securities in our AFS portfolio. Furthermore, we do not intend to sell nor do we anticipate that we will be required to sell any securities in an unrealized loss position as of June 30, 2023, prior to this recovery. Our ability and intent to hold these securities until recovery is supported by our capital and liquidity positions as well as historically low portfolio turnover.

The following summarizes, by investment security type, the impact of securities in an unrealized loss position at June 30, 2023:

US Government-sponsored enterprises

492 out of the total 506 securities in our portfolios of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 14.38% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guarantee the contractual cash flows of all of our US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter.

US Government agency

148 out of the total 158 securities in our portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 13.71% of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association guarantees the contractual cash flows of all of our US Government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter.

Private label

26 of the total 28 securities in our portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 4.61% of the amortized cost of securities in unrealized loss positions. We expect to receive all of the future contractual cash flows related to the amortized cost on these securities.

Obligations of states and political subdivisions thereof

64 of the total 71 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 14.91% of the amortized cost of securities in unrealized loss positions. We continually monitor the municipal bond sector of the market carefully and periodically evaluate the appropriate level of exposure to the market. At this time, we think the bonds in this portfolio carry minimal risk of default, and we are appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter.

Corporate bonds

30 out of the total 33 securities in our portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 11.51% of the amortized cost of bonds in unrealized loss positions. We review the financial strength of all of these bonds, and we have concluded that the amortized cost remains supported by the expected future cash flows of these securities. The most recent review includes all bond issuers and their current credit ratings, financial performance and capitalization.