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SECURITIES AVAILABLE FOR SALE

9 Months Ended

Sep. 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
September 30, 2023
Debt securities:
Obligations of US Government-sponsored enterprises		$	2,218		$	1		$	(40)		$	2,179
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			230,746			2			(41,025)			189,723
US Government agency			84,324			—			(13,890)			70,434
Private label			61,235			23			(2,413)			58,845
Obligations of states and political subdivisions thereof			115,908			9,305			(27,805)			97,408
Corporate bonds			101,491			31			(10,658)			90,864
Total securities available for sale		$	595,922		$	9,362		$	(95,831)		$	509,453


					Gross			Gross
					Unrealized			Unrealized
(in thousands)		Amortized Cost			Gains			Losses			Fair Value
December 31, 2022
Debt securities:
Obligations of US Government-sponsored enterprises		$	2,692		$	5		$	(37)		$	2,660
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			249,838			14			(34,825)			215,027
US Government agency			90,318			16			(10,728)			79,606
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 September 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 September 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 and collateralized mortgage obligations are shown in total, as their maturities are highly variable.


		Available for sale
(in thousands)		Amortized Cost			Fair Value
Within 1 year		$	3,051		$	3,022
Over 1 year to 5 years			36,218			33,257
Over 5 years to 10 years			51,635			54,313
Over 10 years			128,713			99,859
Total bonds and obligations			219,617			190,451
Mortgage-backed securities and collateralized mortgage obligations			376,305			319,002
Total securities available for sale		$	595,922		$	509,453

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


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(in thousands)		2023			2022			2023			2022
Gross gains on sales of available for sale securities		$	—		$	142		$	34		$	151
Gross losses on sales of available for sale securities			—			(98)			—			(98)
Net gains on sale of available for sale securities		$	—		$	44		$	34		$	53

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
September 30, 2023
Debt securities:
Obligations of US Government-sponsored enterprises		$	—		$	8		$	40		$	930		$	40		$	938
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			154			4,373			40,871			184,991			41,025			189,364
US Government agency			43			2,627			13,847			67,729			13,890			70,356
Private label			1			25			2,412			58,797			2,413			58,822
Obligations of states and political subdivisions thereof			571			7,386			27,234			88,571			27,805			95,957
Corporate bonds			1,079			6,921			9,579			80,918			10,658			87,839
Total securities available for sale		$	1,848		$	21,340		$	93,983		$	481,936		$	95,831		$	503,276


		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
Debt securities:
Obligations of US Government-sponsored enterprises		$	32		$	435		$	6		$	790		$	38		$	1,225
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			7,005			82,483			27,820			127,745			34,825			210,228
US Government agency			2,870			42,430			7,857			34,198			10,727			76,628
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 September 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 September 30, 2023:

Obligations of US Government-sponsored enterprises

7 out of the total 8 securities in our portfolio of AFS obligations of US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 4.09% of the amortized cost of securities in unrealized loss positions. The US Small Business Administration guarantees the contractual cash flows of all of our obligations of US Government-sponsored enterprises. The securities are investment-grade rated and there were no material underlying credit downgrades during the quarter.

US Government-sponsored enterprises

492 out of the total 499 securities in our portfolio of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 17.81% 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

147 out of the total 150 securities in our portfolio of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 16.49% 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 3.94% 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

66 of the total 70 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 24.29% 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 10.82% 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.