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SECURITIES AVAILABLE FOR SALE

6 Months Ended

Jun. 30, 2024

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, 2024
Debt securities:
Obligations of US Government-sponsored enterprises		$	1,677		$	2		$	(29)		$	1,650
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			215,288			1			(33,118)			182,171
US Government agency			98,099			58			(11,850)			86,307
Private label			46,975			22			(1,266)			45,731
Obligations of states and political subdivisions thereof			117,397			5,342			(16,337)			106,402
Corporate bonds			101,947			126			(11,406)			90,667
Total securities available for sale		$	581,383		$	5,551		$	(74,006)		$	512,928


					Gross			Gross
					Unrealized			Unrealized
(in thousands)		Amortized Cost			Gains			Losses			Fair Value
December 31, 2023
Debt securities:
Obligations of US Government-sponsored enterprises		$	2,021		$	—		$	(29)		$	1,992
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			223,602			12			(30,332)			193,282
US Government agency			85,005			145			(10,937)			74,213
Private label			60,888			18			(1,855)			59,051
Obligations of states and political subdivisions thereof			119,857			4,515			(14,204)			110,168
Corporate bonds			105,552			19			(9,703)			95,868
Total securities available for sale		$	596,925		$	4,709		$	(67,060)		$	534,574

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, significant pricing changes, or drops below investment-grade. 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, 2024 and December 31, 2023, 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, 2024 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		$	1,011		$	651
Over 1 year to 5 years			52,527			46,808
Over 5 years to 10 years			42,338			43,408
Over 10 years			125,145			107,852
Total bonds and obligations			221,021			198,719
Mortgage-backed securities and collateralized mortgage obligations			360,362			314,209
Total securities available for sale		$	581,383		$	512,928

The following table presents the realized 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)		2024			2023			2024			2023
Gross gains on sales of available for sale securities		$	50		$	—		$	50		$	34
Gross losses on sales of available for sale securities			—			—			—			—
Net gains on sale of available for sale securities		$	50		$	—		$	50		$	34

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, 2024
Debt securities:
Obligations of US Government-sponsored enterprises		$	—		$	—		$	29		$	787		$	29		$	787
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			16			3,530			33,102			178,525			33,118			182,055
US Government agency			259			16,520			11,591			63,968			11,850			80,488
Private label			6			1,487			1,260			39,221			1,266			40,708
Obligations of states and political subdivisions thereof			59			4,133			16,278			99,933			16,337			104,066
Corporate bonds			521			6,931			10,885			80,612			11,406			87,543
Total securities available for sale		$	861		$	32,601		$	73,145		$	463,046		$	74,006		$	495,647


		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, 2023
Debt securities:
Obligations of US Government-sponsored enterprises		$	1		$	1,084		$	28		$	907		$	29		$	1,991
Mortgage-backed securities and collateralized mortgage obligations:
US Government-sponsored enterprises			10			3,439			30,322			188,611			30,332			192,050
US Government agency			2			120			10,935			68,891			10,937			69,011
Private label			—			26			1,855			59,007			1,855			59,033
Obligations of states and political subdivisions thereof			26			3,099			14,178			101,036			14,204			104,135
Corporate bonds			156			4,913			9,547			84,950			9,703			89,863
Total securities available for sale		$	195		$	12,681		$	66,865		$	503,402		$	67,060		$	516,083

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, 2024, 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, 2024:

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 3.54% 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

474 out of the total 487 securities in our portfolio of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 15.39% 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

145 out of the total 159 securities in our portfolio of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 12.83% 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

22 of the total 25 securities in our portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 3.02% 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

61 of the total 67 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 14.20% 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 believe (i) the bonds in this portfolio carry minimal risk of default and (ii) we are appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter.

Corporate bonds

32 out of the total 35 securities in our portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 11.53% 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.