Investments

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at June 30, 2023 and December 31, 2022 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses (in thousands):


	June 30, 2023
Available-for-Sale Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Debt securities:
U.S. Treasury securities	$	9,989	$	—	$	(1,209)	$	—	$	8,780
U.S. Government agencies	105		—		(9)		—		96
Obligations of states and political subdivisions	199,818		—		(22,392)		—		177,426
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	96,072		2		(6,857)		—		89,217
Private label mortgage and asset backed securities	399,009		10		(54,779)		—		344,240

Total available-for-sale	$	704,993	$	12	$	(85,246)	$	—	$	619,759

	June 30, 2023
Held-to-Maturity Securities	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
Debt securities:
Obligations of states and political subdivisions	$	192,034	$	76	$	(17,108)	$	175,002	$	17
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,592		—		(1,728)		8,864		—
Private label mortgage and asset backed securities	55,673		—		(6,484)		49,189		1
Corporate debt securities	46,033		—		(5,240)		40,793		438
Total held-to-maturity	$	304,332	$	76	$	(30,560)	$	273,848	$	456


	December 31, 2022
Available-for-Sale Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Debt securities:
U.S. Treasury securities	$	9,990	$	—	$	(1,283)	$	8,707
U.S. Government agencies	107		—		(9)		98
Obligations of states and political subdivisions	201,638		—		(26,653)		174,985
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	117,292		4		(7,803)		109,493
Private label mortgage and asset backed securities	411,441		14		(55,913)		355,542

Total available-for-sale	$	740,468	$	18	$	(91,661)	$	648,825


	December 31, 2022
Held-to-Maturity Securities	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
Debt securities:
Obligations of states and political subdivisions	192,004		67		(23,166)		$	168,905
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,430		—		(1,762)		8,668
Private label mortgage and asset backed securities	56,691		—		(5,931)		50,760
Corporate debt securities	45,982		—		(3,066)		42,916
Total held-to-maturity	$	305,107	$	67	$	(33,925)	$	271,249

Proceeds and gross realized gains (losses) from the sales or calls of available-for-sale investment securities for the periods ended June 30, 2023 and 2022 are shown below (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Available-for-Sale Securities	2023		2022		2023		2022
Proceeds from sales or calls	$	310	$	102,379	$	12,376	$	235,370
Gross realized gains from sales or calls	—		1,216		—		5,123
Gross realized losses from sales or calls	(39)		(2,185)		(257)		(5,886)

The provision for income taxes includes a $76,000 and $226,000 income tax benefit from security sales for the six months ended June 30, 2023 and 2022.

The amortized cost and estimated fair value of available-for-sale and held-to maturity investment securities at June 30, 2023 by contractual maturity is shown below (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may 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.


	June 30, 2023				December 31, 2022
Available-for-Sale Securities	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within one year	$	—	$	—	$	—	$	—
After one year through five years	9,991		8,780		—		—
After five years through ten years	35,405		30,127		45,918		38,383
After ten years	164,411		147,300		165,710		145,309
	209,807		186,207		211,628		183,692
Investment securities not due at a single maturity date:

U.S. Government agencies	105		96		107		98
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	96,072		89,217		117,292		109,493
Private label mortgage and asset backed securities	399,009		344,239		411,441		355,542

Total available-for-sale	$	704,993	$	619,759	$	740,468	$	648,825

	June 30, 2023				December 31, 2022
Held-to-Maturity Securities	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Within one year	$	—	$	—	$	—	$	—
After one year through five years	134		130		132		129
After five years through ten years	75,683		68,920		51,424		46,143
After ten years	116,217		105,952		140,448		122,633
	192,034		175,002		192,004		168,905
Investment securities not due at a single maturity date:
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	10,592		8,864		10,430		8,668
Private label mortgage and asset backed securities	55,673		49,189		56,691		50,760
Corporate debt securities	46,033		40,793		45,982		42,916
Total held-to-maturity	$	304,332	$	273,848	$	305,107	$	271,249

At June 30, 2023 there were nine issuers of private label mortgage securities in which the Company had holdings of securities in amounts greater than 10% of shareholders’ equity. Investments with these issuers were in senior tranches and/or were rated “AAA” or higher and there were no credit issues identified.

The following table summarizes the Company’s AFS debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	June 30, 2023
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale Securities	Value		Losses		Value		Losses		Value		Losses
Debt securities:
U.S. Treasury securities	$	—	$	—	$	8,780	$	(1,209)	$	8,780	$	(1,209)
U.S. Government agencies	—		—		96		(9)		96		(9)
Obligations of states and political subdivisions	—		—		177,426		(22,392)		177,426		(22,392)
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	860		(21)		88,218		(6,836)		89,078		(6,857)
Private label mortgage and asset backed securities	3,353		(553)		340,834		(54,226)		344,187		(54,779)

Total available-for-sale	$	4,213	$	(574)	$	615,354	$	(84,672)	$	619,567	$	(85,246)


	December 31, 2022
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-Sale Securities	Value		Losses		Value		Losses		Value		Losses
Debt securities:
U.S. Treasury securities	$	—	$	—	$	8,707	$	(1,283)	$	8,707	$	(1,283)
U.S. Government agencies	—		—		98		(9)		98		(9)
Obligations of states and political subdivisions	90,808		(12,208)		84,177		(14,445)		174,985		(26,653)
U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations	20,825		(1,058)		88,520		(6,745)		109,345		(7,803)
Private label mortgage and asset backed securities	126,284		(14,529)		229,152		(41,384)		355,436		(55,913)
Total available-for-sale	$	237,917	$	(27,795)	$	410,654	$	(63,866)	$	648,571	$	(91,661)

As of June 30, 2023, the Company had a total of 189 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting of 6 U.S. Treasury securities and U.S. Government agencies, 43 obligations of states and political subdivisions, 57 U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations, and 83 private label mortgage and asset backed securities.

Allowance for Credit Losses on Available-for-Sale Debt Securities

Each reporting period, the Company assesses each AFS debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors. The Company did not record an ACL on any available for sale securities at June 30, 2023 or upon adoption of ASU 2016-13 on January 1, 2023. As of both dates, the Company considers the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value.

The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate increases and liquidity and were mainly comprised of the following:

•Obligations of States and Political Subdivisions: The unrealized losses on investments in obligations of states and political subdivisions are caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

•U.S. Government Sponsored Entities and Agencies Collateralized by Residential Mortgage Obligations: The unrealized losses on the Company’s investments in U.S. Government sponsored entities and agencies collateralized by residential mortgage obligations were caused by interest rate changes. The contractual cash flows of those investments are guaranteed or supported by an agency or sponsored entity of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment.

•Private Label Mortgage and Asset Backed Securities: The Company has invested exclusively in AA and AAA tranches of various private label mortgage and asset backed securities. Each purchase is subject to a credit and structure review prior to their purchase. Ratings are reviewed on a quarterly basis in addition to other metrics provided through third-party services. Following review of the financial metrics and ratings, management concluded that the unrealized loss position of the private label mortgage and asset backed securities related exclusively to the fluctuation in market conditions and were not reflective of any credit concerns with the tranches comprising the Company’s investments.

As of June 30, 2023 and December 31, 2022, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-than-likely-than-not that the Company would not be required to sell these securities. Accordingly, there was no allowance for credit losses as of June 30, 2023 and December 31, 2022 provided against these securities.

Allowance for Credit Losses on Held-to-Maturity Debt Securities

The Company separately evaluates its HTM debt securities for any credit losses based on probability of default and loss given default utilizing historical industry data based on investment category, while also considering reasonable and supportable forecasts. The probability of default and loss given default are incorporated into the present value of expected cash flows and

compared against amortized cost. The Company recorded an ACL on January 1, 2023 for held-to-maturity debt securities within the corporate bond and private label mortgage securities of $545,000 and $231,000, respectively.

The allowance for credit losses on HTM securities was $456,000 at June 30, 2023.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. For non-rated investment securities, management receives quarterly performance updates to monitor for any credit concerns. There were no HTM securities on nonaccrual or past due over 89 days and still on accrual. The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator. U.S. Government sponsored agencies are not included in the below tables as credit ratings are not applicable.


	June 30, 2023
Debt Securities Held-to-Maturity	AAA/AA/A		BBB/BB/B		Unrated
Obligations of states and political subdivisions	$	192,034	$	—	$	—

Private label mortgage and asset backed securities	46,651		—		9,022
Corporate debt securities	—		30,154		15,879
Total debt securities held-to-maturity	$	238,685	$	30,154	$	24,901