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Investment Securities | 9 Months Ended
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Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | Investment Securities The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2023:
| Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value (Estimated)
Securities available for sale |  |  |  |  |  |  |
U.S. Treasury & Agency securities | $ | 45,851,000 |  |  | $ | — |  |  | $ | (7,599,000) |  |  | $ | 38,252,000 |
Mortgage-backed securities | 263,775,000 |  |  | 1,000 |  |  | (50,930,000) |  |  | 212,846,000 |
State and political subdivisions | 40,417,000 |  |  | — |  |  | (9,637,000) |  |  | 30,780,000 |
Asset-backed securities | 3,097,000 |  |  | 1,000 |  |  | (4,000) |  |  | 3,094,000 |
| $ | 353,140,000 |  |  | $ | 2,000 |  |  | $ | (68,170,000) |  |  | $ | 284,972,000 |
Securities to be held to maturity |  |  |  |  |  |  |
U.S. Treasury & Agency securities | $ | 40,100,000 |  |  | $ | — |  |  | $ | (11,996,000) |  |  | $ | 28,104,000 |
Mortgage-backed securities | 57,224,000 |  |  | 4,000 |  |  | (13,336,000) |  |  | 43,892,000 |
State and political subdivisions | 255,732,000 |  |  | 16,000 |  |  | (46,807,000) |  |  | 208,941,000 |
Corporate securities | 34,750,000 |  |  | — |  |  | (3,823,000) |  |  | 30,927,000 |
| $ | 387,806,000 |  |  | $ | 20,000 |  |  | $ | (75,962,000) |  |  | $ | 311,864,000 |
Less allowance for credit losses | (432,000) |  |  | — |  |  | — |  |  | — |
Net securities to be held to maturity | $ | 387,374,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Restricted equity securities |  |  |  |  |  |  |
Federal Home Loan Bank Stock | $ | 2,823,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,823,000 |
Federal Reserve Bank Stock | 1,037,000 |  |  | — |  |  | — |  |  | 1,037,000 |
| $ | 3,860,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,860,000 |
Allowance for Credit Losses: The Company adopted ASC 326, the CECL standard, in the first quarter of 2023. In conjunction with adoption, holdings of AFS and HTM securities were evaluated to determine the need to establish an allowance for credit losses, if any. AFS securities, as shown in the table above, consist of securities issued by U.S. Government Agencies, U.S. Government Sponsored Entities, State or Local Municipal Governments, or are backed by collateral that is guaranteed by the U.S. Government. We monitor the credit quality of these investments through credit ratings issued by major rating providers and through substantial price changes not consistent with general market movements. Each of the AFS securities is deemed to be investment grade, and no ACL has been established for AFS securities. Similarly, the agency and mortgage-backed securities in the HTM portfolio have been determined to all be investment grade with no ACL required. Municipal securities within HTM include two private activity bonds issued by well-known customers of the Bank with total balances of $19,734,000 as of September 30, 2023. These bonds carry similar risk characteristics to the commercial real estate - owner occupied segment of the Bank's loan portfolio described in Note 3; management has elected to apply a loss rate matching the loan segment to the balance of these bonds for purposes of establishing an ACL. Corporate securities in HTM consist of fourteen individual companies in the banking industry. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, and other performance factors. Aggregate credit risk of the corporate securities is considered very low and an immaterial ACL has been established. The total ACL for HTM securities was $432,000 as of September 30, 2023; there was no reserve as of December 31, 2022 and September 30, 2022. Changes in the allowance for credit losses are recorded as credit loss expense, or reversal. Losses would be charged against the allowance when management believes collection of the full contractual amount due on a security is unlikely. The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2022:
| Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value (Estimated)
Securities available for sale |  |  |  |  |  |  |
U.S. Treasury & Agency securities | $ | 26,025,000 |  |  | $ | — |  |  | $ | (6,878,000) |  |  | $ | 19,147,000 |
Mortgage-backed securities | 271,068,000 |  |  | 55,000 |  |  | (42,447,000) |  |  | 228,676,000 |
State and political subdivisions | 40,472,000 |  |  | 2,000 |  |  | (7,283,000) |  |  | 33,191,000 |
Asset-backed securities | 3,548,000 |  |  | — |  |  | (53,000) |  |  | 3,495,000 |
| $ | 341,113,000 |  |  | $ | 57,000 |  |  | $ | (56,661,000) |  |  | $ | 284,509,000 |
Securities to be held to maturity |  |  |  |  |  |  |
U.S. Treasury & Agency securities | $ | 40,100,000 |  |  | $ | 4,000 |  |  | $ | (10,477,000) |  |  | $ | 29,627,000 |
Mortgage-backed securities | 60,497,000 |  |  | 42,000 |  |  | (11,392,000) |  |  | 49,147,000 |
State and political subdivisions | 258,549,000 |  |  | 154,000 |  |  | (30,733,000) |  |  | 227,970,000 |
Corporate securities | 34,750,000 |  |  | — |  |  | (2,483,000) |  |  | 32,267,000 |
| $ | 393,896,000 |  |  | $ | 200,000 |  |  | $ | (55,085,000) |  |  | $ | 339,011,000 |
Restricted equity securities |  |  |  |  |  |  |
Federal Home Loan Bank Stock | $ | 2,846,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,846,000 |
Federal Reserve Bank Stock | 1,037,000 |  |  | — |  |  | — |  |  | 1,037,000 |
| $ | 3,883,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,883,000 |
The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2022:
| Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value (Estimated)
Securities available for sale |  |  |  |  |  |  |
U.S. Treasury & Agency securities | $ | 26,023,000 |  |  | $ | — |  |  | $ | (6,879,000) |  |  | $ | 19,144,000 |
Mortgage-backed securities | 273,215,000 |  |  | 4,000 |  |  | (44,041,000) |  |  | 229,178,000 |
State and political subdivisions | 40,489,000 |  |  | — |  |  | (9,383,000) |  |  | 31,106,000 |
Asset-backed securities | 3,872,000 |  |  | — |  |  | (32,000) |  |  | 3,840,000 |
| $ | 343,599,000 |  |  | $ | 4,000 |  |  | $ | (60,335,000) |  |  | $ | 283,268,000 |
Securities to be held to maturity |  |  |  |  |  |  |
U.S. Treasury & Agency securities | $ | 38,100,000 |  |  | $ | — |  |  | $ | (10,428,000) |  |  | $ | 27,672,000 |
Mortgage-backed securities | 56,423,000 |  |  | 48,000 |  |  | (11,784,000) |  |  | 44,687,000 |
State and political subdivisions | 257,633,000 |  |  | 38,000 |  |  | (43,899,000) |  |  | 213,772,000 |
Corporate securities | 29,750,000 |  |  | — |  |  | (2,085,000) |  |  | 27,665,000 |
| $ | 381,906,000 |  |  | $ | 86,000 |  |  | $ | (68,196,000) |  |  | $ | 313,796,000 |
Restricted equity securities |  |  |  |  |  |  |
Federal Home Loan Bank Stock | $ | 3,477,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,477,000 |
Federal Reserve Bank Stock | 1,037,000 |  |  | — |  |  | — |  |  | 1,037,000 |
| $ | 4,514,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,514,000 |
The following table summarizes the contractual maturities of investment securities at September 30, 2023:
| Securities available for sale |  | Securities to be held to maturity
| Amortized Cost |  | Fair Value (Estimated) |  | Amortized Cost |  | Fair Value (Estimated)
Due in 1 year or less | $ | 19,819,000 |  |  | $ | 19,819,000 |  |  | $ | 2,158,000 |  |  | $ | 2,151,000 |
Due in 1 to 5 years | 3,640,000 |  |  | 3,468,000 |  |  | 15,780,000 |  |  | 14,771,000 |
Due in 5 to 10 years | 28,082,000 |  |  | 23,360,000 |  |  | 92,565,000 |  |  | 81,812,000 |
Due after 10 years | 301,599,000 |  |  | 238,325,000 |  |  | 277,303,000 |  |  | 213,130,000 |
| $ | 353,140,000 |  |  | $ | 284,972,000 |  |  | $ | 387,806,000 |  |  | $ | 311,864,000 |
The following table summarizes the contractual maturities of investment securities at December 31, 2022:
| Securities available for sale |  | Securities to be held to maturity
| Amortized Cost |  | Fair Value (Estimated) |  | Amortized Cost |  | Fair Value (Estimated)
Due in 1 year or less | $ | — |  |  | $ | — |  |  | $ | 1,787,000 |  |  | $ | 1,782,000 |
Due in 1 to 5 years | 3,609,000 |  |  | 3,409,000 |  |  | 14,998,000 |  |  | 14,480,000 |
Due in 5 to 10 years | 18,591,000 |  |  | 15,203,000 |  |  | 86,833,000 |  |  | 81,443,000 |
Due after 10 years | 318,913,000 |  |  | 265,897,000 |  |  | 290,278,000 |  |  | 241,306,000 |
| $ | 341,113,000 |  |  | $ | 284,509,000 |  |  | $ | 393,896,000 |  |  | $ | 339,011,000 |
The following table summarizes the contractual maturities of investment securities at September 30, 2022:
| Securities available for sale |  | Securities to be held to maturity
| Amortized Cost |  | Fair Value (Estimated) |  | Amortized Cost |  | Fair Value (Estimated)
Due in 1 year or less | $ | 4,000 |  |  | $ | 4,000 |  |  | $ | 1,346,000 |  |  | $ | 1,343,000 |
Due in 1 to 5 years | 3,640,000 |  |  | 3,427,000 |  |  | 15,235,000 |  |  | 14,644,000 |
Due in 5 to 10 years | 18,064,000 |  |  | 14,436,000 |  |  | 75,492,000 |  |  | 68,704,000 |
Due after 10 years | 321,891,000 |  |  | 265,401,000 |  |  | 289,833,000 |  |  | 229,105,000 |
| $ | 343,599,000 |  |  | $ | 283,268,000 |  |  | $ | 381,906,000 |  |  | $ | 313,796,000 |
At September 30, 2023, securities with a carrying value of $383,946,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. This compares to securities with a carrying value of $350,411,000 as of December 31, 2022 and $343,677,000 at September 30, 2022, pledged for the same purposes. Gains and losses on the sale of securities are computed by subtracting the amortized cost at the time of sale from the security's selling price, net of accrued interest to be received. The following table shows securities gains and losses for the nine months and quarters ended September 30, 2023 and 2022:
| For the nine months ended September 30, | For the quarter ended September 30,
| 2023 | 2022 | 2023 | 2022
Proceeds from sales of securities | $ | — |  | $ | 1,301,000 |  | $ | — |  | $ | 1,301,000 |
Gross realized gains | — |  | 8,000 |  | — |  | 6,000 |
Gross realized losses | — |  | (1,000) |  | — |  | (1,000) |
Net gain (loss) | $ | — |  | $ | 7,000 |  | $ | — |  | $ | 5,000 |
Related income taxes | $ | — |  | $ | 1,000 |  | $ | — |  | $ | 1,000 |
As of September 30, 2023, there were 941 securities with unrealized losses held in the Company's portfolio. The Company has the ability and intent to hold its securities which are in an unrealized loss position until a recovery of their amortized cost, which may be at maturity. The following table summarizes debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:
| Less than 12 months | 12 months or more | Total
| Fair Value (Estimated) | Unrealized Losses | Fair Value (Estimated) | Unrealized Losses | Fair Value (Estimated) | Unrealized Losses
U.S. Treasury & Agency securities | $ | 11,842,000 |  | $ | (40,000) |  | $ | 44,577,000 |  | $ | (19,555,000) |  | $ | 56,419,000 |  | $ | (19,595,000) |
Mortgage-backed securities | 18,017,000 |  | (441,000) |  | 238,150,000 |  | (63,825,000) |  | 256,167,000 |  | (64,266,000) |
State and political subdivisions | 66,583,000 |  | (6,675,000) |  | 147,818,000 |  | (49,769,000) |  | 214,401,000 |  | (56,444,000) |
Asset-backed securities | — |  | — |  | 1,510,000 |  | (4,000) |  | 1,510,000 |  | (4,000) |
Corporate securities | — |  | — |  | 21,677,000 |  | (3,823,000) |  | 21,677,000 |  | (3,823,000) |
| $ | 96,442,000 |  | $ | (7,156,000) |  | $ | 453,732,000 |  | $ | (136,976,000) |  | $ | 550,174,000 |  | $ | (144,132,000) |
As of December 31, 2022, there were 869 securities with unrealized losses held in the Company's portfolio. These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 300 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of December 31, 2022 is summarized below:
| Less than 12 months | 12 months or more | Total
| Fair Value (Estimated) | Unrealized Losses | Fair Value (Estimated) | Unrealized Losses | Fair Value (Estimated) | Unrealized Losses
U.S. Treasury & Agency securities | $ | 4,804,000 |  | $ | (675,000) |  | $ | 41,965,000 |  | $ | (16,680,000) |  | $ | 46,769,000 |  | $ | (17,355,000) |
Mortgage-backed securities | 73,509,000 |  | (6,486,000) |  | 197,102,000 |  | (47,353,000) |  | 270,611,000 |  | (53,839,000) |
State and political subdivisions | 149,517,000 |  | (13,769,000) |  | 67,932,000 |  | (24,247,000) |  | 217,449,000 |  | (38,016,000) |
Asset-backed securities | 3,495,000 |  | (53,000) |  | — |  | — |  | 3,495,000 |  | (53,000) |
Corporate securities | 19,857,000 |  | (2,143,000) |  | 3,160,000 |  | (340,000) |  | 23,017,000 |  | (2,483,000) |
| $ | 251,182,000 |  | $ | (23,126,000) |  | $ | 310,159,000 |  | $ | (88,620,000) |  | $ | 561,341,000 |  | $ | (111,746,000) |
As of September 30, 2022, there were 912 securities with unrealized losses held in the Company's portfolio. These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 138 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of September 30, 2022 is summarized below:
| Less than 12 months | 12 months or more | Total
| Fair Value (Estimated) | Unrealized Losses | Fair Value (Estimated) | Unrealized Losses | Fair Value (Estimated) | Unrealized Losses
U.S. Treasury & Agency securities | $ | 7,364,000 |  | $ | (1,264,000) |  | $ | 39,452,000 |  | $ | (16,043,000) |  | $ | 46,816,000 |  | $ | (17,307,000) |
Mortgage-backed securities | 109,041,000 |  | (13,868,000) |  | 162,979,000 |  | (41,957,000) |  | 272,020,000 |  | (55,825,000) |
State and political subdivisions | 197,145,000 |  | (44,277,000) |  | 17,902,000 |  | (9,005,000) |  | 215,047,000 |  | (53,282,000) |
Asset-backed securities | 3,840,000 |  | (32,000) |  | — |  | — |  | 3,840,000 |  | (32,000) |
Corporate securities | 20,186,000 |  | (1,814,000) |  | 3,229,000 |  | (271,000) |  | 23,415,000 |  | (2,085,000) |
| $ | 337,576,000 |  | $ | (61,255,000) |  | $ | 223,562,000 |  | $ | (67,276,000) |  | $ | 561,138,000 |  | $ | (128,531,000) |
Credit Quality Indicators: Agency-backed and government-sponsored enterprise securities have a long history with no credit losses, including during times of severe stress. The principal and interest payments on agency-guaranteed debt is backed by the U.S. Government. Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit guarantee from the U.S. Department of the Treasury. Additionally, government-sponsored enterprise securities are exceptionally liquid, readily marketable, and provide a substantial amount of price transparency and price parity, indicating a perception of zero credit losses. HTM municipal debt holdings are comprised primarily of high credit quality (rated A- or higher) state and municipal obligations. High credit quality state and municipal obligations have a history of zero to near-zero credit loss. HTM municipal debt holdings also include two unrated private activity bonds issued by well known customers of the Bank. These securities are regularly monitored as part of an overall credit relationship with the issuers; both issuers were in good standing as of September 30, 2023. HTM corporate debt holdings consist of 14 individual companies in the banking industry. Management conducts periodic reviews of the collectability of these securities taking into consideration such factors as the financial condition of the issuers; each were in good standing as of September 30, 2023. The following table presents the activity in the ACL for held-to-maturity debt securities by major security type for the nine months ended September 30, 2023:
| State and Political Subdivisions | Corporate Securities | Total
Allowance for credit losses: |  |  |
Beginning balance | $ | — |  | $ | — |  | $ | — |
Impact of adopting ASC 326 | 229,000 |  | 209,000 |  | 438,000 |
Credit loss expense (reduction)1 | (17,000) |  | 11,000 |  | (6,000) |
Securities charged-off | — |  | — |  | — |
Recoveries | — |  | — |  | — |
Total ending allowance balance | $ | 212,000 |  | $ | 220,000 |  | $ | 432,000 |
1 Difference between total and amount reported on the Consolidated Statements of Income is due to rounding. There was no ACL on U.S. Government-sponsored enterprise and agency securities as of September 30, 2023. A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement. As of September 30, 2023, none of the Company’s HTM debt securities were past due or on non-accrual status. During the third quarter of 2014, the Company transferred securities with a total amortized cost of $89,780,000 with a corresponding fair value of $89,757,000 from available for sale to held to maturity. The net unrealized loss, net of taxes, on these securities at the date of the transfer was $15,000. The net unrealized holding loss at the time of transfer continues to be reported in AOCI, net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield. The amortization of the net unrealized loss reported in AOCI will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $58,000, net of taxes, at September 30, 2023. This compares to $64,000 and $67,000, net of taxes, at December 31, 2022 and September 30, 2022, respectively. These securities were transferred as a part of the Company's overall investment and balance sheet strategies. The Bank is a member of the FHLBB, a cooperatively owned wholesale bank for housing and finance in the six New England States. As a requirement of membership in the FHLBB, the Bank must own a minimum required amount of FHLBB stock, calculated periodically based primarily on its level of borrowings from the FHLBB. The Bank uses the FHLBB for a portion of its wholesale funding needs. As of September 30, 2023 and 2022, and December 31, 2022, the Bank's investment in FHLBB stock totaled $2,823,000, $3,477,000 and $2,846,000, respectively. FHLBB stock is a non-marketable equity security and therefore is reported at cost, which equals par value. The Bank is also a member of the FRBB. As a requirement for membership in the FRBB, the Bank must own a minimum required amount of FRBB stock. The Bank uses FRBB for certain correspondent banking services and maintains borrowing capacity at its discount window. The Bank's investment in FRBB stock totaled $1,037,000 at September 30, 2023 and 2022, and December 31, 2022. The Company periodically evaluates its investment in FHLBB and FRBB stock for impairment based on, among other factors, the capital adequacy of the Banks and their overall financial condition. No impairment losses have been recorded through September 30, 2023. The Bank will continue to monitor its investment in these restricted equity securities.

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