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INVESTMENT SECURITIES
 12 Months Ended
Dec. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
INVESTMENT SECURITIES

Note 3—INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are summarized below:

AVAILABLE-FOR-SALE:

(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair Value 
December 31, 2023                    
US Treasury securities  $20,791   $—   $(2,445)  $18,346 
Government Sponsored Enterprises   2,500    —    (371)   2,129 
Mortgage-backed securities   255,757    15    (17,613)   238,159 
Small Business Administration pools   16,108    24    (411)   15,721 
Corporate and other securities   8,759    —    (888)   7,871 
Total  $303,915   $39   $(21,728)  $282,226 
                     
(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair Value 
December 31, 2022                    
US Treasury securities  $60,552   $—   $(4,569)  $55,983 
Government Sponsored Enterprises   2,500    —    (426)   2,074 
Mortgage-backed securities   263,704    10    (19,114)   244,600 
Small Business Administration pools   21,657    60    (630)   21,087 
Corporate and other securities   8,772    12    (666)   8,118 
Total  $357,185   $82   $(25,405)  $331,862 
(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair Value 
December 31, 2021                    
US Treasury securities  $15,736   $—   $(300)  $15,436 
Government Sponsored Enterprises   2,499    2    —    2,501 
Mortgage-backed securities   398,125    3,596    (3,992)   397,729 
Small Business Administration pools   30,835    505    (67)   31,273 
State and Local Government   105,469    4,918    (539)   109,848 
Corporate and other securities   8,024    157    (129)   8,118 
Total  $560,688   $9,178   $(5,027)  $564,839 

 

HELD-TO-MATURITY:

(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair Value 
December 31, 2023                    
Mortgage-backed securities  $112,740   $—   $(8,490)  $104,250 
State and local government   104,430    282    (3,445)   101,268 
Total  $217,170   $282   $(11,935)  $205,518 
                 
(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair Value 
December 31, 2022                    
Mortgage-backed securities  $121,772    —   $(8,656)  $113,116 
State and local government   106,929    —    (6,432)   100,497 
Total  $228,701   $—   $(15,088)  $213,613 

 

There were no securities classified as held-to maturity at December 31, 2021.

 

On June 1, 2022, the Company reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available for sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) at December 31, 2023 and $15.7 million ($12.4 million net of tax) at December 31, 2022.

 

During the year ended December 31, 2023, the Company sold $39.9 million of book value US Treasury securities from the available-for-sale investment securities portfolio. This sale created a one-time pre-tax loss of $1.2 million and provided additional liquidity to pay down borrowings and fund loan growth. During the years ended December 31, 2022 and 2021, the Company sold no investment securities. The tax benefit applicable to the net realized loss was approximately $262, $0, and $0 for 2023, 2022 and 2021, respectively.

 

The following tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at December 31, 2023 and December 31, 2022. 

 

                         
(Dollars in thousands)  Less than 12 months   12 months or more   Total 
December 31, 2023  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Available-for-sale securities:  Value   Loss   Value   Loss   Value   Loss 
US Treasury Securities  $—   $—   $18,346   $2,445   $18,346   $2,445 
Government Sponsored Enterprise   —    —    2,129    371    2,129    371 
Mortgage-backed securities   8,164    423    223,844    17,190    232,008    17,613 
Small Business Administration pools   4,253    45    7,638    366    11,891    411 
Corporate and other securities   1,880    115    4,236    773    6,116    888 
Total  $14,297   $583   $256,193   $21,145   $270,490   $21,728 
                         
(Dollars in thousands)  Less than 12 months   12 months or more   Total 
December 31, 2022  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Available-for-sale securities:  Value   Loss   Value   Loss   Value   Loss 
US Treasury Securities  $28,827   $1,032   $27,156   $3,537   $55,983   $4,569 
Government Sponsored Enterprise   —    —    2,074    426    2,074    426 
Mortgage-backed securities   81,961    4,435    159,227    14,679    241,188    19,114 
Small Business Administration pools   16,066    453    2,592    177    18,658    630 
Corporate and other securities   2,128    146    3,230    520    5,358    666 
Total  $128,982   $6,067   $194,279   $19,338   $323,261   $25,405 

 

                         
(Dollars in thousands)  Less than 12 months   12 months or more   Total 
December 31, 2023  Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
Held-to-maturity securities:  Value   Loss   Value   Loss   Value   Loss 
Mortgage-backed securities   —    —    104,250    8,490    104,250    8,490 
State and local government   6,278    25    78,597    3,420    84,875    3,445 
Total  $6,278   $25   $182,847   $11,910   $189,125   $11,935 

  

The following table shows a roll forward of the allowance for credit losses on held to maturity securities for the year ended December 31, 2023.

   State and 
   local 
(Dollars in thousands)  government 
Allowance for Credit Losses on Held-to-Maturity Securities:     
      
Beginning balance, December 31, 2022  $— 
Adjustment for adoption of ASU 2016-13   (43)
Provision for credit losses   13 
Ending balance, December 31, 2023  $(30)

 

For the year ended December 31, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as non-accrual at December 31, 2023.

The amortized cost and fair value of investment securities at December 31, 2023, by expected maturity, follow. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. Mortgage-backed securities are included in the year corresponding with the remaining expected life.

AVAILABLE-FOR-SALE:

(Dollars in thousands)  Available-for-sale 
   Amortized
Cost		   Fair
Value		 
Due in one year or less  $5,003   $4,996 
Due after one year through five years   9,658    9,328 
Due after five years through ten years   39,482    35,424 
Due after ten years   249,772    232,478 
   $303,915   $282,226 

 

HELD-TO-MATURITY:

(Dollars in thousands)  Held-to-maturity 
   Amortized
Cost		   Fair
Value		 
Due in one year or less  $809   $805 
Due after one year through five years   42,349    40,915 
Due after five years through ten years   74,378    71,522 
Due after ten years   99,664    92,276 
Allowance for Credit Losses on Held-to-Maturity Securities   (30)   — 
   $217,170   $205,518 

 

Securities with an amortized cost of $160.8 million and fair value of $150.6 million at December 31, 2023 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase. Securities with an amortized cost of $290.1 million and fair value of $270.4 million at December 31, 2022 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase.

 

Allowance for Credit Losses on Held-to-Maturity Securities

Expected credit losses on held-to-maturity debt securities are evaluated by major security type. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Municipal securities are analyzed individually to establish a CECL reserve.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL or as of December 31, 2023.

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

 

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit loss related to the available-for-sale securities portfolio.