Investments

3 Months Ended

Mar. 31, 2023

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Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of March 31, 2023 and December 31, 2022 are as follows:



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2023	cost		gains		losses		Value
U.S. Treasury	$	84,025	$	—	$	(9,762)	$	74,263
Municipal		170,095		—		(24,590)		145,505
Corporate		26,381		—		(2,382)		23,999
Agency mortgage & asset-backed		156,934		68		(10,910)		146,092
Non-Agency mortgage & asset-backed		72,601		28		(4,721)		67,908
Total	$	510,036	$	96	$	(52,365)	$	457,767



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2022	cost		gains		losses		value
U.S. Treasury	$	101,980	$	—	$	(11,723)	$	90,257
Municipal		186,007		14		(30,566)		155,455
Corporate		26,316		—		(2,077)		24,239
Agency mortgage & asset-backed		163,274		19		(12,358)		150,935
Non-Agency mortgage & asset-backed		70,756		1		(4,807)		65,950
Total	$	548,333	$	34	$	(61,531)	$	486,836

At March 31, 2023 and December 31, 2022, the fair value of debt securities pledged to secure public funds and trust deposits totaled $147.1 million and $208.9 million, respectively. The Bank has no investment in a single issuer that exceeds 10% of shareholders’ equity, except for securities issued by the U.S. Treasury and U.S. government sponsored entities.

The amortized cost and estimated fair value of debt securities at March 31, 2023, by contractual maturity are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.



(Dollars in thousands)	Amortized ‎cost		Fair ‎value
Due in one year or less	$	—	$	—
Due after one year through five years		10,911		9,946
Due after five years through ten years		144,217		127,268
Due after ten years		125,373		106,553
		280,501		243,767
Mortgage & asset-backed		229,535		214,000
	$	510,036	$	457,767

The composition of the net realized gains (losses) on debt securities for the three months ended are as follows:


	For the Three Months Ended
	March 31,
(Dollars in thousands)	2023		2022
Proceeds	$	32,855	$	—
Gross gains realized		12		—
Gross losses realized		(614)		—
Net (losses) gains realized	$	(602)	$	—

Tax benefit (provision) on net (losses) gains realized	$	126	$	—

Impairment:

The debt securities portfolio contained 571 securities with $448.6 million of temporarily impaired fair value and $52.4 million in unrealized losses at March 31, 2023. The total unrealized loss position has decreased $9.2 million since year-end 2022 due primarily to a decrease in long-term market interest rates.

AFS securities in an unrealized loss position are evaluated for credit impairment at least quarterly. For these securities, the Bank considers: (1) the extent to which the fair value is less than amortized cost; (2) adverse conditions specifically related to the security, industry or geographic area; (3) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; (4) failure of the issuer of the security to make scheduled interest or principal payments; and (5) any changes to the rating of the security by a rating agency. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The Bank does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. The impairment identified on debt securities and subject to evaluation at March 31, 2023, was determined not to be attributable to credit related factors; therefore, the Bank does not have an allowance for credit loss for these investments. During the first quarter of 2023, approximately $33 million of securities was sold as part of a portfolio restructuring to take advantage of higher market interest rates. The loss on these sales was $602 thousand.

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The following table reflects impairment in the AFS portfolio, aggregated by investment category, length of time that individual securities have been in a continuous unrealized loss position and the number of securities in each category as of March 31, 2023 and December 31, 2022:



	March 31, 2023
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count

U.S. Treasury	$	—	$	—	—	$	74,263	$	(9,762)	28	$	74,263	$	(9,762)	28
Municipal		1,332		(171)	3		144,173		(24,419)	173		145,505		(24,590)	176
Corporate		7,462		(576)	17		16,537		(1,806)	34		23,999		(2,382)	51
Agency mortgage & asset-backed		17,046		(479)	58		124,043		(10,431)	192		141,089		(10,910)	250
Non-Agency mortgage & asset-backed		27,105		(1,416)	29		36,632		(3,305)	37		63,737		(4,721)	66
Total temporarily impaired	$	52,945	$	(2,642)	107	$	395,648	$	(49,723)	464	$	448,593	$	(52,365)	571



	December 31, 2022
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count

U.S. Treasury	$	17,598	$	(183)	3	$	72,659	$	(11,540)	28	$	90,257	$	(11,723)	31
Municipal		73,644		(9,586)	90		80,503		(20,981)	104		154,147		(30,566)	194
Corporate		12,221		(851)	25		10,368		(1,226)	21		22,589		(2,077)	46
Agency mortgage & asset-backed		55,393		(2,747)	139		88,953		(9,611)	113		144,346		(12,358)	252
Non-Agency mortgage & asset-backed		49,301		(3,092)	52		14,207		(1,715)	16		63,508		(4,807)	68
Total temporarily impaired	$	208,157	$	(16,459)	309	$	266,690	$	(45,072)	282	$	474,847	$	(61,531)	591

Equity Securities at Fair Value

The Corporation owns one equity investment with a readily determinable fair value. At March 31, 2023 and December 31, 2022, this investment was reported at fair value of $387 thousand and $411 thousand, respectively, with changes in value reported through income.