Investments

9 Months Ended

Sep. 30, 2023

‎

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of September 30, 2023 and December 31, 2022 are as follows:



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
September 30, 2023	cost		gains		losses		Value
U.S. Treasury	$	83,672	$	—	$	(12,531)	$	71,141
Municipal		161,659		—		(32,942)		128,717
Corporate		26,331		—		(3,348)		22,983
Agency mortgage & asset-backed		147,099		81		(12,810)		134,370
Non-Agency mortgage & asset-backed		106,767		7		(5,709)		101,065
Total	$	525,528	$	88	$	(67,340)	$	458,276



(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 September 30, 2023 and December 31, 2022, the fair value of debt securities pledged to secure public funds and trust deposits totaled $199.1 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 September 30, 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		44,354		38,583
Due after five years through ten years		117,050		97,821
Due after ten years		110,258		86,437
		271,662		222,841
Mortgage & asset-backed		253,866		235,435
	$	525,528	$	458,276

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



	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2023		2022		2023		2022
Proceeds	$	—	$	1,000	$	40,117	$	1,082
Gross gains realized	$	—	$	—	$	12	$	—
Gross losses realized		—		(15)		(1,131)		(34)
Net (losses) gains realized	$	—	$	(15)	$	(1,119)	$	(34)

Tax benefit (provision) on net (losses) gains realized	$	—	$	3	$	235	$	7

Impairment:

The debt securities portfolio contained 578 securities with $448.9 million of temporarily impaired fair value and $67.3 million in unrealized losses at September 30, 2023. The total unrealized loss position has increased $5.8 million since year-end 2022 due primarily to an increase in long-term interest rates during the period despite the Bank realizing $1.1 million of losses due to restructuring of the portfolio.

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 September 30, 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 2023, approximately $40 million of securities was sold as part of a portfolio restructuring to take advantage of higher market interest rates. The realized loss on these sales was $1.1 million.

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 September 30, 2023 and December 31, 2022:



	September 30, 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	$	—	$	—	—	$	71,141	$	(12,531)	28	$	71,141	$	(12,531)	28
Municipal		810		(193)	2		127,907		(32,749)	166		128,717		(32,942)	168
Corporate		1,483		(167)	5		21,500		(3,181)	46		22,983		(3,348)	51
Agency mortgage & asset-backed		7,716		(195)	22		120,909		(12,615)	228		128,625		(12,810)	250
Non-Agency mortgage & asset-backed		49,219		(859)	25		48,230		(4,850)	56		97,449		(5,709)	81
Total temporarily impaired	$	59,228	$	(1,414)	54	$	389,687	$	(65,926)	524	$	448,915	$	(67,340)	578



	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		(20,980)	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 September 30, 2023 and December 31, 2022, this investment was reported at fair value of $386 thousand and $411 thousand, respectively, with changes in value reported through income.