Securities

9 Months Ended

Sep. 30, 2023

Debt Securities, Available-for-Sale [Abstract]

NOTE 4. Securities

On January 1, 2023, the Company adopted ASC 326, which made changes to accounting for available for sale debt securities whereby credit losses should be presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell a security prior to maturity. In addition, ASC 326 requires financial assets measured at amortized cost to measure an expected credit loss under the CECL methodology that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. All securities information presented as of September 30, 2023 is in accordance with ASC 326. All securities information presented as of December 31, 2022 or a prior date is presented in accordance with previously applicable GAAP.

Amortized costs and fair values of securities available for sale at September 30, 2023 and December 31, 2022 were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
	September 30, 2023
	(in thousands)
Obligations of U.S. government corporations and agencies	$	9,259	$	—	$	(1,011	)	$	8,248
Mortgage-backed securities		143,206		—		(27,616	)		115,590
Obligations of states and political subdivisions		6,591		—		(423	)		6,168
Subordinated debt		4,750		—		(780	)		3,970
	$	163,806	$	—	$	(29,830	)	$	133,976


	December 31, 2022
	(in thousands)
Obligations of U.S. government corporations and agencies	$	9,993	$	—	$	(858	)	$	9,135
Mortgage-backed securities		153,289		—		(24,136	)		129,153
Obligations of states and political subdivisions		7,027		2		(422	)		6,607
Subordinated debt		4,750		—		(489	)		4,261
	$	175,059	$	2	$	(25,905	)	$	149,156

The amortized cost and estimated fair value of securities at September 30, 2023, by the earlier of contractual maturity or expected maturity, are shown below. The Company has elected to exclude accrued interest receivable, totaling $396 thousand at September 30, 2023, from the amortized cost basis of securities. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Fair Value
	(in thousands)
Due in one year or less	$	1,667	$	1,646
Due after one year through five years		5,124		4,705
Due after five years through ten years		20,776		18,124
Due after ten years		136,239		109,501
	$	163,806	$	133,976

During the nine months ended September 30, 2023, the Company sold no available for sale securities. During the nine months ended September 30, 2022, the Company sold $15.4 million of available for sale securities recognizing $6 thousand in gross gains and $743 thousand in gross losses.

The fair value and gross unrealized losses for securities available for sale, totaled by the length of time that individual securities have been in a continuous gross unrealized loss position, at September 30, 2023 and December 31, 2022 were as follows:


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	September 30, 2023
	(in thousands)
Obligations of U.S. government corporations and agencies	$	—	$	—	$	8,248	$	1,011	$	8,248	$	1,011
Mortgage-backed securities		—		—		115,590		27,616		115,590		27,616
Obligations of states and political subdivisions		485		16		5,283		407		5,768		423
Subordinated debt		218		32		3,252		748		3,470		780
	$	703	$	48	$	132,373	$	29,782	$	133,076	$	29,830


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	December 31, 2022
	(in thousands)
Obligations of U.S. government corporations and agencies	$	6,140	$	543	$	2,994	$	315	$	9,134	$	858
Mortgage-backed securities		31,771		4,052		97,382		20,084		129,153		24,136
Obligations of states and political subdivisions		6,065		422		—		—		6,065		422
Subordinated debt		2,431		319		1,080		170		3,511		489
	$	46,407	$	5,336	$	101,456	$	20,569	$	147,863	$	25,905

The reference point for determining when securities are in an unrealized loss position is month end. As such, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.

There were 104 debt securities with a fair value below the amortized cost basis, totaling $133.1 million of aggregate fair value as of September 30, 2023. The Company concluded that a credit loss does not exist in its securities portfolio at September 30, 2023, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Company’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

Securities having a carrying value of $13.8 million at September 30, 2023 were pledged as security for trust accounts.

The composition of restricted investments at September 30, 2023 and December 31, 2022 was as follows:


	September 30, 2023		December 31, 2022
	(in thousands)
Federal Reserve Bank Stock	$	344	$	944
Federal Home Loan Bank Stock		8,099		8,149
Community Bankers’ Bank Stock		140		140
	$	8,583	$	9,233