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Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

The following tables summarize securities AFS and securities HTM as of September 30, 2023 and December 31, 2022.

						September 30, 2023
						Amortized						Gross Unrealized												Fair
(in thousands)						Cost						Gains						Losses						Value
Securities available-for-sale
U.S. Government-sponsored agencies						$	98,594					$	550					$	(1,966)					$	97,178
Municipal securities						69,031						64						(6,323)						62,772
Agency mortgage-backed securities - residential 1						235,468						—						(42,372)						193,096
Agency mortgage-backed securities - commercial						37,931						—						(1,768)						36,163
Private label mortgage-backed securities - residential						20,292						—						(1,716)						18,576
Asset-backed securities						6,713						2						(12)						6,703
Corporate securities						39,603						113						(3,377)						36,339
Total available-for-sale						$	507,632					$	729					$	(57,534)					$	450,827

						September 30, 2023
						Amortized Cost						Gross Unrealized												Fair Value						Allowance for Credit Losses						Net Carrying Value
(in thousands)												Gains						Losses
Securities held-to-maturity
Municipal securities						$	13,903					$	—					$	(1,454)					$	12,449					$	(3)					$	13,900
Mortgage-backed securities - residential						170,524						—						(23,112)						147,412						—						170,524
Mortgage-backed securities - commercial						5,782						—						(1,592)						4,190						—						5,782
Corporate securities						42,040						—						(4,441)						37,599						(318)						41,722
Total held-to-maturity						$	232,249					$	—					$	(30,599)					$	201,650					$	(321)					$	231,928

1 Includes $0.4 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of September 30, 2023.

Accrued interest receivable on AFS and HTM securities at September 30, 2023 was $2.3 million and $1.1 million, respectively, and is included in accrued interest receivable on the condensed consolidated balance sheet. The Company elected to exclude all accrued interest receivable from securities when estimating credit losses.

Over 96% of mortgage-backed securities (including both AFS and HTM) held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses; therefore, the Company did not record an ACL on these securities.

Additionally, the Company evaluated credit impairment for individual AFS securities that are in an unrealized loss position and determined that the unrealized losses are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the financial markets. As the Company does not intend to sell the AFS securities that are in an unrealized loss position, and it is unlikely that it will be required to sell these securities before recovery of their amortized cost basis, the Company did not record an ACL on these securities.

In accordance with the adoption of ASC 326, the Company also evaluated its HTM securities that are in an unrealized loss position and considered issuer bond ratings, historical loss rates for bond ratings and economic forecasts. As a result, the Company recorded in an initial ACL in retained earnings of $0.3 million on January 1, 2023. The Company reevaluated these securities at September 30, 2023 and determined no additional ACL was necessary.

						December 31, 2022
						Amortized						Gross Unrealized												Fair
(in thousands)						Cost						Gains						Losses						Value
Securities available-for-sale
U.S. Government-sponsored agencies						$	35,606					$	—					$	(1,797)					$	33,809
Municipal securities						68,958						458						(2,140)						67,276
Agency mortgage-backed securities - residential 1						252,066						—						(36,974)						215,092
Agency mortgage-backed securities - commercial						17,142						—						(1,302)						15,840
Private label mortgage-backed securities - residential						11,777						—						(1,322)						10,455
Asset-backed securities						5,000						—						(40)						4,960
Corporate securities						45,634						35						(2,717)						42,952
Total available-for-sale						$	436,183					$	493					$	(46,292)					$	390,384

						December 31, 2022
						Amortized						Gross Unrealized												Fair
(in thousands)						Cost						Gains						Losses						Value
Securities held-to-maturity
Municipal securities						$	13,946					$	—					$	(1,114)					$	12,832
Agency mortgage-backed securities - residential						121,853						—						(15,112)						106,741
Agency mortgage-backed securities - commercial						5,818						—						(1,266)						4,552
Corporate securities						47,551						—						(3,193)						44,358
Total held-to-maturity						$	189,168					$	—					$	(20,685)					$	168,483

1 Includes $0.5 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2022.

The carrying value of securities at September 30, 2023 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

						Available-for-Sale
(in thousands)						Amortized Cost						Fair Value
Within one year						$	550					$	545
One to five years						29,373						30,293
Five to ten years						60,746						57,066
After ten years						116,559						108,385
						207,228						196,289
Agency mortgage-backed securities - residential						235,468						193,096
Agency mortgage-backed securities - commercial						37,931						36,163
Private label mortgage-backed securities - residential						20,292						18,576
Asset-backed securities						6,713						6,703
Total						$	507,632					$	450,827

						Held-to-Maturity
(in thousands)						Amortized Cost						Fair Value
Within one year						$	995					$	977
One to five years						7,135						6,817
Five to ten years						43,859						38,974
After ten years						3,954						3,280
						55,943						50,048
Agency mortgage-backed securities - residential						170,524						147,412
Agency mortgage-backed securities - commercial						5,782						4,190
Total						$	232,249					$	201,650

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three and nine months ended September 30, 2023 and September 30, 2022, respectively.

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at September 30, 2023 and December 31, 2022 was $605.9 million and $527.4 million, which was approximately 93% and 94%, respectively, of the Company’s AFS and HTM securities portfolios. As of September 30, 2023, the Company’s security portfolio consisted of 504 securities, of which 488 were in an unrealized loss position. As of December 31, 2022, the Company’s security portfolio consisted of 445 securities, of which 434 were in an unrealized loss position. The unrealized losses are related to the categories noted below.

U. S. Government-Sponsored Agencies, Municipal Securities and Corporate Securities

The unrealized losses on the Company’s investments in securities issued by U.S. Government-sponsored agencies, municipal organizations and corporate entities were caused primarily by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be upon maturity.

Agency Mortgage-Backed and Private Label Mortgage-Backed Securities

The unrealized losses on the Company’s investments in agency mortgage-backed and private label mortgage-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost basis over the terms of the securities. The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be upon maturity.

The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2023 and December 31, 2022.

						September 30, 2023
						Less Than 12 Months												12 Months or Longer												Total
(in thousands)						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies						$	42,445					$	(184)					$	26,328					$	(1,782)					$	68,773					$	(1,966)
Municipal securities						9,729						(815)						46,445						(5,508)						56,174						(6,323)
Agency mortgage-backed securities- residential						4,292						(67)						188,803						(42,305)						193,095						(42,372)
Agency mortgage-backed securities- commercial						21,856						(95)						14,307						(1,673)						36,163						(1,768)
Private label mortgage-backed securities - residential						9,431						(251)						9,145						(1,465)						18,576						(1,716)
Asset-backed securities						5,803						(12)						—						—						5,803						(12)
Corporate securities						1,720						(330)						23,953						(3,047)						25,673						(3,377)
Total						$	95,276					$	(1,754)					$	308,981					$	(55,780)					$	404,257					$	(57,534)

						December 31, 2022
						Less Than 12 Months												12 Months or Longer												Total
(in thousands)						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies						$	29,668					$	(1,008)					$	4,141					$	(789)					$	33,809					$	(1,797)
Municipal securities						39,557						(1,766)						4,778						(374)						44,335						(2,140)
Agency mortgage-backed securities - residential						170,026						(29,690)						45,066						(7,284)						215,092						(36,974)
Agency mortgage-backed securities - commercial						10,560						(926)						5,280						(376)						15,840						(1,302)
Private label mortgage-backed securities						2,445						(330)						8,010						(992)						10,455						(1,322)
Asset-backed securities						4,960						(40)						—						—						4,960						(40)
Corporate securities						21,568						(1,452)						13,239						(1,265)						34,807						(2,717)
Total						$	278,784					$	(35,212)					$	80,514					$	(11,080)					$	359,298					$	(46,292)

						December 31, 2022
						Less Than 12 Months												12 Months or Longer												Total
(in thousands)						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Securities held-to-maturity
Municipal securities						$	8,160					$	(661)					$	4,258					$	(453)					$	12,418					$	(1,114)
Agency mortgage-backed securities - residential						68,408						(8,848)						38,332						(6,264)						106,740						(15,112)
Agency mortgage-backed securities - commercial						4,552						(1,266)						—						—						4,552						(1,266)
Corporate securities						36,866						(2,685)						7,492						(508)						44,358						(3,193)
Total						$	117,986					$	(13,460)					$	50,082					$	(7,225)					$	168,068					$	(20,685)

The following table summarizes ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of September 30, 2023.

						Held-to-Maturity
(in thousands)						State and Municipal						Other						Total
Aaa/AAA						$	95					$	—					$	95
Aa1/AA+						9,831						—						9,831
Aa2/AA						1,539						—						1,539
A1/A+						1,794						—						1,794
A2/A						644						5,000						5,644
A3/A-						—						4,512						4,512
Baa1/BBB+						—						9,500						9,500
Baa2/BBB						—						8,500						8,500
Baa3/BBB-						—						12,528						12,528
Ba1/BB+						—						2,000						2,000
Not Rated 1						—						176,306						176,306
Total						$	13,903					$	218,346					$	232,249

1 HTM agency mortgage-backed securities - commercial and residential are listed under Other securities as not rated.

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three and nine months ended September 30, 2023.

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- Definition

The entire disclosure for investments in certain debt and equity securities.

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-Name Accounting Standards Codification
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