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Investment Securities

12 Months Ended

Dec. 31, 2023

(4) Investment Securities

A summary of investment securities available-for-sale and securities held-to-maturity is as follows:

(Dollars in thousands)	As of December 31, 2023
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value

Available-for-sale:
U. S. treasury securities	$	99,340	$	-	$	(3,673	)	$	95,667
Municipal obligations, tax exempt		122,775		186		(2,338	)		120,623
Municipal obligations, taxable		82,926		225		(4,068	)		79,083
Agency mortgage-backed securities		169,656		247		(12,507	)		157,396
Total available-for-sale	$	474,697	$	658	$	(22,586	)	$	452,769

Held-to-maturity:
Other	$	3,555	$	-	$	(506	)	$	3,049
Total held-to-maturity	$	3,555	$	-	$	(506	)	$	3,049

(Dollars in thousands)	As of December 31, 2022
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value

Available-for-sale:
U. S. treasury securities	$	130,684	$	-	$	(7,573	)	$	123,111
U. S. federal agency obligations		2,002		-		(14	)		1,988
Municipal obligations, tax exempt		130,848		59		(3,645	)		127,262
Municipal obligations, taxable		73,520		14		(6,290	)		67,244
Agency mortgage-backed securities		185,451		172		(15,922	)		169,701
Total available-for-sale	$	522,505	$	245	$	(33,444	)	$	489,306

Held-to-maturity:
Other	$	3,524	$	5	$	(77	)	$	3,452
Total held-to-maturity	$	3,524	$	5	$	(77	)	$	3,452

The tables above show that some of the securities in the available-for-sale and held-to-maturity investment portfolio had unrealized losses, or were temporarily impaired, as of December 31, 2023 and 2022. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date.

The following table summarizes securities available-for-sale in an unrealized loss positions for which an allowance for credit losses has not been recorded at December 31, 2023 along with length of time in a continuous unrealized loss position.

(Dollars in thousands)			As of December 31, 2023
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Available-for-sale	securities		value		losses			value		losses			value		losses
U. S. treasury securities		47	$	1,129	$	(7	)	$	93,833	$	(3,666	)	$	94,962	$	(3,673	)
Municipal obligations, tax exempt		229		31,468		(337	)		64,962		(2,001	)		96,430		(2,338	)
Municipal obligations, taxable		110		17,278		(151	)		52,212		(3,917	)		69,490		(4,068	)
Agency mortgage-backed securities		100		6,480		(68	)		128,512		(12,439	)		134,992		(12,507	)
Total available-for-sale		486	$	56,355	$	(563	)	$	339,519	$	(22,023	)	$	395,874	$	(22,586	)

Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

(Dollars in thousands)			As of December 31, 2022
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Available-for-sale	securities		value		losses			value		losses			value		losses
U. S. treasury securities		67	$	85,988	$	(4,591	)	$	37,123	$	(2,982	)	$	123,111	$	(7,573	)
U. S. federal agency obligations		1		1,988		(14	)		-		-			1,988		(14	)
Municipal obligations, tax exempt		274		107,262		(3,020	)		8,495		(625	)		115,757		(3,645	)
Municipal obligations, taxable		108		54,746		(5,006	)		7,571		(1,284	)		62,317		(6,290	)
Agency mortgage-backed securities		100		78,971		(4,550	)		79,882		(11,372	)		158,853		(15,922	)
Total available-for-sale		550	$	328,955	$	(17,181	)	$	133,071	$	(16,263	)	$	462,026	$	(33,444	)

Other		6	$	3,009	$	(77	)	$	-	$	-		$	3,009	$	(77	)
Total		6	$	3,009	$	(77	)	$	-	$	-		$	3,009	$	(77	)

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the security and its belief that it was more likely than not that the Company will not be required to sell the security before recovery of its cost basis, the Company believed that the U.S. treasury securities identified in the tables above were temporarily impaired.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of December 31, 2023, the Company did not intend to sell and it is more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost basis. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the GNMA. The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the tables above were temporarily impaired.

The Company’s other investment securities portfolio consists of seven subordinated debentures issued by financial institutions. These investment securities were acquired in the Freedom Bank acquisition and classified as held-to-maturity. The securities were issued in 2021 and 2022 with a 10 year maturity and a fixed rate for five years. The securities are callable after the end of the fixed rate term. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the other securities identified in the tables above were temporarily impaired.

The following table provides information on the Company’s allowance for credit losses related to held-to-maturity investment securities.

(Dollars in thousands)
Balance at January 1, 2023	$	-
Impact of adopting ASC 326		72
Provision for credit losses		19
Balance at December 31, 2023	$	91

The table below includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties. The amortized cost and fair value of investment securities at December 31, 2023 are as follows:

	Amortized		Estimated
(Dollars in thousands)	cost		fair value
Available-for-sale:
Due in less than one year	$	37,665	$	37,145
Due after one year but within five years		244,383		232,810
Due after five years but within ten years		142,669		134,262
Due after ten years		49,980		48,552
Total available-for-sale	$	474,697	$	452,769

Held-to-maturity:
Due after five years but within ten years	$	3,555	$	3,049
Total held-to-maturity	$	3,555	$	3,049

The Company has not sold any investment securities subsequent to December 31, 2023 and the date of this filing. Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

Schedule of Realized Gain (loss)

	2023			2022			2021
(Dollars in thousands)	Years ended December 31,
	2023			2022			2021

Sales proceeds	$	20,913		$	52,597		$	16,623

Realized gains	$	-		$	-		$	1,138
Realized losses		(1,246	)		(1,103	)		-
Net realized (losses) gains	$	(1,246	)	$	(1,103	)	$	1,138

Securities with carrying values of $380.4 million and $420.8 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at December 31, 2023 and 2022, respectively. As of December 31, 2023, all of the Company’s investment securities were performing and there were no securities on non-accrual status. Except for U.S. treasuries and federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.