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Investments

3 Months Ended

Mar. 31, 2024

2. Investments

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

(Dollars in thousands)	As of March 31, 2024
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
Available-for-sale:
U. S. treasury securities	$	97,535	$	-	$	(3,852	)	$	93,683
Municipal obligations, tax exempt		121,586		77		(3,218	)		118,445
Municipal obligations, taxable		79,882		129		(4,640	)		75,371
Agency mortgage-backed securities		162,658		66		(12,947	)		149,777
Total available-for-sale	$	461,661	$	272	$	(24,657	)	$	437,276

Held-to-maturity:
Other	$	3,584	$	-	$	(480	)	$	3,104
Total held-to-maturity	$	3,584	$	-	$	(480	)	$	3,104

	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

The amortized cost of the above held-to-maturity investment securities has been further reduced by the allowance for credit losses of $91,000 at March 31, 2024 and December 31, 2023.

The tables above show that some of the securities in the available-for-sale and held-to-maturity investment portfolios had unrealized losses, or were temporarily impaired, as of March 31, 2024 and December 31, 2023. 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 available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded at March 31, 2024 and December 31, 2023 along with the length of time in a continuous loss position.

			As of March 31, 2024
(Dollars in thousands)			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		52	$	1,959	$	(4	)	$	91,724	$	(3,848	)	$	93,683	$	(3,852	)
Municipal obligations, tax exempt		267		22,079		(193	)		88,067		(3,025	)		110,146		(3,218	)
Municipal obligations, taxable		115		15,016		(243	)		55,090		(4,397	)		70,106		(4,640	)
Agency mortgage-backed securities		103		10,440		(21	)		128,458		(12,926	)		138,898		(12,947	)
Total for available-for-sale		537	$	49,494	$	(461	)	$	363,339	$	(24,196	)	$	412,833	$	(24,657	)

			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 for available-for-sale		486		56,355		(563	)		339,519		(22,023	)		395,874		(22,586	)

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 securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of its cost basis, the Company believed that the U.S. treasury securities identified in the table above were temporarily impaired as of March 31, 2024 and December 31, 2023.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of March 31, 2024, the Company did not intend to sell and it was 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 as of March 31, 2024 and December 31, 2023.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and the Government National Mortgage Association. 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 table above were temporarily impaired as of March 31, 2024 and December 31, 2023.

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

(Dollars in thousands)	2024		2023
	Three months ended March 31,
(Dollars in thousands)	2024		2023
Balance at January 1,	$	91	$	-
Balance	$	91	$	-
Impact of adopting ASC 326		-		72
Provision for credit losses		-		19
Balance at March 31,	$	91	$	91
Balance	$	91	$	91

The table below sets forth amortized cost and fair value of investment securities at March 31, 2024. The table 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.

(Dollars in thousands)	Amortized		Estimated
Available-for-sale:	cost		fair value
Due in less than one year	$	43,396	$	42,807
Due after one year but within five years		216,817		204,500
Due after five years but within ten years		155,502		145,894
Due after ten years		45,946		44,075
Total available-for-sale	$	461,661	$	437,276

Held-to-maturity:
Due after one year but within five years		3,584		3,104
Total held-to-maturity	$	3,584	$	3,104

The Company did not record any sales of available-for-sale securities during the three months ended March 31, 2024 and 2023.

Securities with carrying values of $375.5 million and $380.4 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at March 31, 2024 and December 31, 2023, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.