Securities

6 Months Ended

Jun. 30, 2024

Securities [Abstract]

Securities

Note 3. Securities

Available-for-sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell, but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in accumulated other comprehensive income (loss). Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the estimated life of the security. Prepayments are anticipated for mortgage-backed and Small Business Administration (“SBA”) securities. Premiums on callable securities are amortized to their earliest call date.

Held-to-maturity securities (“HTM”), which include any security for which the Company has both the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the security’s estimated life. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date.

The amortized cost, gross unrealized gains and losses and fair value of securities AFS and HTM are summarized as follows (in thousands):

	June 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Available-for-sale:	Cost		Gains		Losses		Value
U.S. Treasury	$	83,822	$	—	$	(8,383)	$	75,439
U.S. Government-sponsored enterprises (GSEs)		45,426		735		(126)		46,035
Municipal securities		18,364		46		(592)		17,818
Other debt securities		42,229		174		(3,410)		38,993
Mortgage-backed securities (GSEs)		344,087		897		(22,448)		322,536
Total	$	533,928	$	1,852	$	(34,959)	$	500,821

	June 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Held-to-maturity:	Cost		Gains		Losses		Value
U.S. Government-sponsored enterprises (GSEs)	$	48,730	$	—	$	(7,433)	$	41,297
Municipal securities		52,171		—		(6,838)		45,333
Mortgage-backed securities (GSEs)		28,095		—		(3,902)		24,193
Total	$	128,996	$	—	$	(18,173)	$	110,823

	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Available-for-sale:	Cost		Gains		Losses		Value
U.S. Treasury	$	84,307	$	—	$	(8,274)	$	76,033
U.S. Government-sponsored enterprises (GSEs)		46,983		1,256		(146)		48,093
Municipal securities		18,616		135		(475)		18,276
Other debt securities		36,863		93		(3,887)		33,069
Mortgage-backed securities (GSEs)		254,288		588		(21,937)		232,939
Total	$	441,057	$	2,072	$	(34,719)	$	408,410

	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Held-to-maturity:	Cost		Gains		Losses		Value
U.S. Treasury	$	150,066	$	—	$	(1,482)	$	148,584
U.S. Government-sponsored enterprises (GSEs)		49,336		—		(7,143)		42,193
Municipal securities		52,680		—		(6,178)		46,502
Mortgage-backed securities (GSEs)		29,154		—		(3,895)		25,259
Total	$	281,236	$	—	$	(18,698)	$	262,538

At June 30, 2024 and December 31, 2023, securities with a carrying value totaling approximately $468.6 million and $358.3 million, respectively, were pledged to secure public funds and securities sold under agreements to repurchase.

For the three and six months ended June 30, 2024, and 2023 there were no gross gains or gross losses related to the sale of investment securities.

The amortized cost and estimated fair value of securities at June 30, 2024, by contractual maturity for non-mortgage-backed securities are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2024
	Amortized		Fair
Available-for-sale:	Cost		Value
Due in one year or less	$	2,757	$	2,711
Due from one year to five years		90,095		81,354
Due from five years to ten years		87,123		84,640
Due after ten years		9,866		9,580
		189,841		178,285
Mortgage-backed securities		344,087		322,536
Total	$	533,928	$	500,821
Held-to-maturity:
Due in one year or less	$	—	$	—
Due from one year to five years		740		688
Due from five years to ten years		46,911		40,198
Due after ten years		53,250		45,744
		100,901		86,630
Mortgage-backed securities		28,095		24,193
Total	$	128,996	$	110,823

The following tables present the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities AFS and HTM have been in a continuous unrealized loss position (in thousands):

	June 30, 2024
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Available-for-sale:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	—	$	—	—	$	75,440	$	(8,383)	9	$	75,440	$	(8,383)	9
U.S. Government-sponsored enterprises (GSEs)		9,688		(110)	3		5,562		(16)	5		15,250		(126)	8
Municipal securities		1,404		(21)	3		12,437		(571)	19		13,841		(592)	22
Other debt securities		5,149		(202)	3		29,704		(3,208)	26		34,853		(3,410)	29
Mortgage-backed securities (GSEs)		79,493		(592)	32		174,041		(21,856)	88		253,534		(22,448)	120
Total	$	95,734	$	(925)	41	$	297,184	$	(34,034)	147	$	392,918	$	(34,959)	188
	June 30, 2024
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Held-to-maturity:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Government-sponsored enterprises (GSEs)	$	—	$	—	—	$	41,297	$	(7,433)	13	$	41,297	$	(7,433)	13
Municipal securities		—		—	—		45,333		(6,838)	35		45,333		(6,838)	35
Mortgage-backed securities (GSEs)		—		—	—		24,193		(3,902)	5		24,193		(3,902)	5
Total	$	—	$	—	—	$	110,823	$	(18,173)	53	$	110,823	$	(18,173)	53

	December 31, 2023
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Available-for-sale:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	—	$	—	—	$	76,033	$	(8,274)	9	$	76,033	$	(8,274)	9
U.S. Government-sponsored enterprises (GSEs)		9,743		(137)	3		1,482		(9)	3		11,225		(146)	6
Municipal securities		2,786		(2)	2		9,849		(473)	17		12,635		(475)	19
Other debt securities		2,986		(17)	2		29,057		(3,870)	26		32,043		(3,887)	28
Mortgage-backed securities (GSEs)		16,401		(229)	8		176,351		(21,708)	88		192,752		(21,937)	96
Total	$	31,916	$	(385)	15	$	292,772	$	(34,334)	143	$	324,688	$	(34,719)	158
	December 31, 2023
	Less than 12 Months					12 Months or Greater					Total
			Gross		Number			Gross		Number			Gross		Number
	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized		of
Held-to-maturity:	Value		Losses		Securities	Value		Losses		Securities	Value		Losses		Securities
U.S. Treasury	$	—	$	—	—	$	148,584	$	(1,482)	4	$	148,584	$	(1,482)	4
U.S. Government-sponsored enterprises (GSEs)		—		—	—		42,194		(7,143)	13		42,194		(7,143)	13
Municipal securities		—		—	—		46,500		(6,178)	35		46,500		(6,178)	35
Mortgage-backed securities (GSEs)		—		—	—		25,258		(3,895)	5		25,258		(3,895)	5
Total	$	—	$	—	—	$	262,536	$	(18,698)	57	$	262,536	$	(18,698)	57

For any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, the Company assesses whether it intends to sell the security, or more likely than not will be required to sell the security before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because the Company currently does not intend to sell those available-for-sale securities that have an unrealized loss at June 30, 2024, and it is not likely that they we will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-down is necessary. In addition, the Company evaluates whether any portion of the decline in fair value of available-for-sale securities is the result of credit deterioration, which would require the recognition of an allowance for credit losses.  The unrealized losses associated with available-for-sale securities at June 30, 2024, are driven by changes in interest rates and are not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at June 30, 2024.  Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments.

The unrealized losses in the Company’s held-to-maturity portfolio were caused by changes in the interest rate environment.  The Company has a zero-loss expectation for its U.S. treasury securities in addition to U.S. Government-sponsored enterprises (GSEs) and mortgage-backed securities (GSEs), and accordingly, no allowance for credit losses is estimated for these securities.  The held-to-maturity state and municipal securities are general obligation bonds which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt.  All debt securities in an unrealized loss position as of June 30, 2024, continue to perform as scheduled and we do not believe an allowance for credit losses is necessary.

The Company utilizes bond credit ratings assigned by third party ratings agencies to monitor the credit quality of debt securities held-to-maturity.  At June 30, 2024, all debt securities classified as held-to-maturity were rated AA- or higher by the ratings agencies.  Updated credit ratings are obtained as they become available from the ratings agencies.

Allowance for Credit Losses (“ACL”)

There were no past due or nonaccrual AFS or HTM securities at June 30, 2024, or December 31, 2023.  Accrued interest receivable is excluded from the estimate of credit losses and based on the analysis of the underlying risk characteristics of

its AFS and HTM portfolios, including credit ratings and other qualitative factors, there was no provision for credit losses related to AFS or HTM securities recorded during the three or six months ended June 30, 2024, and 2023, respectively, because the ACL was deemed immaterial.  

Other Investments:

Our other investments consist of restricted non-marketable equity securities that have no readily determinable market value. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.  As of June 30, 2024, the Company determined that there was no impairment on its other investment securities.

The following is the amortized cost and carrying value of other investments (in thousands):

	June 30,		December 31,
	2024		2023
Federal Reserve Bank stock	$	9,398	$	9,526
Federal Home Loan Bank stock		4,032		3,786
First National Bankers Bank stock		350		350
Total	$	13,780	$	13,662