Investment Securities

3 Months Ended

Mar. 31, 2023

Note 2—Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows:

Available-for-Sale Securities			Gross Unrealized
(Dollars in thousands)	Amortized Cost		Gains		Losses		Fair Value
As of March 31, 2023
U.S. Government-sponsored securities	$	4,117	$	18	$	23	$	4,112
Mortgage-backed securities⁽¹⁾		125,610		41		21,954		103,697
Collateralized mortgage obligations⁽¹⁾		620		-		13		607
Corporate securities		10,041		-		330		9,711
Other		310		-		-		310
Total available-for-sale securities	$	140,698	$	59	$	22,320	$	118,437

⁽¹⁾All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

Available-for-Sale Securities			Gross Unrealized
(Dollars in thousands)	Amortized Cost		Gains		Losses		Fair Value
As of December 31, 2022
U.S. Treasury notes	$	4,989	$	-	$	25	$	4,964
U.S. Government-sponsored securities		4,430		21		24		4,427
Mortgage-backed securities⁽¹⁾		162,314		9		29,795		132,528
Collateralized mortgage obligations⁽¹⁾		1,085		-		31		1,054
Corporate securities		10,043		-		462		9,581
Other		310		-		-		310
Total available-for-sale securities	$	183,171	$	30	$	30,337	$	152,864

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows:

Held-to-Maturity Securities				Gross Unrealized
(Dollars in thousands)	Amortized Cost			Gains			Losses			Fair Value			Allowance for Credit Losses
As of March 31, 2023
Municipal securities		$	76,260		$	98		$	96		$	76,262		$	393
Mortgage-backed securities⁽¹⁾			695,083			59			130,405			564,737			-
Collateralized mortgage obligations⁽¹⁾			79,044			-			14,134			64,910			-
Total held-to-maturity securities		$	850,387		$	157		$	144,635		$	705,909		$	393

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

Held-to-Maturity Securities				Gross Unrealized
(Dollars in thousands)	Amortized Cost			Gains			Losses			Fair Value			Allowance for Credit Losses
As of December 31, 2022
Municipal securities		$	62,302		$	49		$	209		$	62,142		$	393
Mortgage-backed securities⁽¹⁾			702,858			29			141,121			561,766			-
Collateralized mortgage obligations⁽¹⁾			80,186			-			15,701			64,485			-
Total held-to-maturity securities		$	845,346		$	78		$	157,031		$	688,393		$	393

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed or pre-refunded by the issuers.

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The following tables show the gross unrealized losses for available-for-sale securities, for which an allowance for credit losses has not been recorded, that are less than 12 months and 12 months or more:

Available-for-Sale Securities							March 31, 2023
	Less Than 12 Months						12 Months or More						Total
(Dollars in thousands)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
As of March 31, 2023
U.S. Government-sponsored securities		$	330		$	1		$	1,246		$	22		$	1,576		$	23
Mortgage-backed securities⁽¹⁾			12,450			343			86,844			21,611			99,294			21,954
Collateralized mortgage obligations⁽¹⁾			-			-			607			13			607			13
Corporate securities			-			-			9,711			330			9,711			330
Total available-for-sale securities		$	12,780		$	344		$	98,408		$	21,976		$	111,188		$	22,320

⁽¹⁾All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

Available-for-Sale Securities							December 31, 2022
	Less Than 12 Months						12 Months or More						Total
(Dollars in thousands)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
As of December 31, 2022
U.S. Treasury notes		$	4,964		$	25		$	-		$	-		$	4,964		$	25
U.S. Government-sponsored securities			378			1			1,326			23			1,704			24
Mortgage-backed securities⁽¹⁾			35,117			1,639			96,589			28,156			131,706			29,795
Collateralized Mortgage Obligations⁽¹⁾			1,054			31			-			-			1,054			31
Corporate securities			-			-			9,581			462			9,581			462
Total available-for-sale securities		$	41,513		$	1,696		$	107,496		$	28,641		$	149,009		$	30,337

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

As of March 31, 2023, the Company held 183 available-for-sale securities of which 61 were in an unrealized loss position for less than twelve months and 97 securities were in an unrealized loss position for twelve months or more without an allowance for credit losses. Because the decline in fair value is attributable to changes in interest rates and not credit quality and because the Company does not have the intent to sell these securities and it is more likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be impaired. Management evaluates the available-for-sale debt securities in an unrealized loss position, relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations.

The following table presents the activity in the allowance for credit losses for held-to-maturity securities by major type:

	March 31, 2023
(Dollars in thousands)	Municipal securities			Mortgage- backed securities			Collateralized Mortgage obligations			Total
Allowance for credit losses - securities
Beginning Balance		$	393		$	-		$	-		$	393
Provision for credit losses			-			-			-			-
Ending Balance		$	393		$	-		$	-		$	393

	December 31, 2022
(Dollars in thousands)	Municipal securities			Mortgage- backed securities			Collateralized Mortgage obligations			Total
Allowance for credit losses - securities
Beginning Balance		$	393		$	-		$	-		$	393
Provision for credit losses			-			-			-			-
Ending Balance		$	393		$	-		$	-		$	393

The amortized cost and estimated fair values of debt securities at March 31, 2023 by contractual final maturity are shown in the following table:

	Available-for-Sale				Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities maturing in:
One year or less	$	335	$	335	$	283	$	283
After one year through five years		19,386		18,756		11,174		11,155
After five years through ten years		6,114		5,913		30,348		28,835
After ten years		114,863		93,433		808,582		665,636
Total	$	140,698	$	118,437	$	850,387	$	705,909

Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Expected maturities of mortgage-backed and CMO securities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

The Company monitors the credit quality of those held-to-maturity debt securities not issued by the U.S. government or one of its agencies or government sponsored entities, through the use of credit ratings. Credit ratings are reviewed and updated quarterly. The following table summarizes the amortized cost of held-to-maturity municipal debt securities by credit rating at March 31, 2023:

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A			BBB/BB/B			Not Rated			Total
March 31, 2023
Municipal securities		$	19,380		$	390		$	56,490		$	76,260
Total		$	19,380		$	390		$	56,490		$	76,260

As of March 31, 2023, there were no past due principal or interest payments associated with these securities.

Proceeds from sales and calls of these securities were as follows:

(Dollars in thousands)	Gross Proceeds		Gross Gains		Gross Losses
Three months ended March 31, 2023	$	30,482	$	-	$	5,686
Three months ended March 31, 2022	$	2,190	$	-	$	-

Pledged Securities

As of March 31, 2023, securities carried at $498 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $479 million at December 31, 2022.