Investment Securities

6 Months Ended

Jun. 30, 2024

Note 2—Investment Securities

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

			Gross Unrealized
(Dollars in thousands)	Amortized Cost		Gains		Losses		Fair Value
As of June 30, 2024
U.S. Government-sponsored securities	$	2,885	$	12	$	15	$	2,882
Mortgage-backed securities⁽¹⁾		248,293		859		21,289		227,863
Collateralized mortgage obligations⁽¹⁾		5,712		-		106		5,606
Corporate securities		14,770		15		33		14,752
Other		310		-		-		310
Total available-for-sale securities	$	271,970	$	886	$	21,443	$	251,413

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

			Gross Unrealized
(Dollars in thousands)	Amortized Cost		Gains		Losses		Fair Value
As of December 31, 2023
U.S. Government-sponsored securities	$	3,230	$	12	$	18	$	3,224
Mortgage-backed securities⁽¹⁾		180,543		3,022		19,727		163,838
Collateralized mortgage obligations⁽¹⁾		548		-		13		535
Corporate securities		14,743		41		179		14,605
Other		310		-		-		310
Total available-for-sale securities	$	199,374	$	3,075	$	19,937	$	182,512

⁽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 unrecognized gains and losses of investments classified as held-to-maturity are as follows:

			Gross Unrecognized
(Dollars in thousands)	Amortized Cost		Gains		Losses		Fair Value		Allowance for Credit Losses
As of June 30, 2024
Mortgage-backed securities⁽¹⁾	$	646,404	$	-	$	141,259	$	505,145	$	-
Collateralized mortgage obligations⁽¹⁾		71,182		-		14,306		56,876		-
Municipal securities		77,211		48		562		76,697		450
Total held-to-maturity securities	$	794,797	$	48	$	156,127	$	638,718	$	450

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

			Gross Unrecognized
(Dollars in thousands)	Amortized Cost		Gains		Losses		Fair Value		Allowance for Credit Losses
As of December 31, 2023
Mortgage-backed securities⁽¹⁾	$	664,728	$	30	$	132,043	$	532,715	$	-
Collateralized mortgage obligations⁽¹⁾		74,170		-		14,017		60,153		-
Municipal securities		78,790		107		180		78,717		450
Total held-to-maturity securities	$	817,688	$	137	$	146,240	$	671,585	$	450

⁽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:

	June 30, 2024
	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-Sale Securities
U.S. Government-sponsored securities	$	-	$	-	$	1,049	$	15	$	1,049	$	15
Mortgage-backed securities⁽¹⁾		109,045		342		74,864		20,947		183,909		21,289
Collateralized mortgage obligations⁽¹⁾		5,113		93		493		13		5,606		106
Corporate securities		9,992		33		-		-		9,992		33
Total available-for-sale securities	$	124,150	$	468	$	76,406	$	20,975	$	200,556	$	21,443

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

					December 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
Available-for-Sale Securities
U.S. Government-sponsored securities	$	33	$	-	$	1,235	$	18	$	1,268	$	18
Mortgage-backed securities⁽¹⁾		1,629		11		80,746		19,716		82,375		19,727
Collateralized mortgage obligations⁽¹⁾		-		-		535		13		535		13
Corporate securities		-		-		9,853		179		9,853		179
Total available-for-sale securities	$	1,662	$	11	$	92,369	$	19,926	$	94,031	$	19,937

⁽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 June 30, 2024, the Company held 181 available-for-sale securities of which 17 were in an unrealized loss position for less than twelve months and 134 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 and it is likely that the Company will not be required to sell the securities prior to their anticipated recovery, it has been determined that there is no expected credit loss. Management evaluates the available-for-sale 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:

	June 30, 2024
(Dollars in thousands)	Municipal securities		Mortgage-backed securities		Collateralized Mortgage obligations		Total
Allowance for credit losses - securities
Beginning balance	$	450	$	-	$	-	$	450
Provision for credit losses		-		-		-		-
Ending Balance	$	450	$	-	$	-	$	450

	December 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		57		-		-		57
Ending Balance	$	450	$	-	$	-	$	450

The amortized cost and estimated fair values of investment securities at June 30, 2024 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	$	358	$	358	$	2,665	$	2,660
After one year through five years		19,719		19,541		18,069		17,647
After five years through ten years		5,146		4,978		19,168		17,943
After ten years		246,747		226,536		754,895		600,468
Total	$	271,970	$	251,413	$	794,797	$	638,718

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 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 tables summarizes the amortized cost of held-to-maturity municipal securities by credit rating as of the dates indicated:

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A		BBB/BB/B		Not Rated		Total
June 30, 2024
Municipal securities	$	19,641	$	399	$	57,171	$	77,211
Total	$	19,641	$	399	$	57,171	$	77,211

As of June 30, 2024, there were no past due principal or interest payments associated with these securities.

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A		BBB/BB/B			Not Rated			Total
December 31, 2023
Municipal securities	$	20,203		$	395		$	58,192		$	78,790
Total	$	20,203		$	395		$	58,192		$	78,790

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

(Dollars in thousands)	Gross Proceeds		Gross Gains		Gross Losses
Six months ended June 30, 2024	$	-	$	-	$	-
Six months ended June 30, 2023	$	30,482	$	-	$	5,686

Pledged Securities

As of June 30, 2024, investment securities carried at $741.6 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount of investments pledged was $794.1 million at December 31, 2023.