INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2022

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 3 - INVESTMENT SECURITIES

The following presents the amortized cost and fair value of securities held-to-maturity and the corresponding amounts of gross unrecognized gains and losses as of the date noted (dollars in thousands):

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
September 30, 2022	Cost		Gains		Losses		Value
Investment securities held-to-maturity:
U.S. Treasury debt	$	241	$	—	$	(9)	$	232
U.S. Government Agency		251		—		(2)		249
Corporate bonds		23,871		2		(1,641)		22,232
GNMA mortgage-backed securities – residential		41,697		—		(2,710)		38,987
FNMA mortgage-backed securities – residential		6,934		—		(634)		6,300
Government CMO and MBS - commercial		7,073		14		(498)		6,589
Corporate CMO and MBS		4,190		—		(155)		4,035
Total securities held-to-maturity	$	84,257	$	16	$	(5,649)	$	78,624

The following presents the amortized cost and fair value of securities available-for-sale and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss as of the date noted (dollars in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2021	Cost		Gains		Losses		Value
Investment securities available-for-sale:
U.S. Treasury debt	$	250	$	—	$	(3)	$	247
U.S. Government Agency		3,522		—		—		3,522
Corporate bonds		8,113		227		(15)		8,325
GNMA mortgage-backed securities – residential		26,611		185		(146)		26,650
FNMA mortgage-backed securities – residential		14,400		43		—		14,443
Government CMO and MBS - commercial		878		—		—		878
Corporate CMO and MBS		1,492		23		(18)		1,497
Total securities available-for-sale	$	55,266	$	478	$	(182)	$	55,562

The Company reassessed classification of investment securities and, effective April 1, 2022, elected to transfer all securities, fair valued at $58.7 million, from available-for-sale to held-to-maturity. The related unrealized loss of $2.3 million included in other comprehensive income on April 1, 2022 remained in other comprehensive income and is being amortized out with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

As of September 30, 2022, the amortized cost and estimated fair value of held-to-maturity securities have contractual maturity dates shown in the table below (dollars in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	Amortized		Fair
September 30, 2022	Cost		Value
Due within one year	$	251	$	249
Due between one year and five years		2,232		2,135
Due between five years and ten years		21,565		20,022
Due after ten years		315		307
Securities (CMO and MBS)		59,894		55,911
Total	$	84,257	$	78,624

In the first quarter of 2022, the Company committed $3.0 million in capital to a bank technology fund. During the nine months ended September 30, 2022, the Company made $0.7 million in contributions to the partnership. As of September 30, 2022, the Company held a balance of $0.7 million, which is included in Other assets in the accompanying Condensed Consolidated Balance Sheets. The Company may be obligated to invest up to an additional $2.3 million in future contributions.

In 2014, the Company began investing in a small business investment company ("SBIC") fund administered by the Small Business Administration. The Company did not make any contributions to the SBIC fund during the nine months ended September 30, 2022 or the year ended December 31, 2021 and received a $0.1 million return of capital during each period. As of September 30, 2022 and December 31, 2021, the Company held a balance of $2.0 million in the SBIC fund, which is included in Other assets in the accompanying Condensed Consolidated Balance Sheets. The Company may be obligated to invest up to an additional $1.0 million in future SBIC investments.

As of September 30, 2022 and December 31, 2021, securities with carrying values totaling $15.8 million and $17.3 million, respectively, were pledged to secure various public deposits and credit facilities of the Company.  

As of September 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the U.S. Government sponsored entities and agencies, in an amount greater than 10% of shareholders’ equity.

As of September 30, 2022, 99 securities were in an unrecognized loss position, with unrecognized losses totaling $5.6 million. As of December 31, 2021, 10 securities were in an unrealized loss position with unrealized losses totaling $0.2 million.  Of the securities in an unrecognized loss position as of September 30, 2022, nine have been in a continuous unrecognized loss position for more than twelve months and the remaining have been in a continuous unrecognized loss position for less than twelve months. The unrecognized loss positions were caused primarily by interest rate changes and market assumptions about prepayments of principal and interest on the underlying mortgages. Because the decline in market value is attributable to market conditions, not credit quality, and because the Company has the ability and intent to hold these investments to maturity, the Company does not consider these investments to be other-than-temporarily impaired as of September 30, 2022.

The following presents securities with unrecognized losses aggregated by major security type and length of time in a continuous unrecognized loss position as of the date noted (dollars in thousands, before tax):

	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
September 30, 2022	Value		Losses		Value		Losses		Value		Losses
Investment securities held-to-maturity:
U.S. Treasury debt	$	—	$	—	$	232	$	(9)	$	232	$	(9)
U.S. Government Agency		249		(2)		—		—		249		(2)
Corporate bonds		21,764		(1,629)		460		(12)		22,224		(1,641)
GNMA mortgage-backed securities – residential		28,987		(1,605)		10,000		(1,105)		38,987		(2,710)
FNMA mortgage-backed securities – residential		6,300		(634)		—		—		6,300		(634)
Government CMO and MBS - commercial		5,731		(498)		—		—		5,731		(498)
Corporate CMO and MBS		3,623		(133)		412		(22)		4,035		(155)
Total	$	66,654	$	(4,501)	$	11,104	$	(1,148)	$	77,758	$	(5,649)

The following presents securities with unrealized losses aggregated by major security type and length of time in a continuous unrealized loss position as of the date noted (dollars in thousands, before tax):

	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2021	Value		Losses		Value		Losses		Value		Losses
Investment securities available-for-sale:
U.S. Treasury debt	$	247	$	(3)	$	—	$	—	$	247	$	(3)
Corporate bonds		485		(15)		—		—		485		(15)
GNMA mortgage-backed securities – residential		17,205		(146)		—		—		17,205		(146)
Corporate CMO and MBS		—		—		521		(18)		521		(18)
Total	$	17,937	$	(164)	$	521	$	(18)	$	18,458	$	(182)

The Company did not sell any securities during the three and nine months ended September 30, 2022 or during the year ended December 31, 2021.