Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Securities

Note 2 – Securities

Available-for-sale and held-to-maturity securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of such securities and their approximate fair values were as follows (dollars in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale, September 30, 2023
Mortgage-backed securities	$	36,044	$	—	$	(5,952	)	$	30,092
U.S. Treasuries		3,073		—		(369	)		2,704
U.S. government agencies		304		—		(23	)		281
Municipal obligations		22,941		—		(3,472	)		19,469
Corporate debt		1,000		—		(184	)		816
Total	$	63,362	$	—	$	(10,000	)	$	53,362

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity, September 30, 2023
Corporate debt	$	5,808		$	—	$	(785	)	$	5,023
Total	$	5,808		$	—	$	(785	)	$	5,023
Allowance for Credit Losses	$	(43	)
Net carrying value of HTM securities	$	5,765

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale, December 31, 2022
Mortgage-backed securities	$	39,709	$	—	$	(5,177	)	$	34,532
U.S. Treasuries		3,083		—		(366	)		2,717
U.S. government agencies		396		—		(26	)		370
Municipal obligations		23,500		—		(3,349	)		20,151
Corporate debt		1,000		—		(188	)		812
Total	$	67,688	$	—	$	(9,106	)	$	58,582

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity, December 31, 2022
Corporate debt	$	5,832	$	9	$	(409	)	$	5,432
Total	$	5,832	$	9	$	(409	)	$	5,432

Securities with unrealized losses as of September 30, 2023, and December 31, 2022., that have not been recognized in income are as follows (dollars in thousands):

	Continued Unrealized Loss for Less than 12 Months					Continued Unrealized Loss for 12 Months or More					Total
Description of securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale, September 30, 2023
Mortgage-backed securities	$	326	$	(45	)	$	29,766	$	(5,907	)	$	30,092	$	(5,952	)
U.S. Treasuries		—		—			2,704		(369	)		2,704		(369	)
U.S. government agencies		—		—			281		(23	)		281		(23	)
Municipal obligations		—		—			19,469		(3,472	)		19,469		(3,472	)
Corporate debt		—		—			816		(184	)		816		(184	)
Total temporarily impaired	$	326	$	(45	)	$	53,036	$	(9,955	)	$	53,362	$	(10,000	)

Held to Maturity September 30, 2023
Corporate debt	$	878	$	(122	)	$	4,145	$	(663	)	5,023	(785	)
Total temporarily impaired	$	878	$	(122	)	$	4,145	$	(663	)	5,023	(785	)

	Continued Unrealized Loss for Less than 12 Months					Continued Unrealized Loss for 12 Months or More					Total
Description of securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale, December 31, 2022
Mortgage-backed securities	$	21,377	$	(2,080	)	$	13,155	$	(3,097	)	$	34,532	$	(5,177	)
U.S. Treasuries		—		—			2,717		(366	)		2,717		(366	)
U.S. government agencies		171		(10	)		199		(16	)		370		(26	)
Municipal obligations		12,547		(1,698	)		7,104		(1,651	)		19,651		(3,349	)
Corporate debt		—		—			812		(188	)		812		(188	)
Total temporarily impaired	$	34,095	$	(3,788	)	$	23,987	$	(5,318	)	$	58,082	$	(9,106	)

Held to Maturity December 31, 2022
Corporate debt	$	2,615	$	(202	)	$	1,793	$	(207	)	4,408	(409	)
Total temporarily impaired	$	2,615	$	(202	)	$	1,793	$	(207	)	4,408	(409	)

Unrealized losses have not been recognized through the income statement, as management believes the issuers are of sound credit quality, management has no intent to sell the securities, the Company can hold the securities to maturity, and the decline in fair value is largely due to changes in market interest rates. The fair value is expected to recover as the securities approach their maturity date. There were 111 and 109 securities in an unrealized loss position at September 30, 2023, and December 31, 2022, respectively. Of the securities in an unrealized loss position as of September 30, 2023, approximately 42% were backed by a government agency.

The were no sales of securities for the nine months ended September 30, 2023, and for the year ended December 31, 2022.

As of September 30, 2023, the amortized cost and estimated fair value of the debt securities portfolio are shown by contractual maturity dates (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 Cost		Fair Value		Average Yield
Available-for-sale
Due in one year or less	$	806	$	785		2.11%
Due from one to five years		8,841		7,809		1.73%
Due from five to ten years		17,671		14,676		2.30%
Due after ten years		—		—		—
Mortgage-backed securities		36,044		30,092		2.00%
Total	$	63,362	$	53,362		2.23%
	Amortized Cost		Fair Value		Average Yield
Held-to-maturity
Due in one year or less		—		—		—
Due from one to five years		—		—		—
Due from five to ten years	$	5,808	$	5,023		4.27%
Due after ten years		—		—		—
Total	$	5,808	$	5,023		4.27%

Securities pledged as of September 30, 2023, and December 31, 2022, had a carrying amount of $19,777,000 and $8,193,000, respectively.

The Company had no investment in securities of issuers outside of the United States as of September 30, 2023, and December 31, 2022.

Allowance for Credit Losses for HTM Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. The held-to-maturity investment portfolio consists solely of bank subordinated debt. Accrued interest receivable on held-to-maturity debt securities totaled $83,000 at September 30, 2023, and is excluded from the estimate of credit losses. Refer to Note 1 – Nature of Operations and Significant Accounting Policies for additional information on the Company’s methodology on estimating credit losses.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity by major security type for the three and nine months ended September 30, 2023 (dollars in thousands):

For 3 months ended September 30, 2023	Corporate Bonds
Allowance for credit losses:
Beginning balance	$	41
Provision for credit losses		2
Securities charged -off (recoveries)		—
Total ending allowance balance		43
For 9 months ended September 30, 2023	Corporate Bonds
Allowance for credit losses:
Beginning balance	$	—
Impact of ASU 2016-13 adoption		38
Provision for credit losses		5
Securities charged -off (recoveries)		—
Total ending allowance balance		43

The Company monitors the credit quality of held-to-maturity securities on a quarterly basis. As of September 30, 2023, there were no held-to-maturity securities past due or on non-accrual.