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Investment Securities

3 Months Ended

Mar. 31, 2023

(4) Investment Securities

(a) Securities available for sale

The amortized cost and fair value of the securities available for sale are as follows:

	March 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	124,149		2		5,019		119,132
State and political subdivisions		34		-		-		34
Mortgage backed securities and collateralized mortgage obligations - residential		282,927		58		27,429		255,556
Corporate bonds		85,517		-		4,053		81,464
Small Business Administration - guaranteed participation securities		21,612		-		1,791		19,821
Other		686		-		34		652
Total Securities Available for Sale	$	514,925		60		38,326		476,659

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	124,123	$	1	$	5,937	$	118,187
State and political subdivisions		34		-		-		34
Mortgage backed securities and collateralized mortgage obligations - residential		291,431		34		31,149		260,316
Corporate bonds		85,641		-		4,295		81,346
Small Business Administration - guaranteed participation securities		23,115		-		2,138		20,977
Other		686		-		33		653
Total Securities Available for Sale	$	525,030	$	35	$	43,552	$	481,513

The following table categorizes the debt securities included in the available for sale portfolio as of March 31, 2023, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

Securities not due at a single maturity date are presented separately:

	Amortized		Fair
(dollars in thousands)	Cost		Value

Due in one year or less	$	40,384		38,887
Due after one year through five years		165,002		157,393
Due after five years through ten years		5,000		5,002
Mortgage backed securities and collateralized mortgage obligations - residential		282,927		255,556
Small Business Administration - guaranteed participation securities		21,612		19,821
	$	514,925		476,659

Gross unrealized losses on securities available for sale and the related fair values aggregated by the length of time that individual securities have been in an unrealized loss position, were as follows:

	March 31, 2023
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unreal.
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	53,231	$	932	$	60,899	$	4,087	$	114,130	$	5,019
Mortgage backed securities and collateralized mortgage obligations - residential		59,807		2,760		193,110		24,669		252,917		27,429
Corporate bonds		19,360		573		62,104		3,480		81,464		4,053
Small Business Administration - guaranteed participation securities		-		-		19,821		1,791		19,821		1,791
Other		48		2		567		32		615		34

Total	$	132,446	$	4,267	$	336,501	$	34,059	$	468,947	$	38,326

	December 31, 2022
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unreal.
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	57,849	$	1,290	$	55,337	$	4,647	$	113,186	$	5,937
Mortgage backed securities and collateralized mortgage obligations - residential		164,772		13,010		93,009		18,139		257,781		31,149
Corporate bonds		52,805		2,395		28,542		1,900		81,347		4,295
Small Business Administration - guaranteed participation securities		802		71		20,175		2,067		20,977		2,138
Other		49		1		568		32		617		33

Total	$	276,277	$	16,767	$	197,631	$	26,785	$	473,908	$	43,552

There were no allowance for credit losses recorded for securities available for sale during the three months ended March 31, 2023.

The proceeds from sales and calls and maturities of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three months ended March 31, 2023 and 2022 are as follows:

	Three months ended March 31,
(dollars in thousands)	2023		2022

Proceeds from sales	$	-		-
Proceeds from calls/paydowns		14,659		17,923
Proceeds from maturities		-		5,000
Gross realized gains		-		-
Gross realized losses		-		-

(b) Held to maturity securities

The amortized cost and fair value of the held to maturity securities are as follows:

	March 31, 2023
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	7,382	$	95	$	179	$	7,298
Total held to maturity	$	7,382	$	95	$	179	$	7,298

	December 31, 2022
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	7,707	$	90	$	217	$	7,580
Total held to maturity	$	7,707	$	90	$	217	$	7,580

The following table categorizes the debt securities included in the held to maturity portfolio as of March 31, 2023, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

(dollars in thousands)	Amortized		Fair
	Cost		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	7,382		7,298
	$	7,382		7,298

All held to maturity securities are held at cost on the financial statements.

Gross unrecognized losses on held to maturity securities and the related fair values aggregated by the length of time that individual securities have been in an unrecognized loss position, were as follows:

March 31, 2023

Less than

12 months

(dollars in thousands)

12 months

or more

Total

Gross

Fair

Unrecognized

Fair

Unrecognized

Fair

Unrecognized

Value

Loss

Value

Loss

Value

Loss

Mortgage backed securities and collateralized mortgage obligations - residential

431

2,826

170

3,257

179

Total

431

2,826

170

3,257

179

December 31, 2022

Less than

12 months

(dollars in thousands)

12 months

or more

Total

Gross

Fair

Unrecognized

Fair

Unrecognized

Fair

Unrecognized

Value

Loss

Value

Loss

Value

Loss

Mortgage backed securities and collateralized mortgage obligations - residential

3,327

206

258

3,585

217

Total

3,327

206

258

3,585

217

There were no sales or transfers of held to maturity securities during the three months ended March 31, 2023 and 2022.

There were no allowance for credit losses recorded for held to maturity securities during the three months ended March 31, 2023. There were no securities on non-accrual status and all securities were performing in accordance with contractual terms.

Debt Securities

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio by type and applying the appropriate OTTI model.

In determining OTTI for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether any other‑than‑temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI on debt securities shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings through the provision for credit losses. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes.

The Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2023. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low turnover in the portfolio.

As of March 31, 2023, the Company’s securities portfolio included certain securities, which were in an unrealized loss position, and are discussed below.

U.S. government sponsored enterprises: In the case of unrealized losses on U.S. government sponsored enterprises, 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 likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired as of March 31, 2023.

Mortgage backed securities and collateralized mortgage obligations – residential: As of March 31, 2023, all mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. 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 likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other‑than‑temporarily impaired as of March 31, 2023.

Corporate Bonds & Other: As of March 31, 2023, corporate and other bonds held by the Company were investment grade quality. 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 likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired as of March 31, 2023.

Small Business Administration (SBA) - guaranteed participation securities: As of March 31, 2023, all of the SBA securities held by the Company were issued and guaranteed by U.S. Small Business Administration. 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 likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired as of March 31, 2023.