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Investment Securities

9 Months Ended

Sep. 30, 2023

(4) Investment Securities

(a) Securities available for sale

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

	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	126,702	$	1	$	5,229	$	121,474
State and political subdivisions		34		-		-		34
Mortgage backed securities and collateralized mortgage obligations - residential		272,012		1		38,294		233,719
Corporate bonds		80,270		-		3,335		76,935
Small Business Administration - guaranteed participation securities		19,477		-		2,161		17,316
Other		687		-		30		657
Total Securities Available for Sale	$	499,182	$	2	$	49,049	$	450,135

	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 September 30, 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	$	60,187	$	58,959
Due after one year through five years		142,506		135,144
Due after five years through ten years		5,000		4,997
Mortgage backed securities and collateralized mortgage obligations - residential		272,012		233,719
Small Business Administration - guaranteed participation securities		19,477		17,316
	$	499,182	$	450,135

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:

	September 30, 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	$	14,890		110		104,083		5,119		118,973		5,229
Mortgage backed securities and collateralized mortgage obligations - residential		6,283		214		222,483		38,080		228,766		38,294
Corporate bonds		-		-		76,935		3,335		76,935		3,335
Small Business Administration - guaranteed participation securities		-		-		17,316		2,161		17,316		2,161
Other		34		3		623		27		657		30

Total	$	21,207		327		421,440		48,722		442,647		49,049

	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	$	49,279		697		9,900		100		59,179		797
Mortgage backed securities and collateralized mortgage obligations - residential		93,447		1,888		22,098		588		115,545		2,476
Corporate bonds		15,670		171		14,546		454		30,216		625
Other		648		1		-		-		648		1

Total	$	159,044		2,757		46,544		1,142		205,588		3,899

There were no allowance for credit losses recorded for securities available for sale during the three or nine months ended September 30, 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 and nine months ended September 30, 2023 and 2022 are as follows:

	Three months ended September 30,
(dollars in thousands)	2023		2022

Proceeds from sales	$	-		-
Proceeds from calls/paydowns		9,877		14,376
Proceeds from maturities		-		5,000
Gross realized gains		-		-
Gross realized losses		-		-

	Nine months ended September 30,
(dollars in thousands)	2023		2022

Proceeds from sales	$	-		-
Proceeds from calls/paydowns		39,346		57,714
Proceeds from maturities		5,000		15,050
Gross realized gains		-		-
Gross realized losses		-		-

There were no transfers of securities available for sale during the three and nine months ended September 30, 2023 and 2022.

(b) Held to maturity securities

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

	September 30, 2023
			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	6,724		21		301		6,444
Total held to maturity	$	6,724		21		301		6,444

	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 September 30, 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:

(dollars in thousands)	Amortized		Fair
	Cost		Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	6,724		6,444
	$	6,724		6,444

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 unrealized loss position, were as follows:

September 30, 2023

Less than

12 months

(dollars in thousands)

12 months

or more

Total

Gross

Fair

Unrec.

Fair

Unrec.

Fair

Unrec.

Value

Loss

Value

Loss

Value

Loss

Mortgage backed securities and collateralized mortgage obligations - residential

1,449

2,733

267

4,182

301

Total

1,449

2,733

267

4,182

301

December 31, 2022

Less than

12 months

(dollars in thousands)

12 months

or more

Total

Gross

Fair

Unrec.

Fair

Unrec.

Fair

Unrec.

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 and nine months ended September 30, 2023 and 2022.

There were no allowance for credit losses recorded for held to maturity securities during the three and nine months ended September 30, 2023. As of September 30, 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 it is more likely than not it 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 the security 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 September 30, 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 September 30, 2023, the Company’s security 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 at September 30, 2023.

Mortgage backed securities and collateralized mortgage obligations – residential: At September 30, 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 at September 30, 2023.

Small Business Administration (SBA) - guaranteed participation securities: At September 30, 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 at September 30, 2023.

Corporate Bonds & Other: At September 30, 2023, corporate bonds held by the Company are 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 at September 30, 2023.