Securities

6 Months Ended

Jun. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Securities available for sale (“AFS”) consist of the following:


	Amortized Cost		Unrealized
			Gains		Losses		Fair Value
	(In thousands)
June 30, 2024
U.S. agency	$	9,570	$	4	$	808	$	8,766
U.S. agency residential mortgage-backed	85,522		8		9,630		75,900
U.S. agency commercial mortgage-backed	13,302		—		1,406		11,896
Private label mortgage-backed	86,490		243		5,891		80,842
Other asset backed	52,328		25		923		51,430
Obligations of states and political subdivisions	331,011		222		39,019		292,214
Corporate	75,401		—		5,426		69,975
Trust preferred	985		—		34		951
Total	$	654,609	$	502	$	63,137	$	591,974

December 31, 2023
U.S. agency	$	10,299	$	5	$	797	$	9,507
U.S. agency residential mortgage-backed	90,195		3		8,981		81,217
U.S. agency commercial mortgage-backed	13,706		—		1,409		12,297
Private label mortgage-backed	93,527		249		7,307		86,469
Other asset backed	114,867		3		1,939		112,931
Obligations of states and political subdivisions	341,177		204		38,644		302,737
Corporate	79,296		—		6,046		73,250
Trust preferred	983		—		41		942
Total	$	744,050	$	464	$	65,164	$	679,350

Securities held to maturity (“HTM”) consist of the following:


	Carrying Value		Transferred Unrealized Loss (1)		ACL		Amortized Cost		Unrealized				Fair Value
									Gains		Losses
	(In thousands)
June 30, 2024
U.S. agency	$	24,960	$	1,502	$	—	$	26,462	$	—	$	4,979	$	21,483
U.S. agency residential mortgage-backed	105,040		9,209		—		114,249		—		24,485		89,764
U.S. agency commercial mortgage-backed	4,083		130		—		4,213		—		431		3,782
Private label mortgage-backed	7,331		246		4		7,581		—		772		6,809
Obligations of states and political subdivisions	156,025		6,047		31		162,103		10		19,731		142,382
Corporate	45,831		648		116		46,595		—		6,161		40,434
Trust preferred	950		46		4		1,000		—		—		1,000
Total	$	344,220	$	17,828	$	155	$	362,203	$	10	$	56,559	$	305,654

December 31, 2023
U.S. agency	$	25,768	$	1,603	$	—	$	27,371	$	—	$	4,892	$	22,479
U.S. agency residential mortgage-backed	108,770		9,715		—		118,485		—		23,849		94,636
U.S. agency commercial mortgage-backed	4,146		153		—		4,299		—		460		3,839
Private label mortgage-backed	7,302		302		4		7,608		—		854		6,754
Obligations of states and political subdivisions	161,352		6,879		33		168,264		88		18,807		149,545
Corporate	45,702		803		116		46,621		780		7,033		40,368
Trust preferred	948		48		4		1,000		—		15		985
Total	$	353,988	$	19,503	$	157	$	373,648	$	868	$	55,910	$	318,606

(1)Represents the remaining unrealized loss to be accreted on securities that were transferred from AFS to HTM on April 1, 2022.

Our investments' gross unrealized losses and fair values for securities AFS aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position follows:


	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
June 30, 2024
U.S. agency	$	134	$	—	$	7,964	$	808	$	8,098	$	808
U.S. agency residential mortgage-backed	634		2		73,897		9,628		74,531		9,630
U.S. agency commercial mortgage-backed	—		—		11,896		1,406		11,896		1,406
Private label mortgage-backed	4,517		46		75,705		5,845		80,222		5,891
Other asset backed	102		—		39,128		923		39,230		923
Obligations of states and political subdivisions	—		—		292,236		39,019		292,236		39,019
Corporate	—		—		69,975		5,426		69,975		5,426
Trust preferred	—		—		950		34		950		34
Total	$	5,387	$	48	$	571,751	$	63,089	$	577,138	$	63,137

December 31, 2023
U.S. agency	$	130	$	—	$	8,453	$	797	$	8,583	$	797
U.S. agency residential mortgage-backed	358		1		80,008		8,980		80,366		8,981
U.S. agency commercial mortgage-backed	—		—		12,297		1,409		12,297		1,409
Private label mortgage-backed	6,285		356		79,507		6,951		85,792		7,307
Other asset backed	7,714		88		97,203		1,851		104,917		1,939
Obligations of states and political subdivisions	—		—		301,038		38,644		301,038		38,644
Corporate	—		—		73,249		6,046		73,249		6,046
Trust preferred	—		—		942		41		942		41
Total	$	14,487	$	445	$	652,697	$	64,719	$	667,184	$	65,164

Securities AFS in unrealized loss positions are evaluated quarterly for impairment related to credit losses. For securities AFS in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities AFS that do not meet this criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, adverse conditions specifically related to the security and the issuer and the impact of changes in market interest rates on the market value of the security, among other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an ACL is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss), net of applicable taxes. No ACL for securities AFS was needed at June 30, 2024 and December 31, 2023. Accrued interest receivable on securities AFS totaled $4.1 million and $4.6 million at June 30, 2024 and December 31, 2023, respectively,

and is excluded from the estimate of credit losses and is included in accrued income and other assets in the Condensed Consolidated Statements of Financial Condition.

U.S. agency, U.S. agency residential mortgage-backed and U.S. agency commercial mortgage-backed securities — at June 30, 2024, we had 30 U.S. agency, 153 U.S. agency residential mortgage-backed and 10 U.S. agency commercial mortgage-backed securities whose fair value is less than amortized cost. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. The unrealized losses are largely attributed to widening spreads to Treasury bonds and/or an increase in interest rates since acquisition.

Private label mortgage backed, other asset backed and corporate securities — at June 30, 2024, we had 83 private label mortgage backed, 57 other asset backed, and 74 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and/or an increase in interest rates since acquisition.

Obligations of states and political subdivisions — at June 30, 2024, we had 314 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to an increase in interest rates since acquisition.

Trust preferred securities — at June 30, 2024, we had one trust preferred security whose fair value is less than amortized cost. This trust preferred security is a single issue security issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening. This security is rated by a major rating agency as investment grade.

At June 30, 2024 management does not intend to liquidate any of the securities discussed above and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses.

We recorded no credit related charges in our Condensed Consolidated Statements of Operations related to securities AFS during the three and six month periods ended June 30, 2024 and 2023, respectively.

The ACL on securities HTM is a contra asset valuation account that is deducted from the carrying amount of securities HTM to present the net amount expected to be collected. Securities HTM are charged off against the ACL when deemed uncollectible. Adjustments to the ACL are reported in our Condensed Consolidated Statements of Operations in provision for credit losses. We measure expected credit losses on securities HTM on a collective basis by major security type with each type sharing similar risk characteristics, and we consider historical credit loss information. Accrued interest receivable on securities HTM totaled $1.8 million and $1.8 million at June 30, 2024 and December 31, 2023, respectively and is excluded from the estimate of credit losses and is included in accrued income and other assets in the Condensed Consolidated Statements of Financial Condition. With regard to U.S. Government-sponsored agency and mortgage-backed securities (residential and commercial), all these securities are issued by a U.S. government-sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has been recorded for these securities. With regard to obligations of states and political subdivisions, private label-mortgage-backed, corporate and trust preferred securities HTM, we consider (1) issuer bond ratings, (2) long-term historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss rates associated with securities having similar grades as those in our portfolio have been insignificant. During the first quarter of 2023, one corporate security (Signature Bank) defaulted resulting in a $3.0 million provision for credit losses and a corresponding full charge-off. Subsequent to this security's charge-off, a portion of its fair value had recovered and was subsequently sold during the first quarter of 2024 for $1.1 million during which period we recorded that amount as a recovery to the ACL. Despite this lone security loss, the long-term historical loss rates associated with securities having similar grades as those in our portfolio have been insignificant. Furthermore, as of June 30, 2024 and December 31, 2023, there were no past due principal and interest payments associated with these securities. At those same dates an allowance for credit losses of $155,000 and $157,000, respectively was recorded on non U.S. agency securities HTM based on applying the long-term historical credit loss rate, as published by credit rating agencies, for similarly rated securities.

On a quarterly basis, we monitor the credit quality of securities HTM through the use of credit ratings. The carrying value of securities HTM aggregated by credit quality follow:


	Private Label Mortgage- Backed		Obligations of States and Political Subdivisions		Corporate		Trust Preferred		Carrying Value Total
	(In thousands)
June 30, 2024
Credit rating:
AAA	$	7,331	$	35,748	$	—	$	—	$	43,079
AA	—		103,416		—		—		103,416
A	—		2,063		5,014		—		7,077
BBB	—		656		35,929		—		36,585
BB	—		—		1,953		—		1,953
Non-rated	—		14,142		2,935		950		18,027
Total	$	7,331	$	156,025	$	45,831	$	950	$	210,137

December 31, 2023
Credit rating:
AAA	$	7,302	$	36,629	$	—	$	—	$	43,931
AA	—		102,583		—		—		102,583
A	—		3,172		6,923		—		10,095
BBB	—		856		33,913		—		34,769
BB	—		—		1,943		—		1,943
Non-rated	—		18,112		2,923		948		21,983
Total	$	7,302	$	161,352	$	45,702	$	948	$	215,304

An analysis of the allowance for credit losses by security HTM type for the three months ended June 30 follows:


	Private Label Mortgage- Backed		Obligations of States and Political Subdivisions		Corporate		Trust Preferred		Total
	(In thousands)
2024
Balance at beginning of period	$	4	$	31	$	116	$	4	$	155
Additions (deductions)
Provision for credit losses	—		—		—		—		—
Recoveries credited to the allowance	—		—		—		—		—
Securities HTM charged against the allowance	—		—		—		—		—
Balance at end of period	$	4	$	31	$	116	$	4	$	155

2023
Balance at beginning of period	$	1	$	39	$	116	$	4	$	160
Additions (deductions)
Provision for credit losses	—		—		—		—		—
Recoveries credited to the allowance	—		—		—		—		—
Securities HTM charged against the allowance	—		—		—		—		—
Balance at end of period	$	1	$	39	$	116	$	4	$	160

An analysis of the allowance for credit losses by security HTM type for the six months ended June 30 follows:


	Private Label Mortgage- Backed		Obligations of States and Political Subdivisions		Corporate		Trust Preferred		Total
	(In thousands)
2024
Balance at beginning of period	$	4	$	33	$	116	$	4	$	157
Additions (deductions)
Provision for credit losses	—		(2)		(1,125)		—		(1,127)
Recoveries credited to the allowance	—		—		1,125		—		1,125
Securities HTM charged against the allowance	—		—		—		—		—
Balance at end of period	$	4	$	31	$	116	$	4	$	155

2023
Balance at beginning of period	$	1	$	39	$	123	$	5	$	168
Additions (deductions)
Provision for credit losses	—		—		2,993		(1)		2,992
Recoveries credited to the allowance	—		—		—		—		—
Securities HTM charged against the allowance	—		—		(3,000)		—		(3,000)
Balance at end of period	$	1	$	39	$	116	$	4	$	160

The amortized cost and fair value of securities AFS and securities HTM at June 30, 2024, by contractual maturity, follow:


	Securities AFS				Securities HTM
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	13,473	$	13,144	$	4,480	$	4,450
Maturing after one year but within five years	154,690		141,729		54,204		49,767
Maturing after five years but within ten years	49,675		43,459		95,934		81,822
Maturing after ten years	199,129		173,574		81,542		69,260
	416,967		371,906		236,160		205,299
U.S. agency residential mortgage-backed	85,522		75,900		114,249		89,764
U.S. agency commercial mortgage-backed	13,302		11,896		4,213		3,782
Private label mortgage-backed	86,490		80,842		7,581		6,809
Other asset backed	52,328		51,430		—		—
Total	$	654,609	$	591,974	$	362,203	$	305,654

The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Gains and losses realized on the sale of securities AFS are determined using the specific identification method and are recognized on a trade-date basis. A summary of proceeds from the sale of securities AFS and gains and losses for the six month periods ending June 30, follows:


			Realized
	Proceeds		Gains		Losses
	(In thousands)
2024	$	37,273	$	14	$	283
2023	278		—		222

Securities classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition consists of Visa Inc. Class C common stock. During both the three and six months ended June 30, 2024, we recognized gains on these equity securities of $2.7 million, that are included in net gains on equity securities at fair value in the Condensed Consolidated Statements of Operations. $0.9 million of these amounts relate to gains on equity securities at fair value still held at June 30, 2024. We had no equity securities at fair value during the same periods in 2023. See note #13.