Securities

9 Months Ended

Sep. 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)
September 30, 2024
U.S. agency	$	9,046	$	3	$	511	$	8,538
U.S. agency residential mortgage-backed	83,116		66		7,091		76,091
U.S. agency commercial mortgage-backed	13,153		—		1,080		12,073
Private label mortgage-backed	80,409		261		4,067		76,603
Other asset backed	44,325		16		577		43,764
Obligations of states and political subdivisions	334,368		12		34,312		300,068
Corporate	74,216		1		3,360		70,857
Trust preferred	985		—		29		956
Total	$	639,618	$	359	$	51,027	$	588,950

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)
September 30, 2024
U.S. agency	$	24,863	$	1,472	$	—	$	26,335	$	—	$	4,007	$	22,328
U.S. agency residential mortgage-backed	102,733		8,933		—		111,666		—		20,019		91,647
U.S. agency commercial mortgage-backed	4,045		118		—		4,163		—		328		3,835
Private label mortgage-backed	7,344		218		1		7,563		—		557		7,006
Obligations of states and political subdivisions	157,525		5,653		17		163,195		129		15,895		147,429
Corporate	45,900		572		111		46,583		—		5,190		41,393
Trust preferred	952		44		4		1,000		—		—		1,000
Total	$	343,362	$	17,010	$	133	$	360,505	$	129	$	45,996	$	314,638

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)
September 30, 2024
U.S. agency	$	126	$	—	$	7,839	$	511	$	7,965	$	511
U.S. agency residential mortgage-backed	44		—		65,654		7,091		65,698		7,091
U.S. agency commercial mortgage-backed	—		—		12,073		1,080		12,073		1,080
Private label mortgage-backed	933		1		74,478		4,066		75,411		4,067
Other asset backed	1,508		2		32,939		575		34,447		577
Obligations of states and political subdivisions	—		—		300,068		34,312		300,068		34,312
Corporate	—		—		69,360		3,360		69,360		3,360
Trust preferred	—		—		956		29		956		29
Total	$	2,611	$	3	$	563,367	$	51,024	$	565,978	$	51,027

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 September 30, 2024 and December 31, 2023. Accrued interest receivable on securities AFS totaled $3.5 million and $4.6 million at September 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 September 30, 2024, we had 27 U.S. agency, 107 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 September 30, 2024, we had 76 private label mortgage backed, 53 other asset backed, and 71 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 September 30, 2024, we had 312 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 September 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 September 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 nine month periods ended September 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 September 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 September 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 $133,000 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)
September 30, 2024
Credit rating:
AAA	$	7,344	$	35,378	$	—	$	—	$	42,722
AA	—		103,090		—		—		103,090
A	—		3,468		5,007		—		8,475
BBB	—		655		35,991		—		36,646
BB	—		—		1,958		—		1,958
Non-rated	—		14,934		2,944		952		18,830
Total	$	7,344	$	157,525	$	45,900	$	952	$	211,721

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 September 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	(3)		(14)		(5)		—		(22)
Recoveries credited to the allowance	—		—		—		—		—
Securities HTM charged against the allowance	—		—		—		—		—
Balance at end of period	$	1	$	17	$	111	$	4	$	133

2023
Balance at beginning of period	$	1	$	39	$	116	$	4	$	160
Additions (deductions)
Provision for credit losses	3		(6)		(2)		—		(5)
Recoveries credited to the allowance	—		—		—		—		—
Securities HTM charged against the allowance	—		—		—		—		—
Balance at end of period	$	4	$	33	$	114	$	4	$	155

An analysis of the allowance for credit losses by security HTM type for the nine months ended September 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	(3)		(16)		(1,130)		—		(1,149)
Recoveries credited to the allowance	—		—		1,125		—		1,125
Securities HTM charged against the allowance	—		—		—		—		—
Balance at end of period	$	1	$	17	$	111	$	4	$	133

2023
Balance at beginning of period	$	1	$	39	$	123	$	5	$	168
Additions (deductions)
Provision for credit losses	3		(6)		2,991		(1)		2,987
Recoveries credited to the allowance	—		—		—		—		—
Securities HTM charged against the allowance	—		—		(3,000)		—		(3,000)
Balance at end of period	$	4	$	33	$	114	$	4	$	155

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


	Securities AFS				Securities HTM
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	21,647	$	21,262	$	7,457	$	7,410
Maturing after one year but within five years	148,875		140,013		55,599		52,401
Maturing after five years but within ten years	45,741		41,401		94,300		82,813
Maturing after ten years	202,352		177,743		79,757		69,526
	418,615		380,419		237,113		212,150
U.S. agency residential mortgage-backed	83,116		76,091		111,666		91,647
U.S. agency commercial mortgage-backed	13,153		12,073		4,163		3,835
Private label mortgage-backed	80,409		76,603		7,563		7,006
Other asset backed	44,325		43,764		—		—
Total	$	639,618	$	588,950	$	360,505	$	314,638

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 nine month periods ending September 30, follows:


			Realized
	Proceeds		Gains		Losses
	(In thousands)
2024	$	39,431	$	14	$	428
2023	278		—		222

During the second quarter of 2024 we acquired certain securities classified as equity securities at fair value consisting of Visa Inc. Class C common stock. These securities were all sold during the second and third quarters of 2024. During the three and nine months ended September 30, 2024, we recognized gains (losses) on these equity securities of $(0.01) million and $2.7 million, respectively that are included in net gains (losses) on equity securities at fair value in the Condensed Consolidated Statements of Operations. We had no equity securities at fair value during the same periods in 2023. See note #13.