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Investments
 9 Months Ended
Sep. 30, 2023
Investments [Abstract]  
Investments
Note 5 – Investments


The amortized cost, gross unrealized gains and losses, and fair value of investment securities at September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023
  
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
 Losses
    
Fair
Value
  
Available-for-sale securities:
                        
  U.S. agency securities
  
$
71,567
    
$
-
    
$
(7,920
)
  
$
63,647
  
  U.S. treasury securities
    
160,426
      
-
      
(12,995
)
    
147,431
  
  Obligations of state and political subdivisions
    
108,569
      
5
      
(12,552
)
    
96,022
  
  Corporate obligations
    
13,381
      
229
      
(1,490
)
    
12,120
  
  Mortgage-backed securities in government sponsored entities
    
115,945
      
9
      
(17,367
)
    
98,587
  
Total available-for-sale securities
  
$
469,888
    
$
243
    
$
(52,324
)
  
$
417,807
  

December 31, 2022
                        
Available-for-sale securities:
                        
  U.S. agency securities
  
$
78,556
    
$
-
    
$
(7,879
)
  
$
70,677
  
  U.S. treasury securities
    
162,236
      
-
      
(13,666
)
    
148,570
  
  Obligations of state and political subdivisions
     120,562       35       (10,297 )     110,300  
  Corporate obligations
    
10,335
      
-
      
(952
)
    
9,383
  
  Mortgage-backed securities in government sponsored entities
     115,304       15       (14,743 )     100,576  
Total available-for-sale securities
  
$
486,993
    
$
50
    
$
(47,537
)
  
$
439,506
  


The following table shows the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time, which individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 (in thousands). As of September 30, 2023, the Company owned 338 securities whose fair value was less than their cost basis.

September 30, 2023
  
Less than Twelve Months
    
Twelve Months or Greater
    
Total
  
   
Fair
Value
    
Gross
Unrealized
Losses
    
Fair
Value
    
Gross
Unrealized
Losses
    
Fair
Value
    
Gross
Unrealized
Losses
  
U.S. agency securities
  
$
-
    
$
-
 
$
61,646
    
$
(7,920
)
  
$
61,646
    
$
(7,920
)
U.S. treasury securities
    
-
      
-
   
147,431
      
(12,995
)
    
147,431
      
(12,995
)
Obligations of state and  political subdivisions
    
4,731
      
(130
)
    
89,094
      
(12,422
)
    
93,825
      
(12,552
)
Corporate obligations
    
1,458
      
(289
)
    
8,102
      
(1,201
)
    
9,560
      
(1,490
)
Mortgage-backed securities in government sponsored entities
    
9,207
      
(293
)
    
86,820
      
(17,074
)
    
96,027
      
(17,367
)
Total securities
  
$
15,396
    
$
(712
)
  
$
393,093
    
$
(51,612
)
  
$
408,489
    
$
(52,324
)

December 31, 2022
                                    
U.S. agency securities
  
$
39,729
    
$
(1,892
)
  
$
30,948
    
$
(5,987
)
  
$
70,677
    
$
(7,879
)
U.S. treasury securities     32,673       (1,337 )     115,897       (12,329 )     148,570       (13,666 )
Obligations of states and political subdivisions
    
66,725
      
(4,887
)
    
35,782
      
(5,410
)
    
102,507
      
(10,297
)
Corporate obligations     2,165       (165 )     6,218       (787 )     8,383       (952 )
Mortgage-backed securities in government sponsored entities
    
40,270
      
(3,367
)
    
57,319
      
(11,376
)
    
97,589
      
(14,743
)
Total securities
  
$
181,562
    
$
(11,648
)
  
$
246,164
    
$
(35,889
)
  
$
427,726
    
$
(47,537
)


Allowance for Credit Losses – Available for Sale Securities


The Company measures expected credit losses on available-for-sale debt securities when the Company does not intend to sell, or when it is not more likely than not that it 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 available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to 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, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows. The Company obtains its forecast data through a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario, and utilizes a single scenario in the model. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

The allowance for credit losses on available-for-sale debt securities is included within Investment securities available-for-sale on the consolidated balance sheet. Changes in the allowance for credit losses are recorded within Provision for credit losses on the consolidated statement of income. Losses are charged against the allowance when the Company believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.



Accrued interest receivable on available-for-sale debt securities totaled $2,145,000 at September 30, 2023 and is included within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.


Credit Losses on Investment Securities – Prior to adopting ASU 2016-13


The Company adopted ASU No. 2016-13 effective January 1, 2023. Financial statement amounts related to Investment Securities recorded as of December 31, 2022 and for the periods ending December 31, 2022 are presented in accordance with the accounting policies described in the following sections. The following sections were carried forward from the Annual Report on Form 10-K for the year ended December 31, 2022.

Securities are evaluated on at least a quarterly basis, and more frequently when market conditions warrant such an evaluation, to determine whether a decline in their value is other than temporary. To determine whether a loss is other than temporary, management utilizes criteria such as the reasons underlying the decline, the magnitude and duration of the decline, and whether or not management intends to sell or expects that it is more likely than not that it will be required to sell the security prior to an anticipated recovery of the fair value. The term “other than temporary” is not intended to indicate that the decline is permanent but indicates that the prospects for a near-term recovery of value are not necessarily favorable or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss), and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive (loss) income.



Proceeds from sales of securities available-for-sale for the nine months ended September 30, 2023 and 2022 were $86,504,000 and $4,492,000, respectively. Proceeds from sales of securities available-for-sale for the three months ended September 30, 2022 were $4,492,000. There were no sales of available for sale securities during the three months ended September 30, 2023.



The gross gains and losses were as follows (in thousands):


 
Three Months Ended
  
Nine Months Ended
  
 
September 30,
  
September 30,
  
 
2023
  
2022
  
2023
  
2022
  
Gross gains on available for sale securities
  
$
-
    
$
-
    
$
38
    
$
-
  
Gross losses on available for sale securities
    
-
      
(6
)
    
(89
)
    
(6
)
Net gains
  
$
-
    
$
(6
)
  
$
(51
)
  
$
(6
)


The following table presents the net gains (losses) on the Company’s equity investments recognized in earnings during the three and nine month periods ended September 30, 2023 and 2022, and the portion of unrealized gains for the period that relates to equity investments held at September 30, 2023 and 2022 (in thousands):

 
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
Equity securities
  
2023
    
2022
    
2023
    
2022
  
Net gains (losses) recognized in equity securities during the period
  
$
69
 
$
(19
)
  
$
(223
)
  
$
(198
)
Less: Net gains realized on the sale of equity securities during the period
    
9
      
4
      
14
      
4
  
Net unrealized  gains (losses)
  
$
60
 
$
(23
)
  
$
(237
)
  
$
(202
)


Investment securities with an approximate carrying value of $353.2 million and $311.8 million at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds, certain other deposits and borrowing lines.


Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.   The amortized cost and fair value of debt securities at September 30, 2023, by contractual maturity, are shown below (in thousands):

 
Amortized
Cost
    
Fair Value
  
Available-for-sale debt securities:
            
Due in one year or less
  
$
44,257
    
$
43,316
  
Due after one year through five years
    
170,521
      
155,161
  
Due after five years through ten years
    
98,835
      
86,730
  
Due after ten years
    
156,275
      
132,600
  
Total
  
$
469,888
    
$
417,807