SECURITIES AVAILABLE FOR SALE

3 Months Ended

Mar. 31, 2023

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE

NOTE 2.           SECURITIES AVAILABLE FOR SALE

The following is a summary of securities available for sale (“AFS”):

			Gross		Gross
			Unrealized		Unrealized
(in thousands)	Amortized Cost		Gains		Losses		Fair Value
March 31, 2023
Mortgage-backed securities:
US Government-sponsored enterprises	$	245,482	$	41	$	(31,223)	$	214,300
US Government agency		91,092		43		(10,197)		80,938
Private label		62,101		34		(3,635)		58,500
Obligations of states and political subdivisions thereof		122,686		5,543		(17,064)		111,165
Corporate bonds		101,505		17		(9,385)		92,137
Total securities available for sale	$	622,866	$	5,678	$	(71,504)	$	557,040

			Gross		Gross
			Unrealized		Unrealized
(in thousands)	Amortized Cost		Gains		Losses		Fair Value
December 31, 2022
Mortgage-backed securities:
US Government-sponsored enterprises	$	249,838	$	14	$	(34,825)	$	215,027
US Government agency		93,010		21		(10,765)		82,266
Private label		64,056		34		(3,936)		60,154
Obligations of states and political subdivisions thereof		121,939		7,149		(21,351)		107,737
Corporate bonds		102,505		33		(8,206)		94,332
Total securities available for sale	$	631,348	$	7,251	$	(79,083)	$	559,516

Credit Quality Information

We monitor the credit quality of available for sale debt securities through credit ratings from various rating agencies and substantial price changes. In an effort to make informed decisions, we utilize credit ratings that express opinions about the credit quality of a security.  Securities are triggered for further review in the quarter if the security has significant fluctuations in ratings, drops below investment grade, or significant pricing changes. For securities without credit ratings, we utilize other financial information indicating the financial health of the underlying municipality, agency, or organization associated with the underlying security.

As of March 31, 2023 and December 31, 2022, we carried no allowance on available for sale debt securities in accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

The amortized cost and estimated fair value of available for sale securities segregated by contractual maturity at March 31, 2023 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.

	Available for sale
(in thousands)	Amortized Cost		Fair Value
Within 1 year	$	195	$	196
Over 1 year to 5 years		37,278		34,483
Over 5 years to 10 years		57,610		57,009
Over 10 years		129,108		111,614
Total bonds and obligations		224,191		203,302
Mortgage-backed securities		398,675		353,738
Total securities available for sale	$	622,866	$	557,040

The following table presents the gains and losses from the sale of AFS securities for the periods presented:

	Three Months Ended March 31,
(in thousands)	2023		2022
Gross gains on sales of available for sale securities	$	34	$	9
Gross losses on sales of available for sale securities		—		—
Net gains on sale of available for sale securities	$	34	$	9

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(in thousands)	Losses		Value		Losses		Value		Losses		Value
March 31, 2023
Mortgage-backed securities:
US Government-sponsored enterprises	$	1,324	$	35,076	$	29,899	$	174,319	$	31,223	$	209,395
US Government agency		834		22,846		9,363		53,711		10,197		76,557
Private label		5		94		3,630		58,372		3,635		58,466
Obligations of states and political subdivisions thereof		184		9,439		16,880		94,281		17,064		103,720
Corporate bonds		3,877		43,045		5,508		45,992		9,385		89,037
Total securities available for sale	$	6,224	$	110,500	$	65,280	$	426,675	$	71,504	$	537,175

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(in thousands)	Losses		Value		Losses		Value		Losses		Value
December 31, 2022
Mortgage-backed securities:
US Government-sponsored enterprises	$	7,005	$	82,483	$	27,820	$	127,745	$	34,825	$	210,228
US Government agency		2,902		42,865		7,863		34,988		10,765		77,853
Private label		841		15,694		3,095		44,396		3,936		60,090
Obligations of states and political subdivisions thereof		7,990		48,799		13,361		55,702		21,351		104,501
Corporate bonds		4,733		65,279		3,473		25,027		8,206		90,306
Total securities available for sale	$	23,471	$	255,120	$	55,612	$	287,858	$	79,083	$	542,978

We expect to recover the amortized cost basis on all securities in our AFS portfolio. Furthermore, we do not intend to sell nor do we anticipate that we will be required to sell any securities in an unrealized loss position as of March 31, 2023, prior to this recovery. Our ability and intent to hold these securities until recovery is supported by our capital and liquidity positions as well as historically low portfolio turnover.

The following summarizes, by investment security type, the impact of securities in an unrealized loss position at March 31, 2023:

US Government-sponsored enterprises

466 out of the total 516 securities in our portfolios of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 12.98% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guarantee the contractual cash flows of all of our US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter.

US Government agency

139 out of the total 160 securities in our portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 11.75% of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association guarantees the contractual cash flows of all of our US Government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter.

Private label

26 of the total 28 securities in our portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 5.85% of the amortized cost of securities in unrealized loss positions. We expect to receive all of the future contractual cash flows related to the amortized cost on these securities.

Obligations of states and political subdivisions thereof

53 of the total 76 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 14.81% of the amortized cost of securities in unrealized loss positions. We continually monitor the municipal bond sector of the market carefully and periodically evaluate the appropriate level of exposure to the market. At this time, we think the bonds in this portfolio carry minimal risk of default, and we are appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter.

Corporate bonds

30 out of the total 33 securities in our portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 9.53% of the amortized cost of bonds in unrealized loss positions. We review the financial strength of all of these bonds, and we have concluded that the amortized cost remains supported by the expected future cash flows of these securities. The most recent review includes all bond issuers and their current credit ratings, financial performance and capitalization.