Investments

6 Months Ended

Jun. 30, 2024

Investments

Investments

Note 4 – Investments

The following tables show a comparison of amortized cost and fair values of investment securities at June 30, 2024 and December 31, 2023:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
June 30, 2024
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	965	$	—	$	6,035
Residential mortgage-backed agencies		23,825		—		4,542		—		19,283
Commercial mortgage-backed agencies		35,901		—		8,593		—		27,308
Collateralized mortgage obligations		18,927		—		3,478		—		15,449
Obligations of states and political subdivisions		10,476		—		309		—		10,167
Corporate bonds		1,000		—		263		—		737
Collateralized debt obligations		18,660		—		4,685		—		13,975
Total available for sale	$	115,789	$	—	$	22,835	$	—	$	92,954

(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
June 30, 2024
Held to Maturity:
U.S. government agencies	$	68,157	$	—	$	11,374	$	56,783	$	—
Residential mortgage-backed agencies		28,841		—		3,517		25,324		—
Commercial mortgage-backed agencies		21,223		—		5,715		15,508		—
Collateralized mortgage obligations		51,513		—		10,068		41,445		—
Obligations of states and political subdivisions		4,508		143		681		3,970		45
Total held to maturity	$	174,242	$	143	$	31,355	$	143,030	$	45

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2023
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	966	$	—	$	6,034
Residential mortgage-backed agencies		24,781		—		4,218		—		20,563
Commercial mortgage-backed agencies		36,258		—		7,841		—		28,417
Collateralized mortgage obligations		19,725		—		3,369		—		16,356
Obligations of states and political subdivisions		10,486		15		189		—		10,312
Corporate bonds		1,000		—		222		—		778
Collateralized debt obligations		18,671		—		3,962		—		14,709
Total available for sale	$	117,921	$	15	$	20,767	$	—	$	97,169
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
December 31, 2023
Held to Maturity:
U.S. treasuries	$	37,462	$	—	$	243	$	37,219	$	—
U.S. government agencies		68,014		—		10,985		57,029		—
Residential mortgage-backed agencies		29,588		42		2,913		26,717		—
Commercial mortgage-backed agencies		21,413		—		5,361		16,052		—
Collateralized mortgage obligations		53,261		—		9,973		43,288		—
Obligations of states and political subdivisions		4,604		177		671		4,110		45
Total held to maturity	$	214,342	$	219	$	30,146	$	184,415	$	45

The Corporation utilizes FASB Accounting Standards Codification (“ASC”) Topic 326 to evaluate its available-for-sale (“AFS”) and held-to-maturity (“HTM”) debt security portfolio for expected credit losses.  For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.  If either criteria is met, the security’s amortized cost basis is written down to fair value through income.  For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors.  In making this assessment, management 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 assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is 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 (“ACL”) is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment.

Changes in the ACL are recorded as a provision for (or reversal of) credit losses.  Losses are charged against the ACL when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.  Any impairment not recorded through an allowance for credit loss is recognized in other comprehensive income as a non-credit-related impairment.

The Corporation has made the policy election to exclude accrued interest from the amortized cost basis of available-for-sale debt securities and report accrued interest separately in other assets in the Consolidated Balance Sheets.  AFS debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due.  Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status.  Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

The Corporation separately evaluates its HTM investment securities for any credit losses.  The Corporation pools like securities and calculates expected credit losses through an estimate based on a security’s credit rating, which is recognized as part of the ACL for HTM securities and is included in the balance of HTM securities held to maturity on the Consolidated Balance Sheets.  If the Corporation determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis.

The Corporation recorded ACL of approximately $45,000 as of June 30, 2024 and December 31, 2023, related to one bond in its HTM security portfolio.

The following tables show the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at June 30, 2024 and December 31, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
June 30, 2024
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,035	$	965	2
Residential mortgage-backed agencies		—		—	—		19,283		4,542	3
Commercial mortgage-backed agencies		—		—	—		27,308		8,593	8
Collateralized mortgage obligations		—		—	—		15,449		3,478	9
Obligations of states and political subdivisions		2,205		30	3		5,041		279	4
Corporate Bonds		—		—	—		737		263	1
Collateralized debt obligations		—		—	—		13,975		4,685	9
Total available for sale	$	2,205	$	30	3	$	87,828	$	22,805	36
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
June 30, 2024
Held to Maturity:
U.S. government agencies	$	—	$	—	—	$	56,783	$	11,374	9
Residential mortgage-backed agencies		3,923		15	2		21,320		3,502	35
Commercial mortgage-backed agencies		—		—	—		15,508		5,715	2
Collateralized mortgage obligations		—		—	—		41,445		10,068	8
Obligations of states and political subdivisions		—		—	—		2,198		681	1
Total held to maturity	$	3,923	$	15	2	$	137,254	$	31,340	55

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
December 31, 2023
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,034	$	966	2
Residential mortgage-backed agencies		—		—	—		20,563		4,218	3
Commercial mortgage-backed agencies		—		—	—		28,417		7,841	8
Collateralized mortgage obligations		—		—	—		16,356		3,369	9
Obligations of states and political subdivisions		1,445		20	2		6,668		169	3
Corporate Bonds		—		—	—		778		222	1
Collateralized debt obligations		—		—	—		14,709		3,962	9
Total available for sale	$	1,445	$	20	2	$	93,525	$	20,747	35
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2023
Held to Maturity:
U.S. treasuries	$	—	$	—	—	$	37,219	$	243	4
U.S. government agencies		—		—	—		57,029		10,985	9
Residential mortgage-backed agencies		—		—	—		22,613		2,913	35
Commercial mortgage-backed agencies		—		—	—		16,052		5,361	2
Collateralized mortgage obligations		—		—	—		43,288		9,973	8
Obligations of states and political subdivisions		—		—	—		2,205		671	1
Total held to maturity	$	—	$	—	—	$	178,406	$	30,146	59

The amortized cost and estimated fair value of securities by contractual maturity at June 30, 2024 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2024
(in thousands)	Amortized Cost		Fair Value
Available for Sale:
Due in one year or less	$	2,670	$	2,670
Due after one year through five years		5,250		4,955
Due after five years through ten years		4,670		4,313
Due after ten years		24,546		18,976
		37,136		30,914
Residential mortgage-backed agencies		23,825		19,283
Commercial mortgage-backed agencies		35,901		27,308
Collateralized mortgage obligations		18,927		15,449
Total available for sale	$	115,789	$	92,954
Held to Maturity:
Due after one year through five years	$	12,500	$	11,794
Due after five years through ten years		40,451		34,116
Due after ten years		19,714		14,843
		72,665		60,753
Residential mortgage-backed agencies		28,841		25,324
Commercial mortgage-backed agencies		21,223		15,508
Collateralized mortgage obligations		51,513		41,445
Total held to maturity	$	174,242	$	143,030