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Securities

9 Months Ended

Sep. 30, 2023

NOTE 6. Securities

This table provides the major components of debt securities available for sale ("AFS") and held to maturity (“HTM”) at amortized cost and estimated fair value at September 30, 2023 and December 31, 2022:


	September 30, 2023								December 31, 2022
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Amortized		unrealized		unrealized		Estimated
(In thousands)	cost		gains		losses		fair value		cost		gains		losses		fair value
Available for sale:
U.S. Government sponsored entities	$	17,133	$	—	$	(808)	$	16,325	$	16,961	$	—	$	(656)	$	16,305
State and political subdivisions		407		—		(45)		362		635		—		(22)		613
Residential mortgage-backed securities		15,835		28		(2,193)		13,670		17,097		32		(1,654)		15,475
Corporate and other securities		65,202		121		(3,558)		61,765		66,495		106		(3,601)		63,000
Total debt securities available for sale	$	98,577	$	149	$	(6,604)	$	92,122	$	101,188	$	138	$	(5,933)	$	95,393
Held to maturity:
U.S. Government sponsored entities	$	28,000	$	—	$	(6,096)	$	21,904	$	28,000	$	—	$	(5,310)	$	22,690
State and political subdivisions		1,158		5		(3)		1,160		1,115		67		—		1,182
Residential mortgage-backed securities		6,798		—		(2,707)		4,091		6,645		—		(1,939)		4,706
Total debt securities held to maturity	$	35,956	$	5	$	(8,806)	$	27,155	$	35,760	$	67	$	(7,249)	$	28,578

The contractual maturities of available for sale and held for maturity debt securities at September 30, 2023 are set forth in the following table. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Therefore, residential mortgage-backed securities are not included in the maturity categories in the following summary.



		Amortized		Fair
(In thousands)		Cost		Value
Available for sale:
Due in one year	$	2,133	$	2,114
Due after one year through five years		30,779		29,404
Due after five years through ten years		10,984		9,616
Due after ten years		38,846		37,318
Residential mortgage-backed securities		15,835		13,670
Total	$	98,577	$	92,122
Held to maturity:
Due in one year	$	—	$	—
Due after one year through five years		—		—
Due after five years through ten years		3,000		2,819
Due after ten years		26,158		20,245
Residential mortgage-backed securities		6,798		4,091
Total	$	35,956	$	27,155

Actual maturities of available for sale and held to maturity debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturitiy without penalty.

The fair value of debt securities with unrealized losses by length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2023 and December 31, 2022 are as follows:

September 30, 2023

Less than 12 months

12 months and greater

Total

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

(In thousands)

fair value

loss

fair value

loss

fair value

loss

Available for sale:

U.S. Government sponsored entities

2,114

(19)

14,211

(789)

16,325

(808)

State and political subdivisions

—

362

(45)

362

(45)

Residential mortgage-backed securities

(3)

13,543

(2,190)

13,624

(2,193)

Corporate and other securities

4,692

(308)

54,452

(3,250)

59,144

(3,558)

Total

6,887

(330)

82,568

(6,274)

89,455

(6,604)

Held to maturity:

U.S. Government sponsored entities

—

21,904

(6,096)

21,904

(6,096)

State and political subdivisions

571

(3)

—

571

(3)

Residential mortgage-backed securities

—

4,091

(2,707)

4,091

(2,707)

Total

571

(3)

25,995

(8,803)

26,566

(8,806)


	December 31, 2022
	Less than 12 months				12 months and greater				Total

	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
(In thousands)	fair value		loss		fair value		loss		fair value		loss
Available for sale:
U.S. Government sponsored entities	$	15,817	$	(622)	$	1,432	$	(34)	$	17,249	$	(656)
State and political subdivisions		160		(5)		253		(17)		413		(22)
Residential mortgage-backed securities		14,023		(1,448)		1,311		(206)		15,334		(1,654)
Corporate and other securities		23,445		(966)		31,948		(2,635)		55,393		(3,601)
Total temporarily impaired AFS securities	$	53,445	$	(3,041)	$	34,944	$	(2,892)	$	88,389	$	(5,933)
Held to maturity:
U.S. Government sponsored entities	$	15,659	$	(2,341)	$	7,031	$	(2,969)	$	22,690	$	(5,310)
Residential mortgage-backed securities		4,707		(1,939)		—		—		4,707		(1,939)
Total temporarily impaired HTM securities	$	20,366	$	(4,280)	$	7,031	$	(2,969)	$	27,397	$	(7,249)

Unrealized losses in each of the categories presented in the tables above were primarily driven by market interest rate fluctuations. Residential mortgage-backed securities are guaranteed by either Ginnie Mae, Freddie Mac or Fannie Mae.

Allowance for Credit Losses

The Company has zero-loss expectation for certain securities within the held to maturity portfolio, and therefore is not required to estimate an allowance for credit losses related to these securities under the CECL standard. The Company does not provide credit quality indicators for held to maturity securities that have zero-loss expectation. After an evaluation of various factors, the following security types are believed to qualify for this exclusion: U.S Government sponsored entities and residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae or Freddie Mac.

After reviewing credit ratings on securities within the portfolio, management recognized no impairment for held to maturity debt securities during the three and nine months ended September 30, 2023 and 2022. There was no allowance for credit losses for held to maturity debt securities at September 30, 2023 and 2022.

Available for sale debt securities in unrealized loss positions are evaluated for impairment on a quarterly basis. The Company has evaluated available for sale securities that are in an unrealized loss position and has determined that the declines in fair value are attributable to market volatility, not credit quality or other factors. Management recognized no impairment during the three and nine months ended September 30, 2023 and 2022. There was no allowance for credit losses for available for sale debt securities at September 30, 2023 and 2022.

Realized Gains and Losses on Debt Securities

Net realized gains are included in noninterest income in the Consolidated Statements of Income as net security gains. There were no realized gains or losses on available for sale securities during the three and nine months ended September 30, 2023 and 2022. There was no realized gain or loss for held for maturity debt securities during the three and nine months ended September 30, 2023 and 2022.

Equity Securities

Included in this category are Community Reinvestment Act ("CRA") investments and the Company’s current other equity holdings of financial institutions. Equity securities are defined to include (a) preferred, common and other ownership interests in entities including partnerships, joint ventures and limited liability companies and (b) rights to acquire or dispose of ownership interests in entities at fixed or determinable prices.

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2023 and 2022:


	For the three months ended September 30,				For the nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Net unrealized losses occurring during the period on equity securities	$	(144)	$	(576)	$	(853)	$	(1,631)
Net realized gains recognized during the period on equity securities sold during the period		21		—		243		—
Net losses recognized during the reporting period on equity securities still held at the reporting date	$	(123)	$	(576)	$	(610)	$	(1,631)