SECURITIES

6 Months Ended

Jun. 30, 2023

The following table summarizes the amortized cost, gross unrealized gains and losses, and estimated fair values of securities available-for-sale (“AFS”) and securities held-to-maturity at June 30, 2023 and December 31, 2022.


($ in thousands)	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:
U.S. Treasury	$	135,683	$	—	$	11,067	$	124,616
Obligations of U.S. government agencies and sponsored entities	152,520		1		19,783		132,738
Tax-exempt and taxable obligations of states and municipal subdivisions	505,231		430		57,760		447,901
Mortgage-backed securities - residential	319,417		3		40,622		278,798
Mortgage-backed securities - commercial	201,601		51		24,471		177,181
Corporate obligations	42,244		—		4,375		37,869
Total available-for-sale	$	1,356,696	$	485	$	158,078	$	1,199,103
Held-to-maturity:
U.S. Treasury	$	89,687	$	—	$	4,648	$	85,039
Obligations of U.S. government agencies and sponsored entities	33,681		—		2,383		31,298
Tax-exempt and taxable obligations of states and municipal subdivisions	247,126		6,330		15,968		237,488
Mortgage-backed securities - residential	148,859		—		16,902		131,957
Mortgage-backed securities - commercial	134,120		—		14,016		120,104
Corporate obligations	10,000		—		2,055		7,945
Total held-to-maturity	$	663,473	$	6,330	$	55,972	$	613,831


($ in thousands)	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:
U.S. Treasury	$	135,752	$	—	$	11,898	$	123,854
Obligations of U.S. government agencies sponsored entities	163,054		3		18,688		144,369
Tax-exempt and taxable obligations of states and municipal subdivisions	519,190		598		61,931		457,857
Mortgage-backed securities - residential	341,272		11		42,041		299,242
Mortgage-backed securities - commercial	215,200		60		24,363		190,897
Corporate obligations	43,869		—		2,987		40,882
Total available-for-sale	$	1,418,337	$	672	$	161,908	$	1,257,101
Held-to-maturity:
U.S. Treasury	$	109,631	$	—	$	5,175	$	104,456
Obligations of U.S. government agencies and sponsored entities	33,789		—		2,153		31,636
Tax-exempt and taxable obligations of states and municipal subdivisions	247,467		4,525		13,699		238,293
Mortgage-backed securities - residential	156,119		—		17,479		138,640
Mortgage-backed securities - commercial	134,478		7		13,798		120,687
Corporate obligations	10,000		—		1,615		8,385
Total held-to-maturity	$	691,484	$	4,532	$	53,919	$	642,097

The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

The Company reassessed classification of certain investments and effective October 2022, the Company transferred $863 thousand of obligations of U.S. government agencies and sponsored entities, $1.2 million of mortgage-backed securities - commercial, and $137.5 million of tax-exempt and taxable obligations of state and municipal subdivisions from AFS to HTM securities. The securities were transferred at their amortized cost basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income. The related unrealized loss of $36.8 million included in other comprehensive income remained in other comprehensive income, to be amortized out of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. There was no allowance for credit loss associated with the AFS securities that were transferred to HTM.

ACL on Securities

Securities Available for Sale

Quarterly, the Company evaluates if a security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as outlined below:

•Review the extent to which the fair value is less than the amortized cost and determine if the decline is indicative of credit loss or other factors.

•The securities that violate the credit loss trigger above would be subjected to additional analysis.

•If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using the discounted cash flow (“DCF”) analysis using the effective interest rate. The amount of credit loss the Company

records will be limited to the amount by which the amortized cost exceeds the fair value. The allowance for the calculated credit loss will be monitored going forward for further credit deterioration or improvement.

At both June 30, 2023 and December 31, 2022, the results of the analysis did not identify any securities where the decline was indicative of credit loss factors; therefore, no credit loss was recognized on any of the securities AFS.

Accrued interest receivable is excluded from the estimate of credit losses for securities AFS. Accrued interest receivable totaled $5.7 million and $6.2 million at June 30, 2023 and December 31, 2022, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

All AFS securities were current with no securities past due or on nonaccrual as of June 30, 2023 and December 31, 2022.

Securities Held to Maturity

At June 30, 2023 and December 31, 2022, the potential credit loss exposure was $201 thousand and $242 thousand, respectively and consisted of tax-exempt and taxable obligations of states and municipal subdivisions and corporate obligations securities. After applying appropriate probability of default (“PD”) and loss given default (“LGD”) assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded at June 30, 2023.

Accrued interest receivable is excluded from the estimate of credit losses for securities held-to-maturity. Accrued interest receivable totaled $3.4 million and $3.6 million at June 30, 2023 and December 31, 2022, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

At both June 30, 2023 and December 31, 2022, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as nonaccrual at both June 30, 2023 and December 31, 2022.

The Company monitors the credit quality of the debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at June 30, 2023 and December 31, 2022, aggregated by credit quality indicators.


($ in thousands)	June 30, 2023		December 31, 2022
Aaa	$	440,152	$	467,736
Aa1/Aa2/Aa3	137,533		110,854
A1/A2	33,349		13,757
BBB	10,000		10,000
Not rated	42,439		89,137
Total	$	663,473	$	691,484


($ in thousands)	June 30, 2023
	Amortized Cost		Fair Value
Available-for-sale:
Due less than one year	$	62,185	$	61,053
Due after one year through five years	265,117		246,185
Due after five years through ten years	334,035		289,647
Due greater than ten years	174,341		146,239
Mortgage-backed securities - residential	319,417		278,798
Mortgage-backed securities - commercial	201,601		177,181
Total	$	1,356,696	$	1,199,103

Held-to-maturity:
Due less than one year	$	38,491	$	37,396
Due after one year through five years	72,423		68,056
Due after five years through ten years	52,315		47,359
Due greater than ten years	217,265		208,959
Mortgage-backed securities - residential	148,859		131,957
Mortgage-backed securities - commercial	134,120		120,104
Total	$	663,473	$	613,831

The amortized costs of securities pledged as collateral, to secure public deposits and for other purposes, was $1.186 billion at June 30, 2023 and $1.031 billion at December 31, 2022, respectively.

The following table summarizes securities in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2023 and December 31, 2022. The securities are aggregated by major security type and length of time in a continuous unrealized loss position:


($ in thousands)	June 30, 2023
	Losses < 12 Months				Losses 12 Months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury	$	—	$	—	$	124,616	$	11,067	$	124,616	$	11,067
Obligations of U.S. government agencies and sponsored entities	1,031		38		131,338		19,745		132,369		19,783
Tax-exempt and taxable obligations of state and municipal subdivisions	47,332		2,055		378,121		55,705		425,453		57,760
Mortgage-backed securities - residential	9,805		423		268,497		40,199		278,302		40,622
Mortgage-backed securities - commercial	5,067		333		167,716		24,138		172,783		24,471
Corporate obligations	8,323		1,177		29,547		3,198		37,870		4,375
Total	$	71,558	$	4,026	$	1,099,835	$	154,052	$	1,171,393	$	158,078

Held-to-maturity:
U.S. Treasury	$	—	$	—	$	85,039	$	4,648	$	85,039	$	4,648
Obligations of U.S. government agencies and sponsored entities	736		—		30,561		2,383		31,297		2,383
Tax-exempt and taxable obligations of state and municipal subdivisions	44,551		4,276		67,739		11,692		112,290		15,968
Mortgage-backed securities - residential	—		—		131,957		16,902		131,957		16,902
Mortgage-backed securities - commercial	25,217		1,829		94,887		12,187		120,104		14,016
Corporate obligations	—		—		7,945		2,055		7,945		2,055
Total	$	70,504	$	6,105	$	418,128	$	49,867	$	488,632	$	55,972


($ in thousands)	December 31, 2022
	Losses < 12 Months				Losses 12 Months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury	$	4,563	$	419	$	119,292	$	11,479	$	123,855	$	11,898
Obligations of U.S. government agencies and sponsored entities	34,254		2,293		109,431		16,395		143,685		18,688
Tax-exempt and taxable obligations of state and municipal subdivisions	275,202		31,152		159,508		30,779		434,710		61,931
Mortgage-backed securities - residential	76,125		4,970		222,274		37,071		298,399		42,041
Mortgage-backed securities - commercial	50,193		3,025		136,062		21,338		186,255		24,363
Corporate obligations	35,142		1,995		5,739		992		40,881		2,987
Total	$	475,479	$	43,854	$	752,306	$	118,054	$	1,227,785	$	161,908

Held-to-maturity:
U.S. Treasury	$	104,457	$	5,175	$	—	$	—	$	104,457	$	5,175
Obligations of U.S. government agencies and sponsored entities	31,636		2,153		—		—		31,636		2,153
Tax-exempt and taxable obligations of state and municipal subdivisions	127,628		13,583		15,303		116		142,931		13,699
Mortgage-backed securities - residential	138,639		17,479		—		—		138,639		17,479
Mortgage-backed securities - commercial	119,758		13,798		—		—		119,758		13,798
Corporate obligations	8,385		1,615		—		—		8,385		1,615
Total	$	530,503	$	53,803	$	15,303	$	116	$	545,806	$	53,919

At June 30, 2023 and December 31, 2022, the Company’s securities portfolio consisted of 1,208 and 1,265 securities, respectively, which were in an unrealized loss position. Securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost basis. No allowance for credit losses was needed at June 30, 2023 and December 31, 2022.