SECURITIES

9 Months Ended

Sep. 30, 2023

SECURITIES

SECURITIES

SECURITIES

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 September 30, 2023 and December 31, 2022.

($ in thousands)	September 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:
U.S. Treasury	$	135,648	$	—	$	10,954	$	124,694
Obligations of U.S. government agencies and sponsored entities	147,347		1		21,984		125,364
Tax-exempt and taxable obligations of states and municipal subdivisions	494,334		168		74,824		419,678
Mortgage-backed securities - residential	307,867		4		46,914		260,957
Mortgage-backed securities - commercial	199,065		48		26,114		172,999
Corporate obligations	41,633		—		4,354		37,279
Other	1,000		—		—		1,000
Total available-for-sale	$	1,326,894	$	221	$	185,144	$	1,141,971
Held-to-maturity:
U.S. Treasury	$	89,687	$	—	$	4,256	$	85,431
Obligations of U.S. government agencies and sponsored entities	33,656		—		2,781		30,875
Tax-exempt and taxable obligations of states and municipal subdivisions	246,611		96		28,288		218,419
Mortgage-backed securities - residential	144,991		—		21,971		123,020
Mortgage-backed securities - commercial	133,579		—		17,028		116,551
Corporate obligations	10,000		—		1,704		8,296
Total held-to-maturity	$	658,524	$	96	$	76,028	$	582,592

($ 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 September 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 $5.2 million and $6.2 million at September 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 September 30, 2023 and December 31, 2022.

Securities Held to Maturity

At September 30, 2023 and December 31, 2022, the potential credit loss exposure was $216 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 September 30, 2023.

Accrued interest receivable is excluded from the estimate of credit losses for securities held-to-maturity. Accrued interest receivable totaled $2.7 million and $3.6 million at September 30, 2023 and December 31, 2022, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

At both September 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 September 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 September 30, 2023 and December 31, 2022, aggregated by credit quality indicators.

($ in thousands)	September 30, 2023		December 31, 2022
Aaa	$	435,761	$	467,736
Aa1/Aa2/Aa3	137,230		110,854
A1/A2	33,326		13,757
BBB	10,000		10,000
Not rated	42,207		89,137
Total	$	658,524	$	691,484

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.

($ in thousands)	September 30, 2023
	Amortized Cost		Fair Value
Available-for-sale:
Due less than one year	$	64,589	$	63,710
Due after one year through five years	258,766		238,230
Due after five years through ten years	329,028		274,301
Due greater than ten years	167,579		131,774
Mortgage-backed securities - residential	307,867		260,957
Mortgage-backed securities - commercial	199,065		172,999
Total	$	1,326,894	$	1,141,971
Held-to-maturity:
Due less than one year	$	38,482	$	37,742
Due after one year through five years	72,433		68,066
Due after five years through ten years	53,952		47,856
Due greater than ten years	215,087		189,357
Mortgage-backed securities - residential	144,991		123,020
Mortgage-backed securities - commercial	133,579		116,551
Total	$	658,524	$	582,592

Total securities pledged as collateral, to secure public deposits and for other purposes, was $1.203 billion at September 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 September 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)	September 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	$	—	$	—	$	124,694	$	10,954	$	124,694	$	10,954
Obligations of U.S. government agencies and sponsored entities	187		—		124,848		21,984		125,035		21,984
Tax-exempt and taxable obligations of state and municipal subdivisions	35,198		3,215		373,596		71,609		408,794		74,824
Mortgage-backed securities - residential	749		10		259,613		46,904		260,362		46,914
Mortgage-backed securities - commercial	306		—		169,023		26,114		169,329		26,114
Corporate obligations	—		—		37,279		4,354		37,279		4,354
Total	$	36,440	$	3,225	$	1,089,053	$	181,919	$	1,125,493	$	185,144
Held-to-maturity:
U.S. Treasury	$	—	$	—	$	85,431	$	4,256	$	85,431	$	4,256
Obligations of U.S. government agencies and sponsored entities	708		36		30,166		2,745		30,874		2,781
Tax-exempt and taxable obligations of state and municipal subdivisions	119,396		10,885		87,466		17,403		206,862		28,288
Mortgage-backed securities - residential	—		—		123,020		21,971		123,020		21,971
Mortgage-backed securities - commercial	870		52		115,680		16,976		116,550		17,028
Corporate obligations	—		—		8,296		1,704		8,296		1,704
Total	$	120,974	$	10,973	$	450,059	$	65,055	$	571,033	$	76,028

($ 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 September 30, 2023 and December 31, 2022, the Company’s securities portfolio consisted of 1,318 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. As of September 30, 2023 and December 31, 2022, the Company determined that it does not intend to sell and is not currently aware of any circumstances which will require it to sell any of the securities that are in an unrealized loss position prior to recovery of their amortized cost basis. As such, no allowance for credit losses was needed at September 30, 2023 and December 31, 2022.