v3.26.1
Investment Securities
 6 Months Ended
Jun. 30, 2026
Investment Securities [Abstract]  
Investment Securities
2.
INVESTMENT SECURITIES
The following
tables present
a summary
of the amortized
cost, unrealized
or unrecognized
gains and
losses,
and fair
value of investment securities at the dates indicated (in
thousands):
Transfers of debt
securities into the held
-to-maturity (“HTM”) category
from the available for
sale (“AFS”) category
are
made at fair
value as of
the date of
transfer. The
unrealized gain or
loss at the
date of transfer
is retained in
accumulated
other comprehensive
loss (“AOCL”) and
in the carrying
value of the
HTM securities
and there is
no impact to
net income.
Such amounts
are amortized
over the
remaining life
of the security.
The Company
made
two
transfers from
AFS to
HTM
portfolios in 2022.
During the quarter ended
June 30, 2026, there were
no
investment securities that
were transferred from AFS
to HTM.
For the
three months ended
June 30, 2026, total
amortization out of
AOCL for net
unrealized losses on
securities transferred
in 2022
from AFS
to HTM
was $
99
thousand and
$
67
thousand for
the three
months ended
June 30, 2025.
At June 30,
2026, the fair value
of the transferred securities
was $
83.4
million and the balance
of the remaining unamortized
loss was
$
8.8
million.
The measurement of expected credit losses under the current expected credit loss (“CECL”) methodology is applicable
to financial assets measured at amortized cost, including
loan receivables and HTM debt securities.
CECL requires a loss reserve for securities
classified as HTM. The reserve should reflect
historical credit performance
as well
as the impact
of projected
economic forecasts. For
U.S. Government bonds
and U.S.
Agency issued bonds
classified
as HTM, the explicit guarantee of the
U.S. Government is sufficient
to conclude that an allowance for
credit loss reserve is
not
required.
The
reserve
requirement
is
for
three
primary
assets
groups:
municipal
bonds,
corporate
bonds,
and
non-
agency securitizations. The Company
calculates quarterly the loss reserve
utilizing Moody’s ImpairmentStudio.
The CECL
measurement
for
investment
securities
incorporates
historical
data,
containing
defaults
and
recoveries
information,
and
Moody’s baseline
economic forecast.
The solution
uses the probability
of default/loss
given default (“PD/LGD”)
approach.
PD represents
the likelihood
a borrower
will default.
Within the
Moody’s model,
this is
determined using
historical default
data, adjusted for the current economic environment. LGD projects
the expected loss if a borrower were to default.
The Company
monitors the credit
quality of HTM
securities through the
use of
credit ratings. Credit
ratings are monitored
by the Company on at least a quarterly basis.
As of June 30, 2026 and December
31, 2025, all HTM securities held by the
Company were rated investment grade.
At
June
30,
2026,
the
Company's
HTM
securities
portfolio
consisted
entirely
of
U.S.
government
and
U.S.
agency-
issued
bonds
and
mortgage-backed
securities
with
an
amortized
cost
of
$
136.1
million.
Due
to
the
explicit
or
implicit
guarantees associated with these securities,
management determined that no ACL was
required as of June 30, 2026. The
Company utilizes a
PD/LGD methodology to
estimate expected credit
losses for
HTM securities exposed
to non-government
credit risk. As
of December 31,
2025, the ACL
for HTM securities
was $
2
thousand. The carrying
value of HTM
securities
represents amortized cost less the related ACL.
The Company’s investment portfolio
includes AFS debt securities, which
are carried at fair value with unrealized
gains
and losses
recognized
in
AOCL, net
of applicable
taxes.
The Company
evaluates
whether the
declines
in fair
value
are
attributable to credit losses or other factors like interest rate risk, using both quantitative and qualitative
analyses, including
company performance analysis, review
of credit ratings, bond
vintage, remaining payment terms,
prepayment speeds and
analysis
of
macro-economic
conditions.
When
the
fair
value
of
an
AFS
security
is
less
than
its
amortized
cost
and
the
decline is attributable
to credit-related
factors, an ACL
is recorded. As
a result of
this evaluation, the
Company concluded
that no allowance was required on AFS securities as of
June 30, 2026 and as of December 31, 2025.
Information pertaining
to investment
securities with
gross unrealized
losses, aggregated
by investment
category
and
length of
time that
those
individual securities
have been
in a
continuous
loss position,
are presented
as of
the following
dates (in thousands):
The contractual
cash flows
associated with
U.S. Government
Agency securities,
collateralized
mortgage obligations,
and residential
and commercial
mortgage-backed
securities
are guaranteed
by U.S.
government-sponsored
enterprises,
thereby minimizing
credit risk.
Municipal bonds
are of
high credit
quality,
and the
observed declines
in fair
value are
not
attributable
to
a
deterioration
in
the
creditworthiness.
Similarly,
the
decrease
in
fair
value
of
bank
subordinated
debt
securities
is
primarily
driven
by
changes
in
market
interest
rates
rather
than
credit
concerns.
Based
on
management’s
evaluation
of these
factors,
management
believes
that
the unrealized
losses
on these
debt
securities
are attributable
to
fluctuations in market spreads and interest rate movements, rather than adverse changes in the underlying credit quality of
the issuers. The
Company does
not intend to
sell the investments
before recovery
of its amortized
cost basis,
which may
be at maturity,
and it is more likely than not that the Company will not
be required to sell the securities before maturity.
Gains
and
losses
on
the
sale
of
securities
are
recorded
on
the
trade
date
and
are
determined
on
the
specific
identification basis. The following table presents the proceeds, realized gross gains and realized gross losses on sales and
calls of AFS debt securities for the three and six months
ended June 30, 2026 and 2025 (in thousands):
The amortized
cost
and
fair
value of
investment
securities,
by contractual
maturity,
are shown
below
as of
the date
indicated (in thousands).
Actual maturities may
differ from contractual
maturities because borrowers
may 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.
At June 30, 2026, there
were no securities
held in the
portfolio from any
one issuer in
an amount greater
than 10% of
total
stockholders’
equity
other
than
the
U.S.
Government
and
U.S.
Government
Agency
issued
securities.
All
the
collateralized mortgage obligations and mortgage-backed securities at June 30, 2026 and December 31, 2025 were issued
by U.S. Government entities.
The Bank is a Qualified Public Depository (“QPD”) with the State of Florida. As a QPD, the Bank
has the legal authority
to
maintain
public
deposits
from
cities,
municipalities,
and
the
State
of
Florida.
These
public
deposits
are
secured
by
securities pledged to the State of Florida at a ratio of
25
% of the quarter daily average balance for quarters ended June 30,
2026 and
December 31, 2025.
The Bank
must also
maintain a
minimum amount
of pledged
securities to
be in the
public
funds program.
As of June 30, 2026, the Bank
had a total of $
223.6
million in deposits under the
public funds program and pledged to
the State of Florida for these public funds were
twenty-three
bonds with an aggregate fair value of $
56.3
million.
As of
December 31, 2025, the
Bank had
a total
of $
167.7
million in
deposits under the
public funds program
and pledged
to the State of Florida for these public funds were
fifteen
bonds with an aggregate fair value of $
43.5
million.
June 30, 2026
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
11,883
$
-
$
(1,028)
$
10,855
Collateralized mortgage obligations
84,406
-
(17,307)
67,099
Mortgage-backed securities - residential
34,909
108
(6,026)
28,991
Mortgage-backed securities - commercial
215,345
171
(8,517)
206,999
Municipal securities
5,191
-
(966)
4,225
Bank subordinated debt securities
14,578
226
(114)
14,690
$
366,312
$
505
$
(33,958)
$
332,859
June 30, 2026
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
37,328
$
67
$
(3,266)
$
34,129
Collateralized mortgage obligations
48,762
705
(5,646)
43,821
Mortgage-backed securities - residential
35,188
628
(3,294)
32,522
Mortgage-backed securities - commercial
14,849
-
(1,144)
13,705
$
136,127
$
1,400
$
(13,350)
$
124,177
Allowance for credit losses - securities held-to-maturity
-
Securities held-to maturity, net of allowance for credit losses
$
136,127
December 31, 2025
Available-for-sale:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
U.S. Government Agency
$
15,169
$
18
$
(1,043)
$
14,144
Collateralized mortgage obligations
92,871
-
(17,043)
75,828
Mortgage-backed securities - residential
35,865
135
(6,083)
29,917
Mortgage-backed securities - commercial
174,622
347
(6,861)
168,108
Municipal securities
5,196
-
(933)
4,263
Bank subordinated debt securities
15,284
189
(243)
15,230
$
339,007
$
689
$
(32,206)
$
307,490
December 31, 2025
Held-to-maturity:
Amortized
Cost
Unrecognized
Gains
Unrecognized
Losses
Fair Value
U.S. Government Agency
$
41,158
$
91
$
(3,279)
$
37,970
Collateralized mortgage obligations
51,431
854
(5,499)
46,786
Mortgage-backed securities - residential
37,221
760
(3,263)
34,718
Mortgage-backed securities - commercial
15,088
-
(1,037)
14,051
Corporate bonds
9,045
-
(62)
8,983
$
153,943
$
1,705
$
(13,140)
$
142,508
Allowance for credit losses - securities held-to-maturity
(2)
Securities held-to maturity, net of allowance for credit losses
$
153,941
Three Months Ended June 30,
Six Months Ended June 30,
Available-for-sale:
2026
2025
2026
2025
Proceeds from sale and call of securities
$
-
$
-
$
37,181
$
-
Gross gains
$
-
$
-
$
82
$
-
Gross losses
-
-
(68)
-
Net realized gain
$
-
$
-
$
14
$
-
June 30, 2026
Less than 12 months
12 months or more
Total
Available-for-Sale:
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
5,072
$
(129)
$
5,783
$
(899)
$
10,855
$
(1,028)
Collateralized mortgage obligations
3,760
(129)
63,339
(17,178)
67,099
(17,307)
Mortgage-backed securities - residential
-
-
21,886
(6,026)
21,886
(6,026)
Mortgage-backed securities - commercial
114,454
(1,368)
60,238
(7,149)
174,692
(8,517)
Municipal securities
-
-
4,225
(966)
4,225
(966)
Bank subordinated debt securities
1,731
(19)
6,396
(95)
8,127
(114)
$
125,017
$
(1,645)
$
161,867
$
(32,313)
$
286,884
$
(33,958)
December 31, 2025
Less than 12 months
12 months or more
Total
Available-for-sale:
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government Agency
$
5,937
$
(59)
$
5,649
$
(984)
$
11,586
$
(1,043)
Collateralized mortgage obligations
8,929
(93)
66,899
(16,950)
75,828
(17,043)
Mortgage-backed securities - residential
-
-
22,695
(6,083)
22,695
(6,083)
Mortgage-backed securities - commercial
59,655
(477)
56,852
(6,384)
116,507
(6,861)
Municipal securities
-
-
4,263
(933)
4,263
(933)
Bank subordinated debt securities
2,020
(4)
7,234
(239)
9,254
(243)
$
76,541
$
(633)
$
163,592
$
(31,573)
$
240,133
$
(32,206)
Available-for-sale
Held-to-maturity
June 30, 2026:
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Due within one year
$
-
$
-
$
-
$
-
Due after one year through five years
2,000
1,990
-
-
Due after five years through ten years
17,769
16,925
-
-
Due after ten years
-
-
-
-
U.S. Government Agency
11,883
10,855
37,328
34,129
Collateralized mortgage obligations
84,406
67,099
48,762
43,821
Mortgage-backed securities - residential
34,909
28,991
35,188
32,522
Mortgage-backed securities - commercial
215,345
206,999
14,849
13,705
$
366,312
$
332,859
$
136,127
$
124,177