UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended | |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
Commission file number:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation | (I.R.S. Employer Identification No.) |
(Address of principal executive offices; Zip Code)
(
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
CATALYST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 26 | ||
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i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| (Unaudited) | |||||
September 30, | December 31, | |||||
(Dollars in thousands) | 2022 | 2021 | ||||
ASSETS |
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Non-interest-bearing cash | $ | | $ | | ||
Interest-bearing cash and due from banks |
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Total cash and cash equivalents |
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Investment securities: |
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Securities available-for-sale, at fair value |
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Securities held-to-maturity (fair values of $ |
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Loans receivable, net of unearned income |
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Allowance for loan losses |
| ( |
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Loans receivable, net |
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Accrued interest receivable |
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Foreclosed assets |
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Premises and equipment, net |
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Stock in correspondent banks, at cost |
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Bank-owned life insurance |
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Other assets |
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TOTAL ASSETS | $ | | $ | | ||
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LIABILITIES |
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Deposits |
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Non-interest-bearing | $ | | $ | | ||
Interest-bearing |
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Total deposits |
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Advances from Federal Home Loan Bank |
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Other liabilities |
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TOTAL LIABILITIES |
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SHAREHOLDERS' EQUITY |
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Preferred stock, $ | ||||||
Common stock, $ | | | ||||
Additional paid-in capital | | | ||||
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP") | ( | ( | ||||
Retained earnings |
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Accumulated other comprehensive income (loss) |
| ( |
| ( | ||
TOTAL SHAREHOLDERS' EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | | $ | |
The accompanying Notes are an integral part of these financial statements.
1
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
INTEREST INCOME |
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Loans receivable, including fees | $ | | $ | | $ | | $ | | ||||
Investment securities |
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Other |
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Total interest income |
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INTEREST EXPENSE |
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Deposits |
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Advances from Federal Home Loan Bank |
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Total interest expense |
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Net interest income |
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Provision for (reversal of) loan losses |
| ( |
| - |
| ( |
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Net interest income after provision for (reversal of) loan losses |
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NON-INTEREST INCOME |
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Service charges on deposit accounts |
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Gain (loss) on disposals and sales of fixed assets |
| - |
| - |
| ( |
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Bank-owned life insurance |
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Federal community development grant |
| - |
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Other |
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Total non-interest income |
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NON-INTEREST EXPENSE |
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Salaries and employee benefits |
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Occupancy and equipment |
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Data processing and communication |
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Professional fees |
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Directors’ fees |
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ATM and debit card |
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Foreclosed assets, net |
| ( |
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Advertising and marketing |
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Franchise and shares tax | | - | | - | ||||||||
Regulatory fees and assessments | | | | | ||||||||
Insurance | | | | | ||||||||
Printing, supplies and postage | | | | | ||||||||
Other |
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Total non-interest expense |
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Income (loss) before income tax expense (benefit) |
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| ( |
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Income tax expense (benefit) |
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| ( |
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NET INCOME | $ | | $ | | $ | | $ | | ||||
Earnings per share - basic | $ | | $ | N/A | $ | | $ | N/A | ||||
Earnings per share - diluted | $ | | $ | N/A | $ | | $ | N/A |
The accompanying Notes are an integral part of these financial statements.
2
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(Dollars in thousands) | 2022 |
| 2021 | 2022 |
| 2021 | |||||||
Net income | $ | | $ | | $ | | $ | | |||||
Net change in unrealized gains (losses) on available-for-sale securities |
| ( |
| ( |
| ( |
| ( | |||||
Income tax effect |
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Total other comprehensive income (loss) |
| ( |
| ( |
| ( |
| ( | |||||
Total comprehensive income (loss) | $ | ( | $ | | $ | ( | $ | |
The accompanying Notes are an integral part of these financial statements.
3
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands) | Common Stock | Additional Paid-in Capital | Unallocated Common Stock Held by ESOP | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||
BALANCE, JUNE 30, 2021 | $ | - | $ | - | $ | - | $ | | $ | ( | $ | | ||||||
Net income |
| - |
| - |
| - |
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| - |
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Other comprehensive income (loss) |
| - |
| - |
| - |
| - | ( |
| ( | |||||||
BALANCE, SEPTEMBER 30, 2021 | $ | - | $ | - | $ | - | $ | | $ | ( | $ | | ||||||
BALANCE, JUNE 30, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income |
| - |
| - |
| - |
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| - |
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Other comprehensive income (loss) |
| - |
| - |
| - |
| - | ( |
| ( | |||||||
ESOP shares released for allocation |
| - |
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| - | - |
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Stock compensation expense |
| - |
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| - |
| - | - |
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BALANCE, SEPTEMBER 30, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
BALANCE, DECEMBER 31, 2020 | $ | - | $ | - | $ | - | $ | | $ | | $ | | ||||||
Net income |
| - |
| - |
| - |
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| - |
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Other comprehensive income (loss) |
| - |
| - |
| - |
| - | ( |
| ( | |||||||
BALANCE, SEPTEMBER 30, 2021 | $ | - | $ | - | $ | - | $ | | $ | ( | $ | | ||||||
BALANCE, DECEMBER 31, 2021 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income |
| - |
| - |
| - |
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| - |
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Other comprehensive income (loss) |
| - |
| - |
| - |
| - | ( |
| ( | |||||||
ESOP shares released for allocation |
| - |
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| - | - |
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Stock compensation expense |
| - |
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| - |
| - | - |
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BALANCE, SEPTEMBER 30, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | |
The accompanying Notes are an integral part of these financial statements.
4
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, | ||||||
(Dollars in thousands) | 2022 |
| 2021 | |||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Investment securities amortization, net |
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Federal Home Loan Bank stock dividends |
| ( |
| ( | ||
Amortization of prepayment penalties on debt restructuring | | | ||||
Provision for (reversal of) loan losses |
| ( |
| ( | ||
Net loss (gain) on disposals and sales of premises and equipment |
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| ( | ||
Increase in cash surrender value of bank-owned life insurance | ( | ( | ||||
Stock-based compensation | | - | ||||
Depreciation of premises and equipment |
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Net writedowns and losses (gains) on the sale of foreclosed assets |
| ( |
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Deferred income tax expense (benefit) |
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(Increase) decrease in other assets |
| ( |
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Increase (decrease) in other liabilities |
| ( |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Activity in available-for-sale securities: |
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Proceeds from maturities, calls, and paydowns |
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Purchases |
| ( |
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Activity in held-to-maturity securities: |
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Proceeds from maturities and calls |
| - |
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Net (increase) decrease in loans |
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Proceeds from sale of foreclosed assets |
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Purchases of premises and equipment |
| ( |
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Proceeds from sale of premises and equipment |
| - |
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Purchase of bank-owned life insurance |
| ( |
| - | ||
Net cash used in investing activities |
| ( |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Net increase in deposits |
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Net cash provided by financing activities |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
| ( |
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CASH AND CASH EQUIVALENTS, beginning of period |
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CASH AND CASH EQUIVALENTS, end of period | $ | | $ | | ||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES |
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Loans originated to facilitate the sale of real estate owned | $ | - | $ | | ||
Acquisition of real estate in settlement of loans | $ | | $ | | ||
SUPPLEMENTAL SCHEDULE OF INTEREST AND TAXES PAID |
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Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes | $ | | $ | |
The accompanying Notes are an integral part of these financial statements.
5
CATALYST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
Catalyst Bancorp, Inc. (“Catalyst Bancorp” or the “Company”) is the holding company for Catalyst Bank (the “Bank”), formerly known as St. Landry Homestead Federal Savings Bank. The Bank has been in operation in the Acadiana region of south-central Louisiana since 1922 and offers commercial and retail banking products through six full-service locations.
The Company was incorporated by the Bank in February 2021 as part of the conversion of the Bank from the mutual to the stock form of organization (the “Conversion”). The Conversion was completed on October 12, 2021, at which time the Company acquired all of the issued and outstanding shares of common stock of the Bank and became the holding company for the Bank. Shares of the Company’s common stock were issued and sold in an offering to certain depositors of the Bank and others. The Company was not engaged in operations and had not issued any shares of stock prior to the completion of the Conversion.
As used in this report, unless the context otherwise requires, the terms “we,” “our,” “us,” or the “Company” refer to Catalyst Bancorp, and the term the “Bank” refers to Catalyst Bank, the wholly owned subsidiary of the Company. In addition, unless the context otherwise requires, references to the operations of the Company include the operations of the Bank.
The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2021.
Critical Accounting Policies and Estimates
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2021.
On March 23, 2022, the Board of Directors adopted the 2022 Stock Option Plan and the 2022 Recognition and Retention Plan and Trust Agreement (“2022 Recognition and Retention Plan”), which were approved by shareholders at our annual meeting on May 17, 2022. Under the terms of both plans, officers, employees and directors selected by the Compensation Committee of the Board of Directors are eligible to receive benefits. A total of
On September 1, 2022, the Company granted a total of
6
the grant date and is recognized over the service period, which is usually the vesting period. All awards issued on September 1, 2022 were issued with a
There were no other material changes from the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.
Certain amounts reported in prior periods may have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported equity or net income.
NOTE 2. COMPLETION OF STOCK OFFERING
The Company completed its initial public offering (“IPO”) of stock in connection with the Bank’s conversion from the mutual to the stock form of organization on October 12, 2021. Information for periods prior to the completion of the Conversion are for the Bank only.
The Company issued a total of
The costs of issuing the common stock were deferred and deducted from the sales proceeds of the IPO at December 31, 2021. Conversion costs totaled $
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC 326), Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on current expected credit losses (“CECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments, including loans, held-to-maturity securities and certain off-balance sheet financial instruments. The CECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating the CECL. The allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial estimate of expected credit loss would be recognized through an allowance for credit losses with an offset to the purchase price at acquisition. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. The ASU also amends the current available-for-sale security impairment model for debt securities whereby credit losses related to available-for-sale debt securities should be recorded through an allowance for credit losses. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. On October 18, 2019, FASB approved an effective date delay applicable to smaller reporting companies and non-public business entities until January 2023. The Company has elected to delay implementation of the standard until January 2023. The Company has completed the implementation of a vendor provided software application and is currently conducting parallel testing of several CECL estimation methodologies. The Company expects the adoption of the ASU to increase the allowance for loan losses. The extent of the impact upon adoption is not known and will depend on the characteristics of the Company’s loan portfolio and economic conditions on that date as well as forecasted conditions thereafter.
7
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326), Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures. The amendments in this ASU respond to feedback received by the FASB during the post-implementation review of the amendments included in ASU 2016-13. The amendments in ASU 2022-02 eliminate the accounting guidance for TDRs by creditors in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors and enhance disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Stakeholders have observed that the additional designation of a loan modification as a TDR and the related accounting under current GAAP are unnecessarily complex and do not provide decision-useful information after the adoption of ASU 2016-13 since credit losses from TDRs are incorporated under the CECL model. Under the amendments in ASU 2022-02, an entity must apply the guidance under ASC 310-20 to determine whether a modification results in a new loan or a continuation of an existing loan rather than applying the guidance for TDRs. For public business entities, the amendments in ASU 2022-02 also require an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The amendments in ASU 2022-02 are effective at the time of adoption of the amendments in ASU 2016-13. The Company is currently evaluating the provisions of the amendment; however, we do not expect that the adoption of ASU 2022-02 will have a material effect on the Company’s consolidated financial statements.
8
NOTE 4. EARNINGS PER SHARE
Earnings per common share was computed based on the following:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||
(In thousands, except per share data) | 2022 | 2022 | ||||
Numerator |
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Net income available to common shareholders | $ | | $ | | ||
Denominator |
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Weighted average common shares outstanding |
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Weighted average unallocated ESOP shares | ( | ( | ||||
Weighted average shares | | | ||||
Effect of dilutive shares: | ||||||
Restricted stock | - | - | ||||
Stock options | - | - | ||||
Weighted average shares - assuming dilution | | | ||||
Basic earnings per common share | $ | | $ | | ||
Diluted earnings per common share | $ | | $ | |
During the three and nine months ended September 30, 2022, the number of convertible securities or other contracts to issue common stock outstanding that if converted or exercised would result in potential dilution of earnings per share was immaterial. At and during the three and nine months ended September 30, 2021, the Company did not have any common shares outstanding. The Company completed its IPO of stock in connection with the Bank’s Conversion from the mutual to the stock form of organization on October 12, 2021.
9
NOTE 5. INVESTMENT SECURITIES
Investment securities have been classified according to management’s intent. The amortized cost of securities and their approximate fair values are as follows:
| September 30, 2022 | |||||||||||
(Dollars in thousands) | Amortized Cost |
| Gross Unrealized Gains |
| Gross Unrealized Losses |
| Fair Value | |||||
Securities available-for-sale |
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Mortgage-backed securities | $ | | $ | - | $ | ( | $ | | ||||
U.S. Government and agency obligations |
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| - |
| ( |
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Municipal obligations |
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| - |
| ( |
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Total available-for-sale | $ | | $ | - | $ | ( | $ | | ||||
Securities held-to-maturity |
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U.S. Government and agency obligations | $ | | $ | - | $ | ( | $ | | ||||
Municipal obligations |
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| - |
| ( |
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Total held-to-maturity | $ | | $ | - | $ | ( | $ | |
| December 31, 2021 | |||||||||||
(Dollars in thousands) | Amortized Cost |
| Gross Unrealized Gains |
| Gross Unrealized Losses |
| Fair Value | |||||
Securities available-for-sale |
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Mortgage-backed securities | $ | | $ | | $ | ( | $ | | ||||
U.S. Government and agency obligations |
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| ( |
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Municipal obligations |
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| - |
| ( |
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Total available-for-sale | $ | | $ | | $ | ( | $ | | ||||
Securities held-to-maturity |
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U.S. Government and agency obligations | $ | | $ | | $ | ( | $ | | ||||
Municipal obligations |
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| - |
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Total held-to-maturity | $ | | $ | | $ | ( | $ | |
There were
Investment securities with a carrying amount of approximately $
10
The following is a summary of maturities of securities held-to-maturity and available-for-sale at September 30, 2022 and December 31, 2021:
September 30, 2022 | ||||||||||||
Available-for-Sale | Held-to-Maturity | |||||||||||
(Dollars in thousands) | Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | |||||
Amounts maturing in: |
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One year or less | $ | - | $ | - | $ | - | $ | - | ||||
After one through five years |
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After five through ten years |
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After ten years |
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Total | $ | | $ | | $ | | $ | |
December 31, 2021 | ||||||||||||
Available-for-Sale | Held-to-Maturity | |||||||||||
(Dollars in thousands) |
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | ||||
Amounts maturing in: |
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One year or less | $ | - | $ | - | $ | - | $ | - | ||||
After one through five years |
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| - |
| - | ||||
After five through ten years |
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After ten years |
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| | ||||
Total | $ | | $ | | $ | | $ | |
Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments, or call options. The expected maturities may differ from contractual maturities because of the exercise of call options and potential paydowns. Accordingly, actual maturities may differ from contractual maturities.
11
Information pertaining to securities with gross unrealized losses at September 30, 2022 and December 31, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
September 30, 2022 | ||||||||||||||||||
Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||
(Dollars in thousands) |
| Fair Value |
| Gross Unrealized Losses |
| Fair Value |
| Gross Unrealized Losses |
| Fair Value |
| Gross Unrealized Losses | ||||||
Securities available-for-sale |
|
|
|
|
|
|
|
|
|
| ||||||||
Mortgage-backed securities | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
U.S. Government and agency obligations |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Municipal obligations |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Total available-for-sale | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
Securities held-to-maturity |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Government and agency obligations | $ | | $ | ( | $ | | $ | ( | $ | | $ |