Note 2 - Securities

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

2. SECURITIES

The amortized cost and fair value of available for sale securities and the related pre-tax gross unrealized gains and losses recognized in accumulated other comprehensive income are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2022
U.S. Government agency debt obligations	$	453,512,000	$	0	$	(46,177,000	)	$	407,335,000
Mortgage-backed securities		40,676,000		56,000		(4,368,000	)		36,364,000
Municipal general obligation bonds		145,002,000		190,000		(7,519,000	)		137,673,000
Municipal revenue bonds		24,287,000		18,000		(2,539,000	)		21,766,000
Other investments		500,000		0		0			500,000
	$	663,977,000	$	264,000	$	(60,603,000	)	$	603,638,000
December 31, 2021
U.S. Government agency debt obligations	$	398,874,000	$	266,000	$	(8,769,000	)	$	390,371,000
Mortgage-backed securities		41,906,000		549,000		(652,000	)		41,803,000
Municipal general obligation bonds		133,894,000		4,092,000		(392,000	)		137,594,000
Municipal revenue bonds		22,289,000		331,000		(145,000	)		22,475,000
Other investments		500,000		0		0			500,000
	$	597,463,000	$	5,238,000	$	(9,958,000	)	$	592,743,000

Securities with unrealized losses at June 30, 2022 and December 31, 2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 30, 2022
U.S. Government agency debt obligations	$	176,893,000	$	17,028,000	$	230,442,000	$	29,149,000	$	407,335,000	$	46,177,000
Mortgage-backed securities		23,935,000		2,259,000		11,372,000		2,109,000		35,307,000		4,368,000
Municipal general obligation bonds		90,305,000		5,551,000		16,284,000		1,968,000		106,589,000		7,519,000
Municipal revenue bonds		12,823,000		1,454,000		7,088,000		1,085,000		19,911,000		2,539,000
	$	303,956,000	$	26,292,000	$	265,186,000	$	34,311,000	$	569,142,000	$	60,603,000

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
December 31, 2021
U.S. Government agency debt obligations	$	274,287,000	$	5,274,000	$	110,053,000	$	3,495,000	$	384,340,000	$	8,769,000
Mortgage-backed securities		23,184,000		652,000		24,000		0		23,208,000		652,000
Municipal general obligation bonds		40,748,000		392,000		0		0		40,748,000		392,000
Municipal revenue bonds		12,843,000		137,000		414,000		8,000		13,257,000		145,000
	$	351,062,000	$	6,455,000	$	110,491,000	$	3,503,000	$	461,553,000	$	9,958,000

We evaluate securities in an unrealized loss position at least quarterly. Consideration is given to the financial condition and near-term prospects of the issuer, and the intent and ability we have to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. For those debt securities whose fair value is less than their amortized cost basis, we also consider our intent to sell the security, whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to recover the entire amortized cost basis of the security. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.

At June 30, 2022, 651 debt securities with estimated fair values totaling $569 million had unrealized losses aggregating $60.6 million. At December 31, 2021, 333 debt securities with estimated fair values totaling $462 million had unrealized losses aggregating $10.0 million. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. As we do not intend to sell our debt securities before recovery of their cost basis and we believe it is more likely than not that we will not be required to sell our debt securities before recovery of the cost basis, no unrealized losses are deemed to be other-than-temporary.

The amortized cost and fair value of debt securities at June 30, 2022, by maturity, are shown in the following table. The contractual maturity is utilized for U.S. Government agency debt obligations and municipal bonds. Expected 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, primarily mortgage-backed securities, are shown separately. Weighted average yields are also reflected, with yields for municipal securities shown at their tax equivalent yield.

	Weighted Average Yield			Amortized Cost		Fair Value
Due in 2022		1.35	%	$	3,750,000	$	3,738,000
Due in 2023 through 2027		1.14			266,931,000		250,890,000
Due in 2028 through 2032		1.84			311,780,000		277,595,000
Due in 2033 and beyond		2.33			40,340,000		34,551,000
Mortgage-backed securities		2.04			40,676,000		36,364,000
Other investments		3.88			500,000		500,000
Total available for sale securities		1.60	%	$	663,977,000	$	603,638,000

Securities issued by the State of Michigan and all its political subdivisions had combined amortized costs of $169 million and $155 million at June 30, 2022 and December 31, 2021, respectively, with estimated market values of $159 million and $158 million, respectively. Securities issued by all other states and their political subdivisions had combined amortized costs of $0.3 million and $1.7 million and estimated market values of $0.2 million and $1.7 million at June 30, 2022 and December 31, 2021, respectively. Total securities of any other specific issuer, other than the U.S. Government and its agencies and the State of Michigan and all its political subdivisions, did not exceed 10% of shareholders’ equity.

The carrying value of U.S. Government agency debt obligations and mortgage-backed securities that are pledged to secure repurchase agreements was $203 million and $197 million at June 30, 2022 and December 31, 2021, respectively. Investments in Federal Home Loan Bank stock are restricted and may only be resold or redeemed by the issuer.