Note 2 - Securities

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

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

2. SECURITIES

The amortized cost and estimated 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
March 31, 2023
U.S. Government agency debt obligations	$	454,000,000	$	0	$	(57,780,000	)	$	396,220,000
Mortgage-backed securities		37,164,000		22,000		(5,596,000	)		31,590,000
Municipal general obligation bonds		168,721,000		1,081,000		(6,731,000	)		163,071,000
Municipal revenue bonds		30,812,000		200,000		(2,420,000	)		28,592,000
Other investments		500,000		0		0			500,000
	$	691,197,000	$	1,303,000	$	(72,527,000	)	$	619,973,000
December 31, 2022
U.S. Government agency debt obligations	$	453,836,000	$	0	$	(65,092,000	)	$	388,744,000
Mortgage-backed securities		38,002,000		19,000		(6,068,000	)		31,953,000
Municipal general obligation bonds		163,041,000		450,000		(9,058,000	)		154,433,000
Municipal revenue bonds		30,267,000		102,000		(3,063,000	)		27,306,000
Other investments		500,000		0		0			500,000
	$	685,646,000	$	571,000	$	(83,281,000	)	$	602,936,000

Securities with unrealized losses at March 31, 2023 and December 31, 2022, 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		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
March 31, 2023
U.S. Government agency debt obligations	$	14,000,000	$	755,000	$	382,220,000	$	57,025,000	$	396,220,000	$	57,780,000
Mortgage-backed securities		29,016,000		5,508,000		1,742,000		88,000		30,758,000		5,596,000
Municipal general obligation bonds		43,446,000		940,000		67,822,000		5,791,000		111,268,000		6,731,000
Municipal revenue bonds		5,404,000		401,000		16,407,000		2,019,000		21,811,000		2,420,000
	$	91,866,000	$	7,604,000	$	468,191,000	$	64,923,000	$	560,057,000	$	72,527,000

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
December 31, 2022
U.S. Government agency debt obligations	$	53,019,000	$	5,713,000	$	335,725,000	$	59,379,000	$	388,744,000	$	65,092,000
Mortgage-backed securities		31,127,000		6,068,000		12,000		0		31,139,000		6,068,000
Municipal general obligation bonds		97,252,000		4,516,000		32,870,000		4,542,000		130,122,000		9,058,000
Municipal revenue bonds		12,532,000		1,141,000		10,609,000		1,922,000		23,141,000		3,063,000
	$	193,930,000	$	17,438,000	$	379,216,000	$	65,843,000	$	573,146,000	$	83,281,000

We evaluate securities in an unrealized loss position at least quarterly. Consideration is given to the financial condition 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 March 31, 2023, 653 debt securities with estimated fair values totaling $560 million had unrealized losses aggregating $72.5 million. At December 31, 2022, 732 debt securities with estimated fair values totaling $573 million had unrealized losses aggregating $83.3 million. At March 31, 2023, unrealized losses aggregating $63.4 million were attributable to bonds issued or guaranteed by agencies of the U.S. federal government, while unrealized losses totaling $9.1 million were associated with bonds issued by state-based municipalities. For available for sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the debt security’s amortized cost basis is written down to fair value through income with the establishment of an allowance. For debt securities available for sale that do not meet the aforementioned criteria, we evaluate whether any decline in fair value is due to credit loss factors. In making this assessment, we consider any changes to the rating of the security by a rating agency and adverse conditions specifically related to the issuer of the security, among other factors.

The amortized cost and fair value of debt securities at March 31, 2023, 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		Amortized		Fair
	Yield (%)		Cost		Value
Due in 2023		0.98	$	20,361,000	$	19,997,000
Due in 2024 through 2028		1.32		319,037,000		293,271,000
Due in 2029 through 2033		2.03		278,488,000		241,115,000
Due in 2034 and beyond		3.58		35,647,000		33,500,000
Mortgage-backed securities		2.12		37,164,000		31,590,000
Other investments		8.00		500,000		500,000
Total available for sale securities		1.76	$	691,197,000	$	619,973,000

No securities were sold during the first three months of 2023 or the full-year 2022.

Securities issued by the State of Michigan and all its political subdivisions had a combined amortized cost of $200 million and $193 million at March 31, 2023 and December 31, 2022, respectively, with estimated market values of $192 million and $182 million at the respective dates. We had no securities issued by all other states and their political subdivisions as of March 31, 2023, and December 31, 2022. 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 $227 million and $194 million at March 31, 2023, and December 31, 2022, respectively.