Note 2 - Securities

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

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

NOTE 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 gain/(loss) were as follows at year-end 2023 and 2022:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
2023
U.S. Government agency debt obligations	$	442,496	$	0	$	(52,000	)	$	390,496
Mortgage-backed securities		35,168		20		(5,715	)		29,473
Municipal general obligation bonds		172,126		1,924		(6,190	)		167,860
Municipal revenue bonds		30,708		262		(2,207	)		28,763
Other investments		500		0		0			500
	$	680,998	$	2,206	$	(66,112	)	$	617,092
2022
U.S. Government agency debt obligations	$	453,836	$	0	$	(65,092	)	$	388,744
Mortgage-backed securities		38,002		19		(6,068	)		31,953
Municipal general obligation bonds		163,041		450		(9,058	)		154,433
Municipal revenue bonds		30,267		102		(3,063	)		27,306
Other investments		500		0		0			500
	$	685,646	$	571	$	(83,281	)	$	602,936

Securities with unrealized losses at year-end 2023 and 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
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss
2023
U.S. Government agency debt obligations	$	0	$	0	$	390,496	$	52,000	$	390,496	$	52,000
Mortgage-backed securities		114		0		28,749		5,715		28,863		5,715
Municipal general obligation bonds		1,109		6		106,171		6,184		107,280		6,190
Municipal revenue bonds		1,506		8		20,602		2,199		22,108		2,207
Other investments		0		0		0		0		0		0
	$	2,729	$	14	$	546,018	$	66,098	$	548,747	$	66,112
2022
U.S. Government agency debt obligations	$	53,019	$	5,713	$	335,725	$	59,379	$	388,744	$	65,092
Mortgage-backed securities		31,127		6,068		12		0		31,139		6,068
Municipal general obligation bonds		97,252		4,516		32,870		4,542		130,122		9,058
Municipal revenue bonds		12,532		1,141		10,609		1,922		23,141		3,063
Other investments		0		0		0		0		0		0
	$	193,930	$	17,438	$	379,216	$	65,843	$	573,146	$	83,281

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 December 31, 2023, 641 debt securities with estimated fair values totaling $549 million had unrealized losses aggregating $66.1 million. At December 31, 2022, 732 debt securities with estimated fair values totaling $573 million had unrealized losses aggregating $83.3 million. At December 31, 2023, unrealized losses aggregating $57.7 million were attributable to bonds issued or guaranteed by agencies of the U.S. federal government, while unrealized losses totaling $8.4 million were associated with bonds issued by state-based municipalities. After considering the issuers of the bonds, and taking into account the fact that no municipal issuer had been subject to a credit rating downgrade by bond credit rating agencies, 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 represent credit losses.

The amortized cost and fair values of debt securities at December 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. 

	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	57,724	$	56,289
Due from one to five years		261,591		241,758
Due from five to ten years		279,722		243,791
Due after ten years		46,293		45,281
Mortgage-backed securities		35,168		29,473
Other investments		500		500
	$	680,998	$	617,092

No securities were sold during the last three years.

Securities issued by the State of Michigan and all its political subdivisions had a combined amortized cost of $203 million and $193 million at December 31, 2023 and December 31, 2022, respectively, with estimated market values of $197 million and $182 million at the respective dates. We had no securities issued by all other states and their political subdivisions as of December 31, 2023 or 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 $230 million and $194 million at December 31, 2023 and 2022, respectively. Investments in FHLBI stock are restricted and may only be resold to, or redeemed by, the issuer.