Note 3 - Investment Securities

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

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

3 - INVESTMENT SECURITIES

The following tables set forth the amortized cost and estimated fair values of the Bank’s AFS investment securities at the dates indicated.

	June 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
State and municipals	$	152,412	$	17	$	(16,790	)	$	135,639
Pass-through mortgage securities		161,479		7		(29,219	)		132,267
Collateralized mortgage obligations		186,665		504		(22,238	)		164,931
SBA agency obligations		114,243		324		(918	)		113,649
Corporate bonds		119,000		—		(7,497	)		111,503
	$	733,799	$	852	$	(76,662	)	$	657,989

	December 31, 2023
State and municipals	$	155,294	$	317	$	(11,990	)	$	143,621
Pass-through mortgage securities		165,734		—		(27,131	)		138,603
Collateralized mortgage obligations		201,500		1,836		(21,074	)		182,262
SBA agency obligations		126,228		331		(1,083	)		125,476
Corporate bonds		119,000		—		(13,085	)		105,915
	$	767,756	$	2,484	$	(74,363	)	$	695,877

Small Business Administration (“SBA”) agency obligations are floating rate, government guaranteed securities backed by $87.7 million of commercial mortgages and $25.9 million of equipment finance loans at June 30, 2024.

At June 30, 2024 and December 31, 2023, investment securities with a carrying value of $301.3 million and $203.9 million, respectively, were pledged as collateral to secure public deposits and borrowed funds.

There were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity at June 30, 2024 and December 31, 2023.

There was no allowance for credit losses associated with the investment securities portfolio at June 30, 2024 or December 31, 2023.

Securities With Unrealized Losses. The following tables set forth securities with unrealized losses at the dates indicated presented by the length of time the securities have been in a continuous unrealized loss position.

	June 30, 2024
	Less than					12 Months
	12 Months					or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(in thousands)	Value		Loss			Value		Loss			Value		Loss
State and municipals	$	12,524	$	(230	)	$	117,327	$	(16,560	)	$	129,851	$	(16,790	)
Pass-through mortgage securities		2,717		(45	)		128,329		(29,174	)		131,046		(29,219	)
Collateralized mortgage obligations		18,960		(150	)		96,790		(22,088	)		115,750		(22,238	)
SBA agency obligations		—		—			92,615		(918	)		92,615		(918	)
Corporate bonds		—		—			111,503		(7,497	)		111,503		(7,497	)
Total temporarily impaired	$	34,201	$	(425	)	$	546,564	$	(76,237	)	$	580,765	$	(76,662	)

	December 31, 2023
State and municipals	$	29,522	$	(719	)	$	95,725	$	(11,271	)	$	125,247	$	(11,990	)
Pass-through mortgage securities		2,361		(1	)		134,558		(27,130	)		136,919		(27,131	)
Collateralized mortgage obligations		—		—			102,528		(21,074	)		102,528		(21,074	)
SBA agency obligations		98,879		(1,083	)		—		—			98,879		(1,083	)
Corporate bonds		—		—			105,915		(13,085	)		105,915		(13,085	)
Total temporarily impaired	$	130,762	$	(1,803	)	$	438,726	$	(72,560	)	$	569,488	$	(74,363	)

State and Municipals

At June 30, 2024, approximately $129.9 million of state and municipal bonds had an unrealized loss of $16.8 million. Substantially all the state and municipal bonds are considered high investment grade and rated Aa2/AA- or higher. The unrealized loss is attributable to changes in interest rates and illiquidity and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

Pass-through Mortgage Securities

At June 30, 2024, pass-through mortgage securities of approximately $131.0 million had an unrealized loss of $29.2 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

Collateralized Mortgage Obligations

At June 30, 2024, collateralized mortgage obligations of approximately $115.8 million had an unrealized loss of $22.2 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

SBA Agency Obligations

At June 30, 2024, SBA agency obligations of approximately $92.6 million had an unrealized loss of $918,000. These securities were issued by the SBA, a U.S. government agency and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuer continues to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

Corporate Bonds

At June 30, 2024, approximately $111.5 million of corporate bonds had an unrealized loss of $7.5 million. The corporate bonds represent senior unsecured debt obligations of six of the largest U.S. based financial institutions, including JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo. Each of the corporate bonds has a stated maturity of ten years and matures in 2028. The bonds reprice quarterly based on the ten year constant maturity swap rate.

Each of the financial institutions is considered upper medium investment grade and rated A3 or higher. The unrealized loss is attributable to changes in credit spreads and interest rates and the illiquid nature of the securities. The Bank does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. Each of these financial institutions has diversified revenue streams, is well capitalized and continues to make timely interest payments. Management evaluates the quarterly financial statements of each company to determine if full payment of principal and interest is in doubt and does not believe there is any impairment at June 30, 2024.

Sales of AFS Securities. Sales of AFS securities were as follows:

	Six Months Ended					Three Months Ended
	June 30,					June 30,
(in thousands)	2024		2023			2024		2023
Proceeds	$	—	$	145,451		$	—	$	—
Gains	$	—	$	—		$	—	$	—
Losses		—		(3,489	)		—		—
Net loss	$	—	$	(3,489	)	$	—	$	—

Income tax benefit related to the net realized losses for the six months ended June 30, 2023 was $1.1 million and is included in the consolidated statements of income in the line item “Income tax expense.” 

Maturities. The following table sets forth by maturity the amortized cost and fair value of the Bank’s state and municipal securities and corporate bonds at June 30, 2024 based on the earlier of their stated maturity or, if applicable, their pre-refunded date. The remaining securities in the Bank’s investment securities portfolio are mortgage and asset-backed securities, consisting of pass-through mortgage securities, collateralized mortgage obligations and SBA agency obligations. Although these securities are expected to have substantial periodic repayments, they are reflected in the table below in aggregate amounts.

(in thousands)	Amortized Cost		Fair Value
Within one year	$	1,077	$	1,076
After 1 through 5 years		135,740		127,180
After 5 through 10 years		36,864		33,266
After 10 years		97,731		85,620
Mortgage and asset-backed securities		462,387		410,847
	$	733,799	$	657,989