XML 24 R10.htm IDEA: XBRL DOCUMENT v3.23.1
Note 2 - Securities
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 2 – Securities

 

On January 1, 2022, ChoiceOne reassessed and transferred, at fair value, $428.4 million of securities classified as available for sale to the held to maturity classification.  The net unrealized after-tax loss of $2.7 million as of the transfer date remained in accumulated other comprehensive income to be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities.  No gains or losses were recognized at the time of the transfer.  The remaining net unamortized unrealized loss on transferred securities included in accumulated other comprehensive income was $2.4 million after tax as of December 31, 2022.

 

The fair value of equity securities and the related gross unrealized gains and losses recognized in noninterest income at December 31 were as follows:

 

  

December 31, 2022

 
      

Gross

  

Gross

     

(Dollars in thousands)

 

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 

Equity securities

 $8,982  $305  $(721) $8,566 

 

  

December 31, 2021

 
      

Gross

  

Gross

     

(Dollars in thousands)

 

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 

Equity securities

 $7,953  $665  $(126) $8,492 

 

The fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

 

  

December 31, 2022

 
      

Gross

  

Gross

     

(Dollars in thousands)

 

Amortized

  

Unrealized

  

Unrealized

  

Fair

 

Available for Sale:

 Cost  Gains  Losses  Value 

U.S. Government and federal agency

 $-  $-  $-  $- 

U.S. Treasury notes and bonds

  90,810   -   (12,606)  78,204 

State and municipal

  277,489   -   (47,551)  229,938 

Mortgage-backed

  236,703   -   (28,140)  208,563 

Corporate

  757   -   (46)  711 

Asset-backed securities

  13,031   -   (698)  12,333 

Total

 $618,790  $-  $(89,041) $529,749 

 

  

December 31, 2021

 
      

Gross

  

Gross

     

(Dollars in thousands)

 

Amortized

  

Unrealized

  

Unrealized

  

Fair

 

Available for Sale:

 Cost  Gains  Losses  Value 

U.S. Government and federal agency

 $2,001  $7  $-  $2,008 

U.S. Treasury notes and bonds

  93,267   23   (1,311)  91,979 

State and municipal

  528,252   10,704   (4,109)  534,847 

Mortgage-backed

  441,383   781   (9,049)  433,115 

Corporate

  20,856   19   (233)  20,642 

Asset-backed securities

  16,387   -   (93)  16,294 

Total

 $1,102,146  $11,534  $(14,795) $1,098,885 

 

The fair value of securities held to maturity and the related gross unrealized gains and losses were as follows:

  

December 31, 2022

 
      

Gross

  

Gross

     

(Dollars in thousands)

 

Amortized

  

Unrealized

  

Unrealized

  

Fair

 

Held to Maturity:

 

Cost

  

Gains

  

Losses

  

Value

 

U.S. Government and federal agency

 $2,966  $-  $(421) $2,545 

State and municipal

  201,890   1   (39,355)  162,536 

Mortgage-backed

  200,473   -   (29,868)  170,605 

Corporate

  19,603   -   (2,285)  17,318 

Asset-backed securities

  974   -   (77)  897 

Total

 $425,906  $1  $(72,006) $353,901 

 

There were no securities held to maturity at  December 31, 2021.

 

Information regarding sales of securities available for sale for the year ended December 31 follows:

 

(Dollars in thousands)

            
  

2022

  

2021

  

2020

 

Proceeds from sales of securities

 $47,167  $29,742  $121,942 

Gross realized gains

  -   -   1,308 

Gross realized losses

  (809)  (40)  - 

 

Contractual maturities of securities available for sale at December 31, 2022 were as follows:

 

(Dollars in thousands)

 

Amortized

  

Fair

 
  

Cost

  

Value

 

Due within one year

 $6,035  $5,972 

Due after one year through five years

  17,069   16,176 

Due after five years through ten years

  149,578   130,215 

Due after ten years

  209,405   168,823 

Total debt securities

  382,087   321,186 

Mortgage-backed securities

  236,703   208,563 

Total

 $618,790  $529,749 

 

Contractual maturities of securities held to maturity at December 31, 2022 were as follows:

 

(Dollars in thousands)

 

Amortized

  

Fair

 
  

Cost

  

Value

 

Due within one year

 $2,417  $2,389 

Due after one year through five years

  6,262   5,834 

Due after five years through ten years

  109,263   92,553 

Due after ten years

  107,491   82,520 

Total debt securities

  225,433   183,296 

Mortgage-backed securities

  200,473   170,605 

Total

 $425,906  $353,901 

 

Certain securities were pledged as collateral for participation in a program that provided Community Reinvestment Act credits. The carrying amount of the securities pledged as collateral at December 31 was as follows:

 

(Dollars in thousands)

 

2022

  

2021

 

Securities pledged for Community Reinvestment Act credits

 $250  $273 

 

Securities with unrealized losses at year-end 2022 and 2021, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:

 

  

2022

 
  

Less than 12 months

  

More than 12 months

  

Total

 

(Dollars in thousands)

 

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 

Available for Sale:

 Value  Losses  Value  Losses  Value  Losses 

U.S. Government and federal agency

 $-  $-  $-  $-  $-  $- 

U.S. Treasury notes and bonds

  -   -   78,204   12,606   78,204   12,606 

State and municipal

  89,158   12,612   140,390   34,939   229,548   47,551 

Mortgage-backed

  63,249   3,093   144,318   25,047   207,567   28,140 

Corporate

  711   46   -   -   711   46 

Asset-backed securities

  -   -   12,333   698   12,333   698 

Total temporarily impaired

 $153,118  $15,751  $375,245  $73,290  $528,363  $89,041 

 

 

  

2021

 
  

Less than 12 months

  

More than 12 months

  

Total

 

(Dollars in thousands)

 

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 

Available for Sale:

 

Value

  

Losses

  

Value

  

Losses

  

Value

  

Losses

 

U.S. Government and federal agency

 $-  $-  $-  $-  $-  $- 

U.S. Treasury notes and bonds

  89,958   1,311   -   -   89,958   1,311 

State and municipal

  130,001   3,253   15,237   856   145,238   4,109 

Mortgage-backed

  261,560   5,709   86,974   3,340   348,534   9,049 

Corporate

  17,369   233   -   -   17,369   233 

Asset-backed securities

  16,294   93   -   -   16,294   93 

Total temporarily impaired

 $515,182  $10,599  $102,211  $4,196  $617,393  $14,795 

 

  

2022

 
  

Less than 12 months

  

More than 12 months

  

Total

 

(Dollars in thousands)

 

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 

Held to Maturity:

 Value  Losses  Value  Losses  Value  Losses 

U.S. Government and federal agency

 $-  $-  $2,545  $421  $2,545  $421 

State and municipal

  13,457   1,899   149,016   37,456   162,473   39,355 

Mortgage-backed

  25,582   822   145,024   29,046   170,606   29,868 

Corporate

  5,296   603   10,771   1,682   16,067   2,285 

Asset-backed securities

  -   -   897   77   897   77 

Total temporarily impaired

 $44,335  $3,324  $308,253  $68,682  $352,588  $72,006 

 

There were no securities classified as held to maturity as of December 31, 2021.

 

ChoiceOne evaluates all securities on a quarterly basis to determine whether unrealized losses are temporary or other than temporary. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of ChoiceOne to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value of amortized cost basis. Management believed that unrealized losses as of December 31, 2022 were temporary in nature and were caused primarily by changes in interest rates, increased credit spreads, and reduced market liquidity and were not caused by the credit status of the issuer. No other than temporary impairments were recorded in 2022 or 2021.

 

Following is information regarding unrealized gains and losses on equity securities for the years ending December 31:

 

  

2022

  

2021

  

2020

 
             

Net gains and losses recognized during the period

 $(955) $479  $(155)

Less: Net gains and losses recognized during the period on securities sold

  -       
             

Unrealized gains and losses recognized during the reporting period on securities still held at the reporting date

 $(955) $479  $(155)

 

At December 31, 2022, there were 611 securities with an unrealized loss, compared to 247 securities with an unrealized loss as of December 31, 2021. Unrealized losses on corporate and municipal bonds have not been recognized into income because the issuers’ bonds are of high credit quality, and management does not intend to sell prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

 

The majority of unrealized losses at December 31, 2022, are related to U.S. Treasury notes and bonds, State and municipal bonds and mortgage backed.  U.S. Treasury notes are guaranteed by the U.S. government and of which 100% are rated AA or better. State and municipal bonds are backed by the taxing authority of the bond issuer or the revenues from the bond. On December 31, 2022, 86% of state and municipal bonds held are rated AA or better.  Agency issued securities are generally guaranteed by a U.S. government agency, such as the government national mortgage association which give 100% of these AA ratings or better. Of the mortgage-backed securities held on December 31, 2022, 38% were issued by US government sponsored entities and agencies, and rated AA, 31% are AAA rated private issue, and 13% are unrated privately issued mortgage-backed securities with structured credit enhancement.