Note 3 - Debt and Equity Securities

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

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

Note 3. Debt and Equity Securities

Debt and equity securities have been classified in the consolidated balance sheet according to management’s intent. Debt and equity securities at June 30, 2023 and December 31, 2022 are summarized as follows:

	June 30, 2023
	Securities Available-For-Sale
	In Thousands
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
U.S. Treasury and other U.S. government agencies	$	7,370		—		830		6,540
U.S. Government-sponsored enterprises (GSEs)		177,249		—		27,891		149,358
Mortgage-backed securities		485,679		2		71,139		414,542
Asset-backed securities		45,048		30		2,192		42,886
Corporate bonds		2,500		—		119		2,381
Obligations of states and political subdivisions		219,152		—		35,018		184,134
	$	936,998		32		137,189		799,841

	December 31, 2022
	Securities Available-For-Sale
	In Thousands
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
U.S. Treasury and other U.S. government agencies	$	7,353		—		856		6,497
U.S. Government-sponsored enterprises (GSEs)		177,261		—		32,049		145,212
Mortgage-backed securities		518,727		1		74,290		444,438
Asset-backed securities		47,538		—		2,288		45,250
Corporate bonds		2,500		—		97		2,403
Obligations of states and political subdivisions		218,936		—		39,924		179,012
	$	972,315		1		149,504		822,812

As of  June 30, 2023, there was no allowance for credit losses on available-for-sale securities.

Included in mortgage-backed securities are collateralized mortgage obligations totaling $139,838,000 (fair value of $118,049,000) and $148,460,000 (fair value of $126,190,000) at June 30, 2023 and December 31, 2022, respectively.

Securities carried on the balance sheet of approximately $502,138,000 (approximate market value of $429,123,000) and $477,051,000 (approximate market value of $405,403,000) were pledged to secure public deposits and for other purposes as required by law at  June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023, there were no holdings of securities of any one issuer, other than U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity. 

The amortized cost and estimated market value of debt securities at June 30, 2023 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-For-Sale
	In Thousands
	Amortized Cost		Estimated Market Value
Due in one year or less	$	5,023	$	4,985
Due after one year through five years		99,690		88,969
Due after five years through ten years		267,253		226,090
Due after ten years		565,032		479,797
	$	936,998	$	799,841

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2023 and December 31, 2022.

	In Thousands, Except Number of Securities
	Less than 12 Months						12 Months or More						Total
June 30, 2023	Fair Value		Unrealized Losses		Number of Securities Included		Fair Value		Unrealized Losses		Number of Securities Included		Fair Value		Unrealized Losses
Available-for-Sale Securities:
U.S. Treasury and other U.S. government agencies	$	—	$	—		—	$	6,540	$	830		3	$	6,540	$	830
U.S. Government-sponsored enterprises (GSEs)		—		—		—		149,358		27,891		58		149,358		27,891
Mortgage-backed securities		604		12		5		413,424		71,127		233		414,028		71,139
Asset-backed securities		13,653		757		6		24,238		1,435		22		37,891		2,192
Corporate bonds		—		—		—		2,381		119		1		2,381		119
Obligations of states and political subdivisions		8,054		131		4		176,080		34,887		202		184,134		35,018
	$	22,311	$	900		15	$	772,021	$	136,289		519	$	794,332	$	137,189

	In Thousands, Except Number of Securities
	Less than 12 Months						12 Months or More						Total
December 31, 2022	Fair Value		Unrealized Losses		Number of Securities Included		Fair Value		Unrealized Losses		Number of Securities Included		Fair Value		Unrealized Losses
Available-for-Sale Securities:
U.S. Treasury and other U.S. government agencies	$	—	$	—		—	$	6,497	$	856		—		6,497	$	856
U.S. Government-sponsored enterprises (GSEs)		9,747		872		4		135,465		31,177		54		145,212		32,049
Mortgage-backed securities		148,441		14,601		113		295,431		59,689		136		443,872		74,290
Asset-backed securities		35,276		1607		21		9,974		681		11		45,250		2,288
Corporate bonds		2,403		97		1		—		—		—		2,403		97
Obligations of states and political subdivisions		58,567		6,056		76		120,445		33,868		128		179,012		39,924
	$	254,434	$	23,233		215	$	567,812	$	126,271		332	$	822,246	$	149,504

The applicable date for determining when securities are in an unrealized loss position is  June 30, 2023 and  December 31, 2022. As such, it is possible that a security had a market value less than its amortized cost on other days during the six months ended June 30, 2023 and the twelve-month period ended  December 31, 2022, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.

As shown in the tables above, at  June 30, 2023 and  December 31, 2022, the Company had unrealized losses of $137.2 million and $149.5 million on $794.3 million and $822.2 million, respectively, of securities. As described in note 1. Summary of Significant Accounting Policies, for any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, the Company assesses whether or not it intends to sell the security, or more-likely-than-not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because the Company currently does not intend to sell those securities that have an unrealized loss at  June 30, 2023, and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-down is necessary. In addition, the Company evaluates whether any portion of the decline in fair value is the result of credit deterioration, which would require the recognition of an allowance for credit losses. Such evaluations consider the extent to which the amortized cost of the security exceeds its fair value, changes in credit ratings and any other known adverse conditions related to the specific security. The unrealized losses associated with securities at  June 30, 2023 are driven by changes in interest rates and not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at  June 30, 2023. These securities will continue to be monitored as a part of the Company's ongoing evaluation of credit quality.

Mortgage-Backed Securities

At  June 30, 2023, approximately 98% of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is largely attributable to interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is not more likely than not that it will be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired (OTTI) at  June 30, 2023.

The Company's mortgage-backed securities portfolio includes non-agency collateralized mortgage obligations with a fair value of $9.5 million which had unrealized losses of approximately $1.6 million at  June 30, 2023. These non-agency mortgage-backed securities were rated AAA at June 30, 2023. The Company monitors to ensure it has adequate credit support and as of  June 30, 2023, the Company believes there is no OTTI and does not have the intent to sell these securities and it is not more likely than not that it will be required to sell the securities before their anticipated recovery. The issuers continue to make timely principal and interest payments on the bonds.

Obligations of States and Political Subdivisions

Unrealized losses on municipal bonds have not been recognized into income because the issuers' bonds are of high credit quality (rated A or higher), management does not intend to sell the securities and it is not more likely than not that management will be required to sell the securities 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. 

Asset-Backed Securities

The Company's asset-backed securities portfolio includes agency and non-agency asset backed and other amortizing debt securities with a fair value of $42.9 million which had unrealized losses of approximately $2.2 million at  June 30, 2023. The Company monitors these securities to ensure it has adequate credit support and as of  June 30, 2023, the Company believes there is no OTTI and does not have the intent to sell these securities and it is not more likely than not that it will be required to sell the securities before their anticipated recovery. The issuers continue to make timely principal and interest payments on the bonds.

Corporate Bonds

The Company's lone corporate debt security with a fair value of $2.4 million had an unrealized loss of approximately $0.1 million at  June 30, 2023. The Company monitors this security to ensure it has adequate credit support and as of June 30, 2023, the Company believes there is no OTTI and does not have the intent to sell this security and it is not more likely than not that it will be required to sell the security before its anticipated recovery. The issuer continues to make timely principal and interest payments on the bond.