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Note 3 - Investment Securities | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Investment Securities | Note 3. Investment Securities The amortized cost and fair value of investment securities as of December 31, 2019 and 2018 are summarized as follows:
|  |  |  |  | Gross |  | Gross |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
|  | Cost |  | Gains |  | (Losses) |  | Value
|  | (dollars in thousands)
December 31, 2019: |  |  |  |  |  |  |  |  |  |  |  |
Securities HTM: |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 399,596 |  | $ | 26,042 |  | $ | (143) |  | $ | 425,495
Other securities |  |  | 1,050 |  |  | — |  |  | — |  |  | 1,050
|  | $ | 400,646 |  | $ | 26,042 |  | $ | (143) |  | $ | 426,545
Securities AFS: |  |  |  |  |  |  |  |  |  |  |  |
U.S. govt. sponsored agency securities |  | $ | 19,872 |  | $ | 283 |  | $ | (77) |  | $ | 20,078
Residential mortgage-backed and related securities |  |  | 118,724 |  |  | 2,045 |  |  | (182) |  |  | 120,587
Municipal securities |  |  | 46,659 |  |  | 1,602 |  |  | (4) |  |  | 48,257
Other securities |  |  | 21,707 |  |  | 138 |  |  | (72) |  |  | 21,773
|  | $ | 206,962 |  | $ | 4,068 |  | $ | (335) |  | $ | 210,695
|  |  |  |  | Gross |  | Gross |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
|  | Cost |  | Gains |  | (Losses) |  | Value
|  | (dollars in thousands)
December 31, 2018: |  |  |  |  |  |  |  |  |  |  |  |
Securities HTM: |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 400,863 |  | $ | 5,661 |  | $ | (6,803) |  | $ | 399,721
Other securities |  |  | 1,050 |  |  | — |  |  | (1) |  |  | 1,049
|  | $ | 401,913 |  | $ | 5,661 |  | $ | (6,804) |  | $ | 400,770
Securities AFS: |  |  |  |  |  |  |  |  |  |  |  |
U.S. govt. sponsored agency securities |  | $ | 37,150 |  | $ | 39 |  | $ | (778) |  | $ | 36,411
Residential mortgage-backed and related securities |  |  | 163,698 |  |  | 182 |  |  | (4,631) |  |  | 159,249
Municipal securities |  |  | 59,069 |  |  | 180 |  |  | (703) |  |  | 58,546
Other securities |  |  | 6,754 |  |  | 100 |  |  | (4) |  |  | 6,850
|  | $ | 266,671 |  | $ | 501 |  | $ | (6,116) |  | $ | 261,056
Note 3. Investment Securities (continued) The Company’s HTM municipal securities consist largely of private issues of municipal debt. The municipalities are located primarily within the Midwest. The municipal debt investments are underwritten using specific guidelines with ongoing monitoring. The Company’s residential mortgage-backed and related securities portfolio consists entirely of government sponsored or government guaranteed securities. The Company has not invested in commercial mortgage-backed securities or pooled trust preferred securities. Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2019 and 2018, are summarized as follows:
|  | Less than 12 Months |  | 12 Months or More |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
|  | Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
|  | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses
|  | (dollars in thousands)
December 31, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities HTM: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 509 |  | $ | (1) |  | $ | 10,047 |  | $ | (142) |  | $ | 10,556 |  | $ | (143)
Other securities |  |  | 550 |  |  | — |  |  | — |  |  | — |  |  | 550 |  |  | —
|  | $ | 1,059 |  | $ | (1) |  | $ | 10,047 |  | $ | (142) |  | $ | 11,106 |  | $ | (143)
Securities AFS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. govt. sponsored agency securities |  | $ | 1,431 |  | $ | (21) |  | $ | 2,117 |  | $ | (56) |  | $ | 3,548 |  | $ | (77)
Residential mortgage-backed and related securities |  |  | 2,263 |  |  | (17) |  |  | 17,862 |  |  | (165) |  |  | 20,125 |  |  | (182)
Municipal securities |  |  | — |  |  | — |  |  | 724 |  |  | (4) |  |  | 724 |  |  | (4)
Other securities |  |  | 17,135 |  |  | (72) |  |  | — |  |  | — |  |  | 17,135 |  |  | (72)
|  | $ | 20,829 |  | $ | (110) |  | $ | 20,703 |  | $ | (225) |  | $ | 41,532 |  | $ | (335)
|  | Less than 12 Months |  | 12 Months or More |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
|  | Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
|  | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses
|  | (dollars in thousands)
December 31, 2018: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities HTM: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 114,201 |  | $ | (2,187) |  | $ | 69,412 |  | $ | (4,616) |  | $ | 183,613 |  | $ | (6,803)
Other securities |  |  | 549 |  |  | (1) |  |  | — |  |  | — |  |  | 549 |  |  | (1)
|  | $ | 114,750 |  | $ | (2,188) |  | $ | 69,412 |  | $ | (4,616) |  | $ | 184,162 |  | $ | (6,804)
Securities AFS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. govt. sponsored agency securities |  | $ | 1,565 |  | $ | (34) |  | $ | 29,605 |  | $ | (744) |  | $ | 31,170 |  | $ | (778)
Residential mortgage-backed and related securities |  |  | 12,810 |  |  | (148) |  |  | 133,535 |  |  | (4,483) |  |  | 146,345 |  |  | (4,631)
Municipal securities |  |  | 28,356 |  |  | (394) |  |  | 15,932 |  |  | (309) |  |  | 44,288 |  |  | (703)
Other securities |  |  | 4,249 |  |  | (4) |  |  | — |  |  | — |  |  | 4,249 |  |  | (4)
|  | $ | 46,980 |  | $ | (580) |  | $ | 179,072 |  | $ | (5,536) |  | $ | 226,052 |  | $ | (6,116)
At December 31, 2019, the investment portfolio included 541 securities. Of this number, 35 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 0.1% of the total aggregate amortized cost. Of these 35 securities, 20 securities had an unrealized loss for 12 months or more. All of the debt securities in unrealized loss positions are considered acceptable credit risks. Based upon an evaluation of the available evidence, including the recent changes in market rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary. In addition, the Company lacks the intent to sell these securities and it is not more-likely-than-not that the Company will be required to sell these debt securities before their anticipated recovery. The Company did not recognize OTTI on any investment securities for the years ended December 31, 2019, 2018 or 2017. Note 3. Investment Securities (continued) All sales of securities for the years ended December 31, 2019, 2018 and 2017, respectively, were from securities identified as AFS. Information on proceeds received, as well as the gains and losses from the sale of those securities are as follows:
|  |  |  |  | 2019 |  | 2018 |  | 2017
|  |  |  |  | (dollars in thousands)
Proceeds from sales of securities |  |  |  |  | $ | 30,055 |  | $ | 1,938 |  | $ | 71,092
Gross gains from sales of securities |  |  |  |  |  | 176 |  |  | — |  |  | 67
Gross losses from sales of securities |  |  |  |  |  | (206) |  |  | — |  |  | (155)
The amortized cost and fair value of securities as of December 31, 2019, by contractual maturity are shown below. Expected maturities of mortgage-backed and related securities may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.
|  | Amortized Cost |  | Fair Value
|  | (dollars in thousands)
Securities HTM: |  |  |  |  |  |
Due in one year or less |  | $ | 3,220 |  | $ | 3,234
Due after one year through five years |  |  | 33,088 |  |  | 33,865
Due after five years |  |  | 364,338 |  |  | 389,446
|  | $ | 400,646 |  | $ | 426,545
Securities AFS: |  |  |  |  |  |
Due in one year or less |  | $ | 1,084 |  | $ | 1,084
Due after one year through five years |  |  | 17,089 |  |  | 17,320
Due after five years |  |  | 70,065 |  |  | 71,704
|  |  | 88,238 |  |  | 90,108
Residential mortgage-backed and related securities |  |  | 118,724 |  |  | 120,587
|  | $ | 206,962 |  | $ | 210,695
Portions of the U.S. government sponsored agencies and municipal securities contain call options, at the discretion of the issuer, to terminate the security at predetermined dates prior to the stated maturity, summarized as follows:
|  | Amortized Cost |  | Fair Value
|  | (dollars in thousands)
Securities HTM: |  |  |  |  |  |
Municipal securities |  | $ | 182,653 |  | $ | 186,631
Securities AFS: |  |  |  |  |  |
Municipal securities |  |  | 39,674 |  |  | 40,990
Other securities |  |  | 4,500 |  |  | 4,638
|  | $ | 44,174 |  | $ | 45,628
Note 3. Investment Securities (continued) As of December 31, 2019 and 2018, investment securities with a carrying value of $1 13.3 million and $10 0.9 million, respectively, were pledged on FHLB advances, customer and wholesale repurchase agreements, derivative liabilities and for other purposes as required or permitted by law. As of December 31, 2019, the Company’s municipal securities portfolios were comprised of general obligation bonds issued by 93 issuers with fair values totaling $77.2 million and revenue bonds issued by 154 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $396.6 million. The Company held investments in general obligation bonds in 22 states, including six states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in 17 states, including seven states in which the aggregate fair value exceeded $5.0 million. As of December 31, 2018, the Company’s municipal securities portfolios were comprised of general obligation bonds issued by 110 issuers with fair values totaling $86.4 million and revenue bonds issued by 160 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $371.9 million. The Company held investments in general obligation bonds in 26 states, including 6 states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in 19 states, including 7 states in which the aggregate fair value exceeded $5.0 million. As of December 31, 2019 and 2018, the Company held revenue bonds of one single issuer, located in Ohio, the aggregate book or market value of which exceeded 5% of the Company’s stockholders’ equity. The issuer’s financial condition is strong and the source of repayment is diversified. The Company monitors the investment and concentration closely. Of the general obligation and revenue bonds in the Company’s portfolio, the majority are unrated bonds that represent small, private issuances. All unrated bonds were underwritten according to loan underwriting standards and have an average risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential municipal services (water, sewer, education, medical facilities). The Company’s municipal securities are owned by each of the four charters, whose investment policies set forth limits for various subcategories within the municipal securities portfolio. Each charter is monitored individually and as of December 31, 2019, all were well-within policy limitations approved by the board of directors. Policy limits are calculated as a percentage of total risk-based capital. As of December 31, 2019, the Company’s standard monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credits ratings than those assigned by a nationally recognized statistical rating organization, or in the case of unrated bonds, the rating assigned using the credit underwriting standards.

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- Definition The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 6 -Subparagraph (SX 210.12-14) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611322-123010 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-12) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611133-123010 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 5 -Subparagraph (SX 210.12-13) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611282-123010 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 4 -Subparagraph (SX 210.12-12C) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611225-123010 + Details
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