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NOTE 2 - INVESTMENT SECURITIES | 3 Months Ended
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Mar. 31, 2020
Notes to Financial Statements |
INVESTMENT SECURITIES | NOTE 2– INVESTMENT SECURITIES The amortized cost and fair value of investment securities as of March 31, 2020 and December 31, 2019 are summarized as follows:
|  |  |  |  | Gross |  | Gross |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
|  | Cost |  | Gains |  | (Losses) |  | Value
|  | (dollars in thousands)
March 31, 2020: |  |  |  |  |  |  |  |  |  |  |  |
Securities HTM: |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 430,233 |  | $ | 21,886 |  | $ | (2,768) |  | $ | 449,351
Other securities |  |  | 1,050 |  |  | — |  |  | — |  |  | 1,050
|  | $ | 431,283 |  | $ | 21,886 |  | $ | (2,768) |  | $ | 450,401
Securities AFS: |  |  |  |  |  |  |  |  |  |  |  |
U.S. govt. sponsored agency securities |  | $ | 18,998 |  | $ | 502 |  | $ | (43) |  | $ | 19,457
Residential mortgage-backed and related securities |  |  | 116,768 |  |  | 6,149 |  |  | (64) |  |  | 122,853
Municipal securities |  |  | 61,432 |  |  | 2,004 |  |  | (5) |  |  | 63,431
Asset-backed securities |  |  | 31,076 |  |  | — |  |  | (2,577) |  |  | 28,499
Other securities |  |  | 18,800 |  |  | 252 |  |  | (4) |  |  | 19,048
|  | $ | 247,074 |  | $ | 8,907 |  | $ | (2,693) |  | $ | 253,288
|  |  |  |  | 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
Asset-backed securities |  |  | 16,958 |  |  | — |  |  | (71) |  |  | 16,887
Other securities |  |  | 4,749 |  |  | 138 |  |  | (1) |  |  | 4,886
|  | $ | 206,962 |  | $ | 4,068 |  | $ | (335) |  | $ | 210,695
The Company's HTM municipal securities consist largely of private issues of municipal debt. The large majority of the municipalities are located 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 private 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 March 31, 2020 and December 31, 2019, 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)
March 31, 2020: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities HTM: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal securities |  | $ | 52,609 |  | $ | (2,762) |  | $ | 531 |  | $ | (6) |  | $ | 53,140 |  | $ | (2,768)
Other securities |  |  | 1,050 |  |  | — |  |  | — |  |  | — |  |  | 1,050 |  |  | —
|  | $ | 53,659 |  | $ | (2,762) |  | $ | 531 |  | $ | (6) |  | $ | 54,190 |  | $ | (2,768)
Securities AFS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. govt. sponsored agency securities |  | $ | 1,449 |  | $ | (2) |  | $ | 1,920 |  | $ | (41) |  | $ | 3,369 |  | $ | (43)
Residential mortgage-backed and related securities |  |  | 2,509 |  |  | (14) |  |  | 1,875 |  |  | (50) |  |  | 4,384 |  |  | (64)
Municipal securities |  |  | 386 |  |  | (1) |  |  | 336 |  |  | (4) |  |  | 722 |  |  | (5)
Asset-backed securities |  |  | 23,752 |  |  | (2,577) |  |  | — |  |  | — |  |  | 23,752 |  |  | (2,577)
Other securities |  |  | 246 |  |  | (4) |  |  | — |  |  | — |  |  | 246 |  |  | (4)
|  | $ | 28,342 |  | $ | (2,598) |  | $ | 4,131 |  | $ | (95) |  | $ | 32,473 |  | $ | (2,693)
|  | 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)
Asset-backed securities |  |  | 16,886 |  |  | (71) |  |  | — |  |  | — |  |  | 16,886 |  |  | (71)
Other securities |  |  | 249 |  |  | (1) |  |  | — |  |  | — |  |  | 249 |  |  | (1)
|  | $ | 20,829 |  | $ | (110) |  | $ | 20,703 |  | $ | (225) |  | $ | 41,532 |  | $ | (335)
At March 31, 2020, the investment portfolio included 581 securities. Of this number, 53 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 0.8% of the total amortized cost of the portfolio. Of these 53 securities, five securities had an unrealized loss for twelve months or more. Asset-backed securities are comprised of collateralized loan obligations, which are debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries. At March 31, 2020, the Company only owned collateralized loan obligations that were AAA rated. 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 three months ended March 31, 2020 and 2019. There were no sales of securities for the three months ended March 31, 2020 and March 31, 2019. The amortized cost and fair value of securities as of March 31, 2020 by contractual maturity are shown below. Expected maturities of residential mortgage-backed and asset-backed securities and related securities may differ from contractual maturities because the residential mortgages underlying the securities may be prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table.
|  | Amortized Cost |  | Fair Value
|  | (dollars in thousands)
Securities HTM: |  |  |  |  |  |
Due in one year or less |  | $ | 3,016 |  | $ | 3,023
Due after one year through five years |  |  | 34,967 |  |  | 35,545
Due after five years |  |  | 393,300 |  |  | 411,833
|  | $ | 431,283 |  | $ | 450,401
Securities AFS: |  |  |  |  |  |
Due in one year or less |  | $ | 1,370 |  | $ | 1,387
Due after one year through five years |  |  | 15,804 |  |  | 16,131
Due after five years |  |  | 82,056 |  |  | 84,418
|  |  | 99,230 |  |  | 101,936
Residential mortgage-backed and related securities |  |  | 116,768 |  |  | 122,853
Asset-backed securities |  |  | 31,076 |  |  | 28,499
|  | $ | 247,074 |  | $ | 253,288
Portions of the U.S. government sponsored agency securities, municipal securities and other securities contain call options, at the discretion of the issuer, to terminate the security at par and at predetermined dates prior to the stated maturity. These callable securities are summarized as follows:
|  | Amortized Cost |  | Fair Value
|  | (dollars in thousands)
Securities HTM: |  |  |  |  |  |
Municipal securities |  | $ | 199,843 |  | $ | 201,706
Securities AFS: |  |  |  |  |  |
Municipal securities |  |  | 47,044 |  |  | 48,483
Other securities |  |  | 18,550 |  |  | 18,802
|  | $ | 65,594 |  | $ | 67,285
As of March 31, 2020, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 91 issuers with fair values totaling $74.4 million and revenue bonds issued by 162 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $438.4 million. The Company held investments in general obligation bonds in 21 states, including six states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in 18 states, including seven states in which the aggregate fair value exceeded $5.0 million. 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 nine states in which the aggregate fair value exceeded $5.0 million. Both general obligation and revenue bonds are diversified across many issuers. As of March 31, 2020 and December 31, 2019, the Company held revenue bonds of one single issuer, located in Ohio, of which the aggregate book or market value 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 loan risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential municipal services such as water, sewer, education, and 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 March 31, 2020, all were well within policy limitations approved by the board of directors. Policy limits are calculated as a percentage of each charter's total risk-based capital. As of March 31, 2020, the Company's standard monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credit 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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