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Note 3 - Investment Securities | 9 Months Ended
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Sep. 30, 2023
Notes to Financial Statements |
Investments in Debt and Equity Instruments, Cash and Cash Equivalents, Unrealized and Realized Gains (Losses) [Text Block] |
3. | Investment Securities
Investment securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at September 30, 2023 and December 31, 2022 are summarized as follows:
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency mortgage-backed securities |  | $ | 84,385 |  |  | $ | - |  |  | $ | 12,312 |  |  | $ | 72,073 |
Agency CMO |  |  | 23,439 |  |  |  | - |  |  |  | 624 |  |  |  | 22,815 |
Other debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency notes and bonds |  |  | 147,195 |  |  |  | - |  |  |  | 12,203 |  |  |  | 134,992 |
Treasury notes and bonds |  |  | 76,527 |  |  |  | - |  |  |  | 2,813 |  |  |  | 73,714 |
Municipal obligations |  |  | 157,641 |  |  |  | 2 |  |  |  | 21,157 |  |  |  | 136,486 |
Total securities available for sale |  | $ | 489,187 |  |  | $ | 2 |  |  | $ | 49,109 |  |  | $ | 440,080 |
Securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate notes |  | $ | 7,000 |  |  | $ | - |  |  | $ | 2,528 |  |  | $ | 4,472 |
Total securities held to maturity |  | $ | 7,000 |  |  | $ | - |  |  | $ | 2,528 |  |  | $ | 4,472 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency mortgage-backed securities |  | $ | 95,056 |  |  | $ | - |  |  | $ | 11,193 |  |  | $ | 83,863 |
Agency CMO |  |  | 9,682 |  |  |  | 20 |  |  |  | 349 |  |  |  | 9,353 |
Other debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency notes and bonds |  |  | 151,143 |  |  |  | - |  |  |  | 13,162 |  |  |  | 137,981 |
Treasury notes and bonds |  |  | 82,646 |  |  |  | - |  |  |  | 3,914 |  |  |  | 78,732 |
Municipal obligations |  |  | 168,939 |  |  |  | 177 |  |  |  | 18,226 |  |  |  | 150,890 |
Total securities available for sale |  | $ | 507,466 |  |  | $ | 197 |  |  | $ | 46,844 |  |  | $ | 460,819 |
Securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate notes |  | $ | 7,000 |  |  | $ | - |  |  | $ | 1,689 |  |  | $ | 5,311 |
Total securities held to maturity |  | $ | 7,000 |  |  | $ | - |  |  | $ | 1,689 |  |  | $ | 5,311 |
Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal Farm Credit Bank (“FFCB”) and the Federal Home Loan Bank (“FHLB”), which are government-sponsored enterprises. Corporate notes classified as held to maturity include subordinated debt obligations issued by other bank holding companies. The amortized cost and fair value of debt securities as of September 30, 2023, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.
|  | Securities Available for Sale |  |  | Securities Held to Maturity |
|  | Amortized |  |  | Fair |  |  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |  |  | Cost |  |  | Value |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 65,774 |  |  | $ | 64,401 |  |  | $ | - |  |  | $ | - |
Due after one year through five years |  |  | 177,859 |  |  |  | 163,024 |  |  |  | - |  |  |  | - |
Due after five years through ten years |  |  | 45,517 |  |  |  | 41,252 |  |  |  | 2,000 |  |  |  | 1,291 |
Due after ten years |  |  | 92,213 |  |  |  | 76,515 |  |  |  | 5,000 |  |  |  | 3,181 |
|  |  | 381,363 |  |  |  | 345,192 |  |  |  | 7,000 |  |  |  | 4,472 |
Mortgage-backed securities and CMO |  |  | 107,824 |  |  |  | 94,888 |  |  |  | - |  |  |  | - |
|  | $ | 489,187 |  |  | $ | 440,080 |  |  | $ | 7,000 |  |  | $ | 4,472 |
Information pertaining to investment securities with gross unrealized losses at September 30, 2023, aggregated by investment category and the length of time that individual investment securities have been in a continuous loss position, follows.
|  | Number of |  |  |  |  |  |  | Gross |
|  | Investment |  |  | Fair |  |  | Unrealized |
|  | Positions |  |  | Value |  |  | Losses |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
September 30, 2023: |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |
Continuous loss position less than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Agency CMO |  |  | 7 |  |  | $ | 17,601 |  |  | $ | 246 |
Agency notes and bonds |  |  | 6 |  |  |  | 5,210 |  |  |  | 108 |
Muncipal obligations |  |  | 124 |  |  |  | 58,212 |  |  |  | 4,680 |
Total less than twelve months |  |  | 137 |  |  |  | 81,023 |  |  |  | 5,034 |
Continuous loss position more than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Agency mortgage-backed securities |  |  | 97 |  |  |  | 72,073 |  |  |  | 12,312 |
Agency CMO |  |  | 23 |  |  |  | 5,214 |  |  |  | 378 |
Agency notes and bonds |  |  | 55 |  |  |  | 129,035 |  |  |  | 12,095 |
Treasury notes and bonds |  |  | 27 |  |  |  | 73,714 |  |  |  | 2,813 |
Muncipal obligations |  |  | 135 |  |  |  | 76,541 |  |  |  | 16,477 |
Total more than twelve months |  |  | 337 |  |  |  | 356,577 |  |  |  | 44,075 |
Total securities available for sale |  |  | 474 |  |  | $ | 437,600 |  |  | $ | 49,109 |
Securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |
Continuous loss position more than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Corporate notes |  |  | 4 |  |  | $ | 4,472 |  |  | $ | 2,528 |
Total more than twelve months |  |  | 4 |  |  |  | 4,472 |  |  |  | 2,528 |
Total held to maturity |  |  | 4 |  |  | $ | 4,472 |  |  | $ | 2,528 |
Information pertaining to investment securities with gross unrealized losses at December 31, 2022, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows.
|  | Number of |  |  |  |  |  |  | Gross |
|  | Investment |  |  | Fair |  |  | Unrealized |
|  | Positions |  |  | Value |  |  | Losses |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2022: |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |
Continuous loss position less than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Agency mortgage-backed securities |  |  | 69 |  |  | $ | 27,561 |  |  | $ | 2,214 |
Agency CMO |  |  | 23 |  |  |  | 6,287 |  |  |  | 336 |
Agency notes and bonds |  |  | 15 |  |  |  | 35,079 |  |  |  | 1,314 |
Treasury notes and bonds |  |  | 17 |  |  |  | 31,615 |  |  |  | 997 |
Muncipal obligations |  |  | 154 |  |  |  | 81,218 |  |  |  | 5,960 |
Total less than twelve months |  |  | 278 |  |  |  | 181,760 |  |  |  | 10,821 |
Continuous loss position more than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Agency mortgage-backed securities |  |  | 28 |  |  |  | 56,303 |  |  |  | 8,979 |
Agency CMO |  |  | 3 |  |  |  | 257 |  |  |  | 13 |
Agency notes and bonds |  |  | 45 |  |  |  | 102,902 |  |  |  | 11,848 |
Treasury notes and bonds |  |  | 13 |  |  |  | 47,117 |  |  |  | 2,917 |
Muncipal obligations |  |  | 98 |  |  |  | 52,279 |  |  |  | 12,266 |
Total more than twelve months |  |  | 187 |  |  |  | 258,858 |  |  |  | 36,023 |
Total securities available for sale |  |  | 465 |  |  | $ | 440,618 |  |  | $ | 46,844 |
Securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |
Continuous loss position less than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Corporate notes |  |  | 3 |  |  | $ | 3,779 |  |  | $ | 1,221 |
Total less than twelve months |  |  | 3 |  |  |  | 3,779 |  |  |  | 1,221 |
Continuous loss position more than twelve months: |  |  |  |  |  |  |  |  |  |  |  |
Corporate notes |  |  | 1 |  |  |  | 1,532 |  |  |  | 468 |
Total more than twelve months |  |  | 1 |  |  |  | 1,532 |  |  |  | 468 |
Total securities held to maturity |  |  | 4 |  |  | $ | 5,311 |  |  | $ | 1,689 |
The Company has not identified any specific available for sale securities in a loss position that it intends to sell in the near term and does not believe that it will be required to sell any such securities. The Company reviews its securities on a quarterly basis to assess declines in fair value for credit losses. Consideration is given to such factors as the credit rating of the borrower, market conditions such as current interest rates, any adverse conditions specific to the security, and delinquency status on contractual payments. At September 30, 2023, management concluded that in all instances, securities with fair values less than carrying value were due to market and other factors; thus, no credit loss provision was required. In addition, management assesses held to maturity securities for credit losses on a quarterly basis. The assessment includes review of performance metrics, identification of delinquency and evaluation of market factors. Based on this analysis, management concludes the decline in fair value is due to changes in interest rates and other market factors. Accordingly, no credit loss provision was recorded in earnings for the three and nine months ended September 30, 2023. At September 30, 2023, the municipal obligations and U.S. government agency debt securities, including Treasury notes and bonds, agency notes and bonds, mortgage-backed securities and CMOs classified as available for sale and in a loss position had depreciated approximately 10.1% from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by first mortgage loans and municipal project revenues. At September 30, 2023, the corporate notes classified as held to maturity in a loss position had depreciated approximately 36.1% from the amortized cost basis. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale, no credit loss is deemed to exist. On January 1, 2023, the Company adopted ASU 2016-13, which replaced the legacy GAAP other-than-temporary impairment (“OTTI”) model with a credit loss model. ASU 2016-13 requires an allowance on lifetime expected credit losses on held to maturity debt securities. As of January 1, 2023 and September 30, 2023, the Company estimated the expected credit losses to be immaterial based on the composition of the held to maturity securities portfolio. While management does not anticipate any credit losses at September 30, 2023, additional deterioration in market and economic conditions may have an adverse impact on credit quality in the future. During the three months ended September 30, 2023, the Company recognized gross gains of $1,000 and gross losses of $95,000 on sales of available for sale securities. During the nine months ended September 30, 2023 the Company recognized gross gains of $79,000 and gross losses of $187,000 on sales of available for sale securities and time deposits. There were no sales of available for sale securities or time deposits during the three and nine months ended September 30, 2022. Certain debt securities available for sale were pledged to secure public fund deposits and advances through the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”) at September 30, 2023 and December 31, 2022. Equity Securities In September 2018, the Company acquired 90,000 shares of common stock in another bank holding company, representing approximately 5% of the outstanding common stock of the entity, for a total investment of $1.9 million. During the three months ended September 30, 2023 and 2022, the Company recognized unrealized losses of $131,000 and $229,000, respectively, on this equity investment. During the nine months ended September 30, 2023 and 2022, the Company recognized unrealized losses of $86,000 and $265,000, respectively, on this equity investment. At September 30, 2023 and December 31, 2022, the equity investment had a fair value of $1.4 million and $1.5 million, respectively, and is included in other assets on the consolidated balance sheets. In October 2021, the Company entered into an agreement to invest in a bank technology fund through a limited partnership. At September 30, 2023 and December 31, 2022, the Company’s investment in the limited partnership was $1.0 million and is reflected in other assets on the consolidated balance sheets. The unfunded commitment related to the limited partnership investment at September 30, 2023 and December 31, 2022 was $580,000 and $780,000, respectively, and is reflected in other liabilities on the consolidated balance sheets. The Company expects to fulfill the commitment as capital calls are made through 2026. The investment is accounted for as an equity security without a readily determinable fair value, and has been recorded at cost, less any impairment, and adjustments resulting from observable price changes. There were no impairments or adjustments on equity securities without readily determinable fair values during the three and nine months ended September 30, 2023 or 2022. In December 2015, the Company acquired Peoples Bancorp, Inc. of Bullitt County and its wholly-owned bank subsidiary, Peoples Bank of Bullitt County (“Peoples”), headquartered in Shepherdsville, Kentucky. Peoples owned Class B shares of VISA that were carried at an amortized costs basis of zero and were subsequently transferred to the Company. During the three and nine months ended September 30, 2023, the Company sold all the VISA Class B shares owned for a gross gain of $157,000. There were no such sales during the three and nine months ended September 30, 2022.

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- Definition The entire disclosure for cash, cash equivalents, investments in debt and equity instruments (including cost and equity investees and related income statement amounts), equity and cost method investments, investments in joint ventures and any other investment. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 65 -Paragraph 13 -Subparagraph (d)(3) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482477/820-10-65-13 + Details
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