Note 2 - Securities

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

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

2.    SECURITIES

The amortized cost and fair value of available for sale securities and the related pre-tax gross unrealized gains and losses recognized in accumulated other comprehensive income are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2020
U.S. Government agency debt obligations	$	170,970,000	$	658,000	$	(497,000	)	$	171,131,000
Mortgage-backed securities		27,816,000		1,088,000		(1,000	)		28,903,000
Municipal general obligation bonds		95,725,000		5,399,000		0			101,124,000
Municipal revenue bonds		10,385,000		398,000		(17,000	)		10,766,000
Other investments		500,000		0		0			500,000
	$	305,396,000	$	7,543,000	$	(515,000	)	$	312,424,000
December 31, 2019
U.S. Government agency debt obligations	$	185,103,000	$	2,449,000	$	(1,142,000	)	$	186,410,000
Mortgage-backed securities		41,998,000		554,000		(82,000	)		42,470,000
Municipal general obligation bonds		98,245,000		2,864,000		(30,000	)		101,079,000
Municipal revenue bonds		4,133,000		63,000		0			4,196,000
Other investments		500,000		0		0			500,000
	$	329,979,000	$	5,930,000	$	(1,254,000	)	$	334,655,000

Securities with unrealized losses at September 30, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
September 30, 2020
U.S. Government agency debt obligations	$	67,172,000	$	497,000	$	0	$	0	$	67,172,000	$	497,000
Mortgage-backed securities		0		0		32,000		1,000		32,000		1,000
Municipal general obligation bonds		0		0		0		0		0		0
Municipal revenue bonds		830,000		17,000		0		0		830,000		17,000
	$	68,002,000	$	514,000	$	32,000	$	1,000	$	68,034,000	$	515,000

	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
December 31, 2019
U.S. Government agency debt obligations	$	25,650,000	$	349,000	$	73,913,000	$	793,000	$	99,563,000	$	1,142,000
Mortgage-backed securities		2,838,000		28,000		10,423,000		54,000		13,261,000		82,000
Municipal general obligation bonds		3,755,000		18,000		994,000		12,000		4,749,000		30,000
Municipal revenue bonds		0		0		0		0		0		0
	$	32,243,000	$	395,000	$	85,330,000	$	859,000	$	117,573,000	$	1,254,000

We evaluate securities for other-than-temporary impairment at least on a quarterly basis. 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 we have to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. For those securities whose fair value is less than their amortized cost basis, we also consider our intent to sell the security, whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to recover the entire amortized cost basis of the security. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.

At September 30, 2020, 38 debt securities with fair values totaling $68.0 million had unrealized losses aggregating $0.5 million. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. As we do not intend to sell our debt securities before recovery of their cost basis and we believe it is more likely than not that we will not be required to sell our debt securities before recovery of the cost basis, no unrealized losses were deemed to be other-than-temporary.

The amortized cost and fair value of debt securities at September 30, 2020, by maturity, are shown in the following table. The contractual maturity is utilized for U.S. Government agency debt obligations and municipal bonds. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately. Weighted average yields are also reflected, with yields for municipal securities shown at their tax equivalent yield.

	Weighted Average Yield	Amortized Cost		Fair Value
Due in 2020	4.08%	$	410,000	$	411,000
Due in 2021 through 2025	1.63		70,413,000		71,694,000
Due in 2026 through 2030	1.89		138,085,000		141,743,000
Due in 2031 and beyond	2.27		68,172,000		69,173,000
Mortgage-backed securities	2.19		27,816,000		28,903,000
Other investments	4.25		500,000		500,000
Total available for sale securities	1.95%	$	305,396,000	$	312,424,000

Securities issued by the State of Michigan and all its political subdivisions had a combined amortized cost of $102 million and $96.5 million at September 30, 2020 and December 31, 2019, respectively, with estimated market values of $107 million and $99.4 million, respectively. Securities issued by all other states and their political subdivisions had a combined amortized cost of $4.4 million and $5.9 million at September 30, 2020 and December 31, 2019, respectively, with estimated market values of $4.5 million and $5.9 million, respectively. Total securities of any other specific issuer, other than the U.S. Government and its agencies and the State of Michigan and all its political subdivisions, did not exceed 10% of shareholders’ equity.

The carrying value of U.S. Government agency debt obligations and mortgage-backed securities that are pledged to secure repurchase agreements was $157 million and $103 million at September 30, 2020 and December 31, 2019, respectively. Investments in Federal Home Loan Bank stock are restricted and may only be resold or redeemed by the issuer.