Note 5 - Investment Securities

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

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

NOTE 5 Investment Securities

As of December 31, 2024, the fair value of the Company’s trading securities was $3.3 million. There were no trading securities as of  December 31, 2023.

The following tables present amortized cost, gross unrealized gains and losses, ACL, and fair value of the AFS investment securities and HTM investment securities as of December 31, 2024 and 2023:

	December 31, 2024
	Amortized		Unrealized		Unrealized			Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses			Credit Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	30,691	$	18	$	(2	)	$	—	$	30,707
Mortgage backed securities
Residential agency		596,510		1		(92,805	)		—		503,706
Commercial		1,350		—		(99	)		—		1,251
Asset backed securities		19		—		—			—		19
Corporate bonds		57,986		—		(5,616	)		—		52,370
Total available-for-sale investment securities		686,556		19		(98,522	)		—		588,053
Held-to-maturity
Obligations of state and political agencies		119,623		—		(11,638	)		77		107,985
Mortgage backed securities
Residential agency		156,093		—		(27,092	)		54		129,001
Total held-to-maturity investment securities		275,716		—		(38,730	)		131		236,986
Total investment securities	$	962,272	$	19	$	(137,252	)	$	131	$	825,039

	December 31, 2023
	Amortized		Unrealized		Unrealized			Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses			Credit Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	1,119	$	4	$	(3	)		—	$	1,120
Mortgage backed securities
Residential agency		524,140		1		(88,547	)		—		435,594
Commercial		1,476		—		(123	)		—		1,353
Asset backed securities		26		—		(1	)		—		25
Corporate bonds		57,993		—		(9,349	)		—		48,644
Total available-for-sale investment securities		584,754		5		(98,023	)		—		486,736
Held-to-maturity
Obligations of state and political agencies		129,603		—		(12,613	)		114		116,990
Mortgage backed securities
Residential agency		170,125		—		(28,498	)		99		141,627
Total held-to-maturity investment securities		299,728		—		(41,111	)		213		258,617
Total investment securities	$	884,482	$	5	$	(139,134	)	$	213	$	745,353

The adequacy of the ACL on investment securities is assessed at the end of each quarter. The Company does not believe that the AFS debt securities that were in an unrealized loss position as of  December 31, 2024 represent a credit loss impairment. As of both  December 31, 2024 and 2023, the gross unrealized loss positions were primarily related to mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Additionally, there were corporate bonds in gross unrealized loss positions; however, all bonds had an investment grade rating as of both  December 31, 2024 and 2023. Total gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

The ACL on HTM debt securities is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable supportable forecasts. Using a probability of default and loss given default analysis, an ACL was established in the amount of $131 thousand and $213 thousand as of  December 31, 2024 and 2023, respectively.

Accrued interest receivable on AFS investment securities and HTM investment securities is recorded in accrued interest receivable and is excluded from the estimate of credit losses. As of  December 31, 2024, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $2.0 million and $1.3 million, respectively. As of December 31, 2023, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $1.5 million and $1.4 million, respectively.

Proceeds from the sale of AFS securities for the years ended December 31, 2024, 2023, and 2022 are displayed in the table below:

	Year ended
	December 31,
(dollars in thousands)	2024		2023			2022
Proceeds	$	130,415	$	171,758		$	—
Realized gains		—		—			—
Realized losses		—		(24,643	)		—

During the years ended  December 31, 2024, 2023 and 2022, there were no sales of HTM securities. 

The following table presents investment securities with gross unrealized losses, for which an ACL has not been recorded at  December 31, 2024 and 2023, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position:

			December 31, 2024
			Less than 12 Months					Over 12 Months					Total
	Number of		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
(dollars in thousands)	Holdings		Losses			Value		Losses			Value		Losses			Value
Available-for-sale
U.S. Treasury and agencies		1	$	—		$	—	$	(2	)	$	327	$	(2	)	$	327
Mortgage backed securities
Residential agency		124		(1,715	)		116,800		(91,090	)		386,864		(92,805	)		503,664
Commercial		1		—			—		(99	)		1,251		(99	)		1,251
Asset backed securities		3		—			—		—			18		—			18
Corporate bonds		12		—			—		(5,616	)		52,370		(5,616	)		52,370
Total available-for-sale investment securities		141	$	(1,715	)	$	116,800	$	(96,807	)	$	440,830	$	(98,522	)	$	557,630

			December 31, 2023
			Less than 12 Months					Over 12 Months					Total
	Number of		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
(dollars in thousands)	Holdings		Losses			Value		Losses			Value		Losses			Value
Available-for-sale
U.S. Treasury and agencies		1	$	(3	)	$	489	$	—		$	—	$	(3	)	$	489
Mortgage backed securities
Residential agency		112		—			43		(88,547	)		435,505		(88,547	)		435,548
Commercial		1		—			—		(123	)		1,353		(123	)		1,353
Asset backed securities		3		—			—		(1	)		25		(1	)		25
Corporate bonds		12		—			—		(9,349	)		48,644		(9,349	)		48,644
Total available-for-sale investment securities		129	$	(3	)	$	532	$	(98,020	)	$	485,527	$	(98,023	)	$	486,059

As of December 31, 2024 and 2023, none of the Company’s HTM debt securities were past due or on non-accrual status. The Company did not recognize any interest income on non-accrual HTM debt securities during years ended December 31, 2024, 2023 and 2022.

The following table presents amortized cost and fair value of AFS investment securities and the carrying value and fair value of HTM investment securities at December 31, 2024, by contractual maturity:

	Held-to-maturity				Available-for-sale
	Carrying		Fair		Amortized		Fair
(dollars in thousands)	Value		Value		Cost		Value
Due within one year or less	$	6,801	$	6,730	$	14,976	$	14,980
Due after one year through five years		54,832		50,924		16,710		16,622
Due after five years through ten years		48,016		41,694		57,990		52,374
Due after 10 years		9,974		8,637		370		371
		119,623		107,985		90,046		84,347
Mortgage-backed securities
Residential agency		156,093		129,001		596,510		503,706
Total investment securities	$	275,716	$	236,986	$	686,556	$	588,053

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities with a total carrying value of $340.2 million and $250.0 million, were pledged at  December 31, 2024 and 2023, respectively, to secure public deposits and for other purposes required or permitted by law.

As of December 31, 2024 and 2023, the carrying value of the Company’s Federal Reserve Bank stock and FHLB of Des Moines stock was as follows:

	December 31,		December 31,
(dollars in thousands)	2024		2023
Federal Reserve	$	7,519	$	4,623
FHLB		13,656		16,566

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

Visa Class B Restricted Shares

In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of  December 31, 2024, the conversion ratio was 1.5653. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (10,838 Class A equivalents) that the Company owned as of December 31, 2024 and 2023, were carried at a zero cost basis.