Note 3 - Investment Securities

6 Months Ended

Jun. 30, 2025

Notes to Financial Statements

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

NOTE 3 Investment Securities

Trading securities are reported on the Company’s consolidated balance sheet at fair value. The fair value of the Company’s trading securities was $1.7 million and $3.3 million as of June 30, 2025 and  December 31, 2024, respectively. Changes in the fair value of trading securities are recorded in other noninterest income on the Company’s consolidated statements of income. 

The following tables present amortized cost, gross unrealized gains and losses, allowance for credit losses (“ACL”) and fair value of available-for-sale (“AFS”) investment securities and the amortized cost, gross unrealized gains and losses and fair value of held-to-maturity (“HTM”) securities as of June 30, 2025 and December 31, 2024:

	June 30, 2025
	Amortized		Unrealized		Unrealized			Allowance for		Fair
(dollars in thousands)	Cost		Gains		Losses			Credit Losses		Value
Available-for-sale
U.S. Treasury and agencies	$	638	$	—	$	(1	)	$	—	$	637
Mortgage backed securities
Residential agency		564,826		330		(76,217	)		—		488,939
Commercial		1,336		—		(56	)		—		1,280
Asset backed securities		17		—		—			—		17
Corporate bonds		53,982		—		(3,703	)		—		50,279
Total available-for-sale investment securities		620,799		330		(79,977	)		—		541,152
Held-to-maturity
Obligations of state and political agencies		114,141		—		(8,770	)		75		105,371
Mortgage backed securities
Residential agency		149,692		—		(23,559	)		52		126,133
Total held-to-maturity investment securities		263,833		—		(32,329	)		127		231,504
Total investment securities	$	884,632	$	330	$	(112,306	)	$	127	$	772,656

	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

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 June 30, 2025 represented a credit loss impairment. As of both June 30, 2025 and December 31, 2024, 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 as of both June 30, 2025 and December 31, 2024; however, all such bonds had an investment grade rating as of both June 30, 2025 and December 31, 2024. 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 and supportable forecasts. Using a probability of default and loss given default analysis, the ACL on HTM debt securities was $127 thousand and $131 thousand as of June 30, 2025 and December 31, 2024, respectively. The change in the ACL on HTM debt securities was due to a change in the provision for credit losses, with no charge-offs or recoveries for the three and six months ended June 30, 2025. 

 

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 June 30, 2025, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $1.6 million and $1.2 million, respectively. 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. 

The Company had no sales of AFS investment securities for the three and six months ended June 30, 2025 and 2024. The Company had calls of AFS investment securities with proceeds of $19.0 million and $29.0 million for the three and six months ended June 30, 2025, respectively, and no calls of AFS investment securities for the three and six months ended June 30, 2024. 

The Company had no sales of HTM investment securities for the three and six months ended June 30, 2025 and 2024. 

The following tables present investment securities with gross unrealized losses, for which an ACL was not recorded at June 30, 2025 and December 31, 2024, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position: 

			June 30, 2025
			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		2	$	—		$	—	$	(1	)	$	469	$	(1	)	$	469
Mortgage backed securities
Residential agency		111		(1	)		35		(76,216	)		383,021		(76,217	)		383,056
Commercial		1		—			—		(56	)		1,278		(56	)		1,278
Asset backed securities		3		—			—		—			16		—			16
Corporate bonds		11		—			—		(3,703	)		50,279		(3,703	)		50,279
Total available-for-sale investment securities		128	$	(1	)	$	35	$	(79,976	)	$	435,063	$	(79,977	)	$	435,098

			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

As of June 30, 2025 and December 31, 2024, none of the Company’s HTM debt securities were past due or on nonaccrual status. The Company did not recognize any interest income on nonaccrual HTM debt securities during the three months ended June 30, 2025 and 2024.

The following table presents the carrying value and fair value of HTM investment securities and the amortized cost and fair value of AFS investment securities as of June 30, 2025, 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	$	6,547	$	6,461	$	—	$	—
Due after one year through five years		57,083		53,878		1,625		1,568
Due after five years through ten years		43,077		38,521		53,999		50,296
Due after 10 years		7,434		6,511		349		349
		114,141		105,371		55,973		52,213
Mortgage-backed securities
Residential agency		149,692		126,133		564,826		488,939
Total investment securities	$	263,833	$	231,504	$	620,799	$	541,152

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 $439.1 million and $340.2 million were pledged as of June 30, 2025 and December 31, 2024, respectively, to secure public deposits and for other purposes required or permitted by law.

As of June 30, 2025 and December 31, 2024, the carrying value of the Company’s Federal Reserve stock and Federal Home Loan Bank of Des Moines (“FHLB”) stock was as follows:

	June 30,		December 31,
(dollars in thousands)	2025		2024
Federal Reserve	$	8,631	$	7,519
FHLB		18,161		13,656

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 June 30, 2025, the conversion ratio was 1.5609. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (10,808 Class A equivalents) that the Company owned as of June 30, 2025 and December 31, 2024, were carried at a zero cost basis.