10-Q 1 hmnf20240331_10q.htm FORM 10-Q hmnf20240331_10q.htm
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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended March 31, 2024

 

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from                    to                   

 

 

Commission File Number 0-24100

HMN FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

41-1777397

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

   

1016 Civic Center Drive N.W., Rochester, MN

 

55901

(Address of principal executive offices)

 

(Zip Code)

   

Registrant's telephone number, including area code:

 

(507) 535-1200

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock

HMNF

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).          Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☒
Smaller reporting company Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No ☒

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

 

 

Class

 

Outstanding at April 29, 2024

 
 

Common stock, $0.01 par value

 

4,464,952

 
 

 

 

 

HMN FINANCIAL, INC.

TABLE OF CONTENTS

 

 

PART I  FINANCIAL INFORMATION

   

Page

Item 1:

Financial Statements

3

     
 

Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023

3

     
 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023 (unaudited)

4

     
 

Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)

5

     
 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)

6

     
 

Notes to Consolidated Financial Statements (unaudited)

7

     

Item 2:

Management's Discussion and Analysis of Financial Condition and Results of Operations

24

     

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

33

     

Item 4:

Controls and Procedures

33

     

PART II OTHER INFORMATION

     

Item 1:

Legal Proceedings

34

     

Item 1A:

Risk Factors

34

     

Item 2:

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

34

     

Item 3:

Defaults Upon Senior Securities

34

     

Item 4:

Mine Safety Disclosures

34

     

Item 5:

Other Information

34

     

Item 6:

Exhibits

35

     

Signatures

36

 

 

PART I FINANCIAL INFORMATION

Item 1 : Financial Statements

 

 

HMN FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 
  

March 31,

  

December 31,

 

(Dollars in thousands)

 

2024

  

2023

 
  

(unaudited)

     

Assets

        

Cash and cash equivalents

 $50,230   11,151 

Securities available for sale:

        

Mortgage-backed and related securities (amortized cost $170,784 and $179,366)

  152,759   161,414 

Other marketable securities (amortized cost $54,221 and $54,112)

  53,850   53,680 

Total securities available for sale

  206,609   215,094 
         

Loans held for sale

  4,146   1,006 

Loans receivable, net

  856,560   845,692 

Accrued interest receivable

  3,674   3,553 

Mortgage servicing rights, net

  2,631   2,709 

Premises and equipment, net

  15,775   15,995 

Goodwill

  802   802 

Prepaid expenses and other assets

  3,614   3,962 

Deferred tax asset, net

  7,174   7,171 

Total assets

 $1,151,215   1,107,135 
         

Liabilities and Stockholders Equity

        

Deposits

 $1,030,918   976,793 

Federal Home Loan Bank advances and other borrowings

  0   13,200 

Accrued interest payable

  3,730   2,399 

Customer escrows

  3,425   2,246 

Accrued expenses and other liabilities

  4,318   4,790 

Total liabilities

  1,042,391   999,428 

Commitments and contingencies

          

Stockholders’ equity:

        

Serial-preferred stock ($.01 par value): authorized 500,000 shares; issued 0

  0   0 

Common stock ($.01 par value): authorized 16,000,000 shares; issued 9,128,662 outstanding 4,462,555 and 4,457,905

  91   91 

Additional paid-in capital

  41,232   41,235 

Retained earnings, subject to certain restrictions

  143,248   142,278 

Accumulated other comprehensive loss

  (13,199)  (13,191)

Unearned employee stock ownership plan shares

  (821)  (870)

Treasury stock, at cost 4,666,107 and 4,670,757 shares

  (61,727)  (61,836)

Total stockholders’ equity

  108,824   107,707 

Total liabilities and stockholders’ equity

 $1,151,215   1,107,135 
         

 

See accompanying notes to consolidated financial statements (unaudited).

 

 

HMN FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(unaudited)

 
  

Three Months Ended

March 31,

 

(Dollars in thousands, except per share data)

 

2024

  

2023

 

Interest income:

        

Loans receivable

 $10,686   9,003 

Securities available for sale:

        

Mortgage-backed and related

  514   652 

Other marketable

  409   143 

Other

  390   115 

Total interest income

  11,999   9,913 
         

Interest expense:

        

Deposits

  4,740   1,803 

Customer escrows

  0   32 

Advances and other borrowings

  3   15 

Total interest expense

  4,743   1,850 
         

Net interest income

  7,256   8,063 
         

Provision for credit losses

  (209)  (8)

Net interest income after provision for credit losses

  7,465   8,071 
         

Non-interest income:

        

Fees and service charges

  732   807 

Loan servicing fees

  388   400 

Gain on sales of loans

  294   295 

Other

  493   426 

Total non-interest income

  1,907   1,928 
         

Non-interest expense:

        

Compensation and benefits

  4,697   4,805 

Occupancy and equipment

  852   950 

Data processing

  535   505 

Professional services

  321   237 

Other

  1,146   1,196 

Total non-interest expense

  7,551   7,693 

Income before income tax expense

  1,821   2,306 

Income tax expense

  503   672 

Net income

  1,318   1,634 

Other comprehensive income (loss), net of tax

  (8)  2,246 

Comprehensive income available to common shareholders

 $1,310   3,880 

Basic earnings per share

 $0.30   0.38 

Diluted earnings per share

 $0.30   0.37 
         

 

See accompanying notes to consolidated financial statements (unaudited).

 

 

HMN FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

(unaudited)

 
                  

Unearned

         
                  

Employee

         
              

Accumulated

  

Stock

      

Total

 
      

Additional

      

Other

  

Ownership

      

Stock-

 
  

Common

  

Paid-In

  

Retained

  

Comprehensive

  

Plan

  

Treasury

  

Holders’

 

(Dollars in thousands)

 

Stock

  

Capital

  

Earnings

  

Loss

  

Shares

  

Stock

  

Equity

 

Balance, December 31, 2023

 $91   41,235   142,278   (13,191)  (870)  (61,836)  107,707 

Net income

          1,318               1,318 

Other comprehensive loss

              (8)          (8)

Dividends paid to stockholders ($0.08 per share)

          (348)              (348)

Restricted stock awards

      (110)              110   0 

Stock awards withheld for tax withholding

                      (1)  (1)

Amortization of restricted stock awards

      49                   49 

Earned employee stock ownership plan shares

      58           49       107 

Balance, March 31, 2024

 $91   41,232   143,248   (13,199)  (821)  (61,727)  108,824 
                             

 

                  

Unearned

         
                  

Employee

         
              

Accumulated

  

Stock

      

Total

 
      

Additional

      

Other

  

Ownership

      

Stock-

 
  

Common

  

Paid-In

  

Retained

  

Comprehensive

  

Plan

  

Treasury

  

Holders’

 

(Dollars in thousands)

 

Stock

  

Capital

  

Earnings

  

Loss

  

Shares

  

Stock

  

Equity

 

Balance, December 31, 2022

 $91   41,013   138,409   (19,761)  (1,063)  (61,353)  97,336 

Net income

          1,634               1,634 

Other comprehensive income

              2,246           2,246 

Adoption of ASU 2016-13

          (830)              (830)

Dividends paid to stockholders ($0.06 per share)

          (261)              (261)

Restricted stock awards

      (150)              150   0 

Stock awards withheld for tax withholding

                      (64)  (64)

Amortization of restricted stock awards

      54                   54 

Earned employee stock ownership plan shares

      58           49       107 

Balance, March 31, 2023

 $91   40,975   138,952   (17,515)  (1,014)  (61,267)  100,222 
                             

 

See accompanying notes to consolidated financial statements (unaudited).

 

 

HMN FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

 
  

Three Months Ended

March 31,

 

(Dollars in thousands)

 

2024

  

2023

 

Cash flows from operating activities:

        

Net income

 $1,318   1,634 

Adjustments to reconcile net income to cash provided (used) by operating activities:

        

Provision for credit losses

  (209)  (8)

Depreciation

  271   282 

Amortization of premiums, net

  72   194 

Amortization of deferred loan fees

  (25)  (60)

Amortization of mortgage servicing rights and servicing costs

  208   199 

Capitalized mortgage servicing rights

  (130)  (91)

Gains recognized on equity securities, net

  (11)  (41)

Gains on sale of premises and equipment

  0   (1)

Gain on sales of loans

  (294)  (295)

Proceeds from sale of loans held for sale

  15,173   11,300 

Disbursements on loans held for sale

  (15,552)  (9,718)

Amortization of restricted stock awards

  49   54 

Amortization of unearned Employee Stock Ownership Plan shares

  49   49 

Earned Employee Stock Ownership Plan shares priced above original cost

  58   58 

Increase in accrued interest receivable

  (121)  (196)

Increase in accrued interest payable

  1,331   751 

(Increase) decrease in other assets

  (252)  283 

Decrease in other liabilities

  (462)  (5,399)

Other, net

  2   0 

Net cash provided (used) by operating activities

  1,475   (1,005)

Cash flows from investing activities:

        

Principal collected on securities available for sale

  8,400   8,976 

Proceeds collected on maturities of securities available for sale

  15,000   0 

Purchases of securities available for sale

  (15,000)  0 

Purchase of Federal Home Loan Bank stock

  (7)  (1,546)

Redemption of Federal Home Loan Bank stock

  594   1,421 

Net increase in loans receivable

  (13,086)  (10,437)

Proceeds from sale of premises

  0   35 

Purchases of premises and equipment

  (52)  (291)

Net cash used by investing activities

  (4,151)  (1,842)

Cash flows from financing activities:

        

Increase (decrease) in deposits

  54,125   (23,608)

Stock awards withheld for tax withholding

  (1)  (64)

Dividends to stockholders

  (348)  (261)

Proceeds from borrowings

  0   37,820 

Repayment of borrowings

  (13,200)  (35,520)

Increase (decrease) in customer escrows

  1,179   (1,659)

Net cash provided (used) by financing activities

  41,755   (23,292)

Increase (decrease) in cash and cash equivalents

  39,079   (26,139)

Cash and cash equivalents, beginning of period

  11,151   36,259 

Cash and cash equivalents, end of period

 $50,230   10,120 

Supplemental cash flow disclosures:

        

Cash paid for interest

 $3,411   1,099 

Cash paid for income taxes

  813   0 

Supplemental noncash flow disclosures:

        

Loans transferred to loans held for sale

  2,452   555 
         

 

See accompanying notes to consolidated financial statements (unaudited).

 

 

HMN FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

 

 

(1) Description of the Business and Summary of Significant Accounting Policies

HMN Financial, Inc. (HMN or the Company) is a stock savings bank holding company that owns 100 percent of Home Federal Savings Bank (the Bank). The Bank has a community banking philosophy and operates retail banking and loan production facilities in Minnesota, Iowa and Wisconsin. The Bank has two wholly owned subsidiaries, Osterud Insurance Agency, Inc. (OIA), which does business as Home Federal Investment Services and offers financial planning products and services, and HFSB Property Holdings, LLC (HPH), which is currently inactive, but has acted in the past as an intermediary for the Bank in holding and operating certain foreclosed properties.

 

The consolidated financial statements included herein are for HMN, the Bank, OIA and HPH. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

(2) Basis of Preparation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of stockholders' equity and consolidated statements of cash flows in conformity with U.S. Generally Accepted Accounting Principles (GAAP). However, all normal recurring adjustments which are, in the opinion of management, necessary for the fair presentation of the interim financial statements have been included.

 

The unaudited consolidated financial statements presented in this report should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2023, included in the Company's Form 10-K/A filed with the Securities and Exchange Commission (SEC) on March 19, 2024. The results of operations for the three month period ended March 31, 2024 are not necessarily indicative of the results which may be expected for the entire year.

 

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q were issued.

 

(3) New Accounting Standards

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the ASU address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this ASU apply to all entities that are subject to Topic 740, Income Taxes with certain disclosures only required by public business entities. For public business entities, such as the Company, the amendments in this ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. Management is currently in the process of reviewing how the Company’s income tax disclosure will be impacted by the additional guidance when this ASU is required to be adopted on December 31, 2025.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in the ASU address investor requests for additional, more detailed information about a reportable segment’s expenses. The amendments in the ASU apply to all public entities, such as the Company, that are required to report segment information in accordance with Topic 280, Segment Reporting. The amendments in the ASU do not change the current disclosure requirements or how a public entity identifies its operating segments. The amendments in the ASU are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024, with early adoption permitted. Management is currently in the process of reviewing how the Company’s segment reporting will be impacted by the additional guidance when this ASU is required to be adopted on December 31, 2024.

 

 

(4) Fair Value Measurements

ASC 820, Fair Value Measurements, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system consisting of three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

 

Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets that the Company has the ability to access.

 

Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which significant assumptions are observable in the market.

 

Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market and are used only to the extent that observable inputs are not available. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

 

The following table summarizes the assets and liabilities of the Company for which fair values are determined on a recurring basis as of March 31, 2024 and December 31, 2023.

 

  

Carrying Value at March 31, 2024

 

(Dollars in thousands)

 

Total

  

Level 1

  

Level 2

  

Level 3

 

Securities available for sale

 $206,609   0   206,609   0 

Equity securities

  394   0   394   0 

Commitments to extend credit

  (18)  0   (18)  0 

Total

 $206,985   0   206,985   0 

 

  

Carrying Value at December 31, 2023

 

Securities available for sale

 $215,094   0   215,094   0 

Equity securities

  382   0   382   0 

Commitments to extend credit

  7   0   7   0 

Total

 $215,483   0   215,483   0 
                 

 

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of the lower-of-cost-or-market accounting or write-downs of individual assets. The following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the related individual assets or portfolios at March 31, 2024 and December 31, 2023.

 

  

Carrying Value at March 31, 2024

     

(Dollars in thousands)

 

Total

  

Level 1

  

Level 2

  

Level 3

  

Three Months Ended

March 31, 2024

Total Gains

 

Loans held for sale

 $4,146   0   4,146   0   10 

Mortgage servicing rights, net

  2,631   0   0   2,631   0 

Collateral dependent loans

  2,841   0   2,841   0   8 

Total

 $9,618   0   6,987   2,631   18 
                     

 

  

Carrying Value at December 31, 2023

     

(Dollars in thousands)

 

Total

  

Level 1

  

Level 2

  

Level 3

  

Year Ended

December 31, 2023

Total Losses

 

Loans held for sale

 $1,006   0   1,006   0   (26)

Mortgage servicing rights, net

  2,709   0   0   2,709   0 

Collateral dependent loans

  3,856   0   3,856   0   (287)

Total

 $7,571   0   4,862   0   (313)
                     

 

 

(5) Fair Value of Financial Instruments

ASC 825, Disclosures about Fair Values of Financial Instruments requires interim reporting period disclosure of the estimated fair values of the Company’s financial instruments, including assets, liabilities and off-balance sheet items for which it is practicable to estimate fair value. The fair value estimates are made as of March 31, 2024 and December 31, 2023 based upon relevant market information, if available, and upon the characteristics of the financial instruments themselves. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based upon judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.

 

The estimated fair value of the Company’s financial instruments as of March 31, 2024 and December 31, 2023 are shown below. There is an explanation of the methods and assumptions used to estimate the fair value of each class of financial instruments following the table.

 

       
  March 31, 2024  December 31, 2023 
          

Fair Value Hierarchy

                 

(Dollars in thousands)

 

Carrying

Amount

  

Estimated

Fair Value

  

Level 1

  

Level 2

  

Level 3

  

Contract

Amount

  

Carrying

Amount

  

Estimated

Fair Value

  

Contract

Amount

 

Financial assets:

                                    

Cash and cash equivalents

 $50,230   50,230   50,230               11,151   11,151     

Securities available for sale

  206,609   206,609       206,609           215,094   215,094     

Equity securities

  394   394       394           382   382     

Loans held for sale

  4,146   4,146       4,146           1,006   1,006     

Loans receivable, net

  856,560   792,017       792,017           845,692   778,952     

Federal Home Loan Bank stock

  665   665       665           1,252   1,252     

Accrued interest receivable

  3,674   3,674       3,674           3,553   3,553     

Mortgage servicing assets

  2,631   6,536          6,536       2,709   6,539     
                                     

Financial liabilities:

                                    

Deposits

  1,030,918   1,029,689       1,029,689           976,793   975,963     

FHLB advances and other borrowings

  0   0       0           13,200   13,200     

Accrued interest payable

  3,730   3,730       3,730           2,399   2,399     

Off-balance sheet financial instruments:

                                    

Commitments to extend credit

  (18)  (18)              159,183   7   7   167,447 

Commitments to sell loans

  (7)  (7)              9,376   (17)  (17)  3,078 
                                     

 

Cash and Cash Equivalents

The carrying amount of cash and cash equivalents approximates their fair value.

 

Securities Available for Sale

The fair values of securities were based upon quoted market prices for similar securities. The fair values measurements are subject to independent verification by another pricing source on a quarterly basis to review for reasonableness.

 

Equity Securities

The fair values of equity securities were based upon quoted market prices for similar securities.

 

Loans Held for Sale

The fair values of loans held for sale were based upon quoted market prices for loans with similar interest rates and terms to maturity.

 

Loans Receivable

The fair value of the loan portfolio, with the exception of the adjustable rate portfolio, was calculated by discounting the scheduled cash flows through the estimated maturity using anticipated prepayment speeds and using discount rates that reflect the credit and interest rate risk inherent in each loan portfolio. The fair value of the adjustable loan portfolio, with the exception of those loans that adjust on a daily basis, is estimated by grouping the loans with similar characteristics and comparing the characteristics of each group to the prices quoted for similar types of loans in the secondary market.

 

Federal Home Loan Bank (FHLB) Stock

The carrying amount of FHLB stock approximates its fair value.

 

9

 

Accrued Interest Receivable

The carrying amount of accrued interest receivable approximates its fair value since it is short-term in nature and does not present unanticipated credit concerns.

 

Mortgage Servicing Assets

The fair values of mortgage servicing assets were calculated by a third party using a discounted cash flow model-based technique that uses significant assumptions both observable and non-observable in the market. The unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the mortgage servicing asset.

 

Deposits

The fair value of demand deposits, savings accounts and certain money market account deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities based on a discounted cash flow calculation.

 

FHLB Advances and Other Borrowings

The fair values of advances and borrowings with fixed maturities are estimated based on a discounted cash flow analysis using as discount rates the interest rates charged by the FHLB for borrowing of similar remaining terms. The carrying amount of overnight advances approximates their fair value.

 

Accrued Interest Payable

The carrying amount of accrued interest payable approximates its fair value since it is short-term in nature.

 

Commitments to Extend Credit

The fair values of commitments to extend credit are estimated using the fees normally charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties.

 

Commitments to Sell Loans

The fair values of commitments to sell loans are estimated using the quoted market prices for loans with similar interest rates and terms to maturity.

 

(6) Securities Available For Sale

The following table shows the gross unrealized losses and fair values for the securities available for sale portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2024 and December 31, 2023.

 

  

Less Than Twelve Months

  

Twelve Months or More

  Total 

(Dollars in thousands)

 

# of

Investments

  

Fair

Value

  

Unrealized

Losses

  

# of

Investments

  

Fair

Value

  

Unrealized

Losses

  

Fair

Value

  

Unrealized

Losses

 

March 31, 2024

                                

Mortgage backed securities:

                                

Federal National Mortgage Association (FNMA)

  0  $0   0   34  $82,474   (9,625) $82,474   (9,625)

Federal Home Loan Mortgage Corporation (FHLMC)

  0   0   0   24   70,254   (8,398)  70,254   (8,398)

Collateralized mortgage obligations:

                                

FNMA

  0   0   0   1   31   (2)  31   (2)

Other marketable securities:

                                

U.S. Government agency obligations

  5   24,874   (76)  4   19,679   (321)  44,553   (397)

Total temporarily impaired securities

  5  $24,874   (76)  63  $172,438   (18,346) $197,312   (18,422)
                                 

 

10

 
  

Less Than Twelve Months

  

Twelve Months or More

  Total 

(Dollars in thousands)

 

# of

Investments

  

Fair

Value

  

Unrealized

Losses

  

# of

Investments

  

Fair

Value

  

Unrealized

Losses

  

Fair

Value

  

Unrealized

Losses

 

December 31, 2023

                                

Mortgage backed securities:

                                

FNMA

  0  $0   0   34  $87,133   (9,704) $87,133   (9,704)

FHLMC

  0   0   0   24   74,249   (8,246)  74,249   (8,246)

Collateralized mortgage obligations:

                                

FNMA

  0   0   0   1   32   (2)  32   (2)

Other marketable securities:

                                

U.S. government agency obligations

  1   5,000   (9)  7   34,456   (543)  39,456   (552)

Total temporarily impaired securities

  1  $5,000   (9)  66  $195,870   (18,495) $200,870   (18,504)
                                 

 

The Company reviews its investment portfolio on a quarterly basis for indications of impairment due to credit-related factors or noncredit-related factors and the Company does not intend to sell the securities and has the intent and ability to hold them for a period of time sufficient for recovery in their amortized cost basis. This review includes analyzing the extent to which the fair value has been lower than the cost, the market liquidity for the investment, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

 

As of March 31, 2024, the Company did not consider the unrealized losses on its securities available for sale to be attributable to credit-related factors. All of the Company’s investments are issued by U.S. government agencies, are implicitly guaranteed by the U.S. government, and have a long history of no credit losses. The unrealized losses on impaired securities are the result of changes in interest rates. As a result, there was no allowance for credit losses required on available for sale debt securities in an unrealized loss position at March 31, 2024. During the three month periods ended March 31, 2024 and March 31, 2023, there were no sales of securities.

 

A summary of securities available for sale at March 31, 2024 and December 31, 2023 is as follows:

 

(Dollars in thousands)

 

Amortized

Cost

  

Gross Unrealized

Gains

  

Gross Unrealized

Losses

  

Fair Value

 

March 31, 2024

                

Mortgage-backed securities:

                

FNMA

 $92,099   0   (9,625)  82,474 

FHLMC

  78,652   0   (8,398)  70,254 

Collateralized mortgage obligations:

                

FNMA

  33   0   (2)  31 
   170,784   0   (18,025)  152,759 

Other marketable securities:

                

U.S. Government agency obligations

  54,221   26   (397)  53,850 
   54,221   26   (397)  53,850 
  $225,005   26   (18,422)  206,609 
                 

December 31, 2023

                

Mortgage-backed securities:

                

FNMA

 $96,837   0   (9,704)  87,133 

FHLMC

  82,495   0   (8,246)  74,249 

Collateralized mortgage obligations:

                

FNMA

  34   0   (2)  32 
   179,366   0   (17,952)  161,414 

Other marketable securities:

                

U.S. Government agency obligations

  54,112   120   (552)  53,680 
   54,112   120