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Note 4 - Investment and Equity Securities | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] |
4. | INVESTMENT AND EQUITY SECURITIES
The amortized cost, gross gains and losses and fair values of securities available for sale are as follows:
|  | December 31, 2020 |
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
(Dollar amounts in thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Subordinated debt |  | $ | 21,050 |  |  | $ | 254 |  |  | $ | (7 | ) |  | $ | 21,297 |
Obligations of states and political subdivisions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 500 |  |  |  | 2 |  |  |  | - |  |  |  | 502 |
Tax-exempt |  |  | 73,157 |  |  |  | 4,643 |  |  |  | - |  |  |  | 77,800 |
Mortgage-backed securities in government-sponsored entities |  |  | 14,230 |  |  |  | 536 |  |  |  | (5 | ) |  |  | 14,761 |
Total |  | $ | 108,937 |  |  | $ | 5,435 |  |  | $ | (12 | ) |  | $ | 114,360 |
|  | December 31, 2019 |
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
(Dollar amounts in thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Subordinated debt |  | $ | 4,000 |  |  | $ | 126 |  |  | $ | - |  |  | $ | 4,126 |
Obligations of states and political subdivisions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 500 |  |  |  | 1 |  |  |  | - |  |  |  | 501 |
Tax-exempt |  |  | 80,436 |  |  |  | 2,065 |  |  |  | (25 | ) |  |  | 82,476 |
Mortgage-backed securities in government-sponsored entities |  |  | 18,465 |  |  |  | 274 |  |  |  | (109 | ) |  |  | 18,630 |
Total |  | $ | 103,401 |  |  | $ | 2,466 |  |  | $ | (134 | ) |  | $ | 105,733 |
Equity securities totaled $609,000 and $710,000 at December 31, 2020 and 2019, respectively, which incorporates a recognized net (loss) gain on equity investments of ($101,000) and $94,000 for the years ended December 31, 2020 and 2019, respectively. No net gains on sold equity securities were realized from sales during these periods. The amortized cost and fair value of debt securities at December 31, 2020, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|  | Amortized |  |  | Fair |
(Dollar amounts in thousands) |  | Cost |  |  | Value |
Due in one year or less |  | $ | 1,556 |  |  | $ | 1,577 |
Due after one year through five years |  |  | 1,701 |  |  |  | 1,738 |
Due after five years through ten years |  |  | 28,767 |  |  |  | 29,236 |
Due after ten years |  |  | 76,913 |  |  |  | 81,809 |
Total |  | $ | 108,937 |  |  | $ | 114,360 |
Investment securities with an approximate carrying value of $71.1 million and $55.6 million at December 31, 2020 and 2019, respectively, were pledged to secure deposits and other purposes as required by law. There were no securities sold during the year ended December 31, 2020. Proceeds from the sales of investment securities and the gross realized gains and losses for the year ended December 31, 2019, are as follows (in thousands):
|  | 2020 |  |  | 2019 |
Proceeds from sales |  | $ | - |  |  | $ | 12,324 |
Gross realized gains |  |  | - |  |  |  | 227 |
Gross realized losses |  |  | - |  |  |  | (33 | )
The tax expense related to the net realized gains above was $0 and $41,000 for the years ended December 31, 2020 and 2019, respectively. The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
|  | December 31, 2020 |
|  | Less than Twelve Months |  |  | Twelve Months or Greater |  |  | Total |
|  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |
|  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
(Dollar amounts in thousands) |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
Subordinated debt |  | $ | 4,243 |  |  | $ | (7 | ) |  | $ | - |  |  | $ | - |  |  | $ | 4,243 |  |  | $ | (7 | )
Mortgage-backed securities in government-sponsored entities |  |  | 2,748 |  |  |  | (5 | ) |  |  | - |  |  |  | - |  |  |  | 2,748 |  |  |  | (5 | )
Total |  | $ | 6,991 |  |  | $ | (12 | ) |  | $ | - |  |  | $ | - |  |  | $ | 6,991 |  |  | $ | (12 | )
|  | December 31, 2019 |
|  | Less than Twelve Months |  |  | Twelve Months or Greater |  |  | Total |
|  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |
|  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
(Dollar amounts in thousands) |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
Obligations of states and political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt |  | $ | 4,324 |  |  | $ | (25 | ) |  | $ | - |  |  | $ | - |  |  | $ | 4,324 |  |  | $ | (25 | )
Mortgage-backed securities in government-sponsored entities |  |  | 1,409 |  |  |  | (2 | ) |  |  | 8,223 |  |  |  | (107 | ) |  |  | 9,632 |  |  |  | (109 | )
Total |  | $ | 5,733 |  |  | $ | (27 | ) |  | $ | 8,223 |  |  | $ | (107 | ) |  | $ | 13,956 |  |  | $ | (134 | )
There were 10 securities that were considered temporarily impaired at December 31, 2020. On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The accounting literature requires the Company to assess whether the unrealized loss is other than temporary. For equity securities where the fair value has been significantly below cost for one year, the Company’s policy is to recognize an impairment loss unless sufficient evidence is available that the decline is not other than temporary and a recovery period can be predicted. The Company has asserted that at December 31, 2020 and 2019, the declines outlined in the above table represent temporary declines and the Company does not intend to sell and does not believe it will be required to sell these securities before recovery of their cost basis, which may be at maturity. The Company has concluded that any impairment of its investment securities portfolio outlined in the above table is not other than temporary and is the result of interest rate changes, sector credit rating changes, or company-specific rating changes that are not expected to result in the non-collection of principal and interest during the period. Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for 81.4% of the total available-for-sale portfolio as of December 31, 2020, and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of significant unrealized loss positions within the obligations of state and political subdivisions security portfolio. The Company evaluates credit losses on a quarterly basis. The Company considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:
| ● | The length of time and the extent to which the fair value has been less than the amortized cost basis.
| ● | Changes in the near-term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions.
| ● | The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities.
| ● | Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation, and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

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