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Securities

3 Months Ended

Mar. 31, 2023

NOTE 3: Securities

On January 1, 2023, the Corporation adopted ASC 326, which made changes to accounting for available for sale debt securities whereby credit losses should be presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity. In addition, ASC 326 requires financial assets measured at amortized cost to measure an expected credit loss under the CECL methodology that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. All securities information presented as of March 31, 2023 is in accordance with ASC 326. All securities information presented as of December 31, 2022 or a prior date is presented in accordance with previously applicable GAAP. For further discussion on the Corporation’s accounting policies and policy elections related to the accounting standard update refer to Note 1 and Note 2.

The Corporation’s debt securities, all of which are classified as available for sale, are summarized as follows:

March 31, 2023

Gross

Gross

Amortized

Unrealized

Unrealized

(Dollars in thousands)

Cost

Gains

Losses

Fair Value

U.S. Treasury securities

$

58,546

$

—

$

(1,591)

$

56,955

U.S. government agencies and corporations

136,877

—

(10,781)

126,096

Mortgage-backed securities

200,248

113

(17,870)

182,491

Obligations of states and political subdivisions

130,550

778

(5,289)

126,039

Corporate and other debt securities

25,256

—

(3,212)

22,044

$

551,477

$

891

$

(38,743)

$

513,625


		December 31, 2022
					Gross			Gross
		Amortized			Unrealized			Unrealized
(Dollars in thousands)		Cost			Gains			Losses			Fair Value
U.S. Treasury securities		$	60,886		$	—		$	(2,053)		$	58,833
U.S. government agencies and corporations			143,241			—			(12,967)			130,274
Mortgage-backed securities			200,393			65			(20,540)			179,918
Obligations of states and political subdivisions			127,317			300			(6,790)			120,827
Corporate and other debt securities			25,291			—			(2,552)			22,739
		$	557,128		$	365		$	(44,902)		$	512,591

The amortized cost and estimated fair value of securities at March 31, 2023, by the earlier of contractual maturity or expected maturity, are shown below. The Corporation has elected to exclude accrued interest receivable, totaling $2.6

million at March 31, 2023, from the amortized cost basis of securities. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.


		March 31, 2023
		Amortized
(Dollars in thousands)		Cost			Fair Value
Due in one year or less		$	98,510		$	97,294
Due after one year through five years			212,795			200,849
Due after five years through ten years			216,905			195,248
Due after ten years			23,267			20,234
		$	551,477		$	513,625

The following table presents the gross realized gains and losses on and the proceeds from the sales, maturities and calls of securities. During the three months ended March 31, 2023 and 2022 there were no sales of securities.


		Three Months Ended March 31,
(Dollars in thousands)		2023			2022
Realized gains from sales, maturities and calls of securities:
Gross realized gains		$	—		$	—
Gross realized losses			(5)			—
Net realized losses		$	(5)		$	—
Proceeds from sales, maturities, calls and paydowns of securities		$	19,730		$	14,629

The Corporation pledges securities primarily to secure public deposits, repurchase agreements and lines of credit that provide liquidity to the Corporation and C&F Bank. Securities with an aggregate amortized cost of $442.64 million and an aggregate fair value of $409.40 million were pledged at March 31, 2023. Securities with an aggregate amortized cost of $237.15 million and an aggregate fair value of $213.58 million were pledged at December 31, 2022.

Securities in an unrealized loss position at March 31, 2023, by duration of the period of the unrealized loss, are shown below.

Less Than 12 Months

12 Months or More

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(Dollars in thousands)

Value

Loss

Value

Loss

Value

Loss

U.S. Treasury securities

$

29,234

$

478

$

27,721

$

1,113

$

56,955

$

1,591

U.S. government agencies and corporations

57,986

750

68,110

10,031

126,096

10,781

Mortgage-backed securities

22,434

615

156,393

17,255

178,827

17,870

Obligations of states and political subdivisions

23,694

344

61,672

4,945

85,366

5,289

Corporate and other debt securities

4,948

577

16,097

2,635

21,045

3,212

Total temporarily impaired securities

$

138,296

$

2,764

$

329,993

$

35,979

$

468,289

$

38,743

There were 538 debt securities with a fair value below the amortized cost basis, totaling $468.29 million of aggregate fair value as of March 31, 2023. The Corporation concluded that a credit loss does not exist in its securities portfolio at March 31, 2023, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Corporation intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Corporation will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Corporation’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

Securities in an unrealized loss position at December 31, 2022, by duration of the period of the unrealized loss, are shown below.


		Less Than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
(Dollars in thousands)		Value			Loss			Value			Loss			Value			Loss
		$	50,556		$	1,368		$	8,277		$	685		$	58,833		$	2,053
U.S. government agencies and corporations			71,948			1,578			58,326			11,389			130,274			12,967
Mortgage-backed securities			73,301			5,441			104,563			15,099			177,864			20,540
Obligations of states and political subdivisions			60,838			2,434			32,120			4,356			92,958			6,790
Corporate and other debt securities			15,049			1,702			6,681			850			21,730			2,552
Total temporarily impaired securities		$	271,692		$	12,523		$	209,967		$	32,379		$	481,659		$	44,902

The Corporation’s investment in restricted stock totaled $5.83 million at March 31, 2023 and $1.12 million at December 31, 2022 and consisted of Federal Home Loan Bank of Atlanta (FHLB) stock. Restricted stock is generally viewed as a long-term investment, which is carried at cost because there is no market for the stock other than the FHLBs. Therefore, when evaluating restricted stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing any temporary decline in value. The Corporation did not consider its investment in restricted stock to be impaired at March 31, 2023 and no impairment has been recognized.