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Note 2 - Securities

12 Months Ended

Dec. 31, 2023

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

Note 2. Securities

The Company invests in U.S. Treasury securities, U.S. agency and mortgage-backed securities, obligations of states and political subdivisions, and corporate debt securities. Amortized costs and fair values of securities at December 31, 2023 and 2022 were as follows (in thousands):

	2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value		Allowance for Credit Losses
Securities available for sale:
U.S. Treasury securities	$	12,476	$	—	$	(1,026	)	$	11,450	$	—
U.S. agency and mortgage-backed securities		96,937		55		(12,192	)		84,800		—
Obligations of states and political subdivisions		64,045		6		(7,444	)		56,607		—
Total securities available for sale	$	173,458	$	61	$	(20,662	)	$	152,857	$	—
Securities held to maturity:
U.S. Treasury securities	$	39,085	$	—	$	(389	)	$	38,696	$	—
U.S. agency and mortgage-backed securities		94,617		—		(8,992	)		85,625		—
Obligations of states and political subdivisions		11,649		107		(943	)		10,813		—
Corporate debt securities		3,000		—		(520	)		2,480		(107	)
Total securities held to maturity	$	148,351	$	107	$	(10,844	)	$	137,614	$	(107	)
Total securities	$	321,809	$	168	$	(31,506	)	$	290,471	$	(107	)

	*2022*
	*Amortized Cost*		*Gross Unrealized Gains*		*Gross Unrealized (Losses)*			*Fair Value*
Securities available for sale:
U.S. Treasury securities	$	12,468	$	—	$	(1,239	)	$	11,229
U.S. agency and mortgage-backed securities		109,972		95		(13,149	)		96,918
Obligations of states and political subdivisions		64,386		4		(9,630	)		54,760
Total securities available for sale	$	186,826	$	99	$	(24,018	)	$	162,907
Securities held to maturity:
U.S. Treasury securities	$	38,211	$	—	$	(568	)	$	37,643
U.S. agency and mortgage-backed securities		99,374		—		(9,189	)		90,185
Obligations of states and political subdivisions		12,573		—		(1,252	)		11,321
Corporate debt securities		3,000		—		(352	)		2,648
Total securities held to maturity	$	153,158	$	—	$	(11,361	)	$	141,797
Total securities	$	339,984	$	99	$	(35,379	)	$	304,704

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows (in thousands):

	*2023*
	*Less than 12 months*					*12 months or more*					*Total*
	*Fair Value*		*Unrealized (Loss)*			*Fair Value*		*Unrealized (Loss)*			*Fair Value*		*Unrealized (Loss)*
Securities available for sale:
U.S. Treasury securities	$	—	$	—		$	11,450	$	(1,026	)	$	11,450	$	(1,026	)
U.S. agency and mortgage-backed securities		1,281		(29	)		78,800		(12,163	)		80,081		(12,192	)
Obligations of states and political subdivisions		4,469		(215	)		47,004		(7,229	)		51,473		(7,444	)
Total securities available for sale	$	5,750	$	(244	)	$	137,254	$	(20,418	)	$	143,004	$	(20,662	)

	*2022*
	*Less than 12 months*					*12 months or more*					*Total*
	*Fair Value*		*Unrealized (Loss)*			*Fair Value*		*Unrealized (Loss)*			*Fair Value*		*Unrealized (Loss)*
Securities available for sale:
U.S. Treasury securities	$	9,041	$	(932	)	$	2,188	$	(307	)	$	11,229	$	(1,239	)
U.S. agency and mortgage-backed securities		27,282		(1,945	)		62,342		(11,204	)		89,624		(13,149	)
Obligations of states and political subdivisions		24,689		(2,581	)		26,362		(7,049	)		51,051		(9,630	)
Total securities available for sale	$	61,012	$	(5,458	)	$	90,892	$	(18,560	)	$	151,904	$	(24,018	)
Securities held to maturity:
U.S. Treasury securities	$	19,302	$	(258	)	$	18,342	$	(310	)	$	37,644	$	(568	)
U.S. agency and mortgage-backed securities		58,019		(6,848	)		32,167		(2,341	)		90,186		(9,189	)
Obligations of states and political subdivisions		8,648		(1,008	)		2,672		(244	)		11,320		(1,252	)
Corporate debt securities		2,648		(352	)		—		—			2,648		(352	)
Total securities held to maturity	$	88,617	$	(8,466	)	$	53,181	$	(2,895	)	$	141,798	$	(11,361	)
Total securities	$	149,629	$	(13,924	)	$	144,073	$	(21,455	)	$	293,702	$	(35,379	)

The Company has evaluated AFS securities in an unrealized loss position for credit related impairment at December 31, 2023 and 2022 and concluded no impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the cost basis of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis.

Additionally, the majority of the Company’s mortgage-backed securities are issued by FNMA, FHLMC, and GNMA and do not have credit risk given the implicit and explicit government guarantees associated with these agencies. In addition, the non-agency mortgage-backed and asset-backed securities generally received a 20% simplified supervisory formula approach rating. The Company’s AFS investment portfolio is generally highly-rated or agency backed. At December 31, 2023 and 2022, all AFS securities were current with no securities past due or on non- accrual and no ACL was held against the Company’s AFS securities portfolio.

At December 31, 2023 , the allowance for credit losses on held to maturity securities was $107 thousand. There was no allowance for credit losses on held to maturity securities at December 31, 2022.

At December 31, 2023, there were 3 out of 3 U.S. Treasury securities, 93 out of 108 U.S. agency and mortgage-backed securities, 85 out of 99 obligations of states and political subdivisions in an unrealized loss position. One hundred percent of the Company’s investment portfolio is considered investment grade. The weighted-average re-pricing term of the portfolio was 5.9 years at December 31, 2023. At December 31, 2022, there were 11 out of 11 U.S. Treasury securities, 126 out of 143 U.S. agency and mortgage-backed securities and 107 out of 116 obligations of states and political subdivisions, and one of one corporate debt securities in an unrealized loss position. One hundred percent of the Company’s investment portfolio was considered investment grade at December 31, 2022. The weighted- average re-pricing term of the portfolio was 6.5 years at December 31, 2022. The unrealized losses at December 31, 2023 in the U.S. Treasury securities portfolio, U.S. agency and mortgage-backed securities portfolio, obligations of states and political subdivisions portfolio, and corporate debt securities portfolio were related to changes in market interest rates and not credit concerns of the issuers.

The amortized cost and fair value of securities at December 31, 2023 by contractual maturity are shown below (in thousands). Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	*Available for Sale*				*Held to Maturity*
	*Amortized Cost*		*Fair Value*		*Amortized Cost*		*Fair Value*
Due within one year	$	760	$	758	$	30,690	$	30,470
Due after one year through five years		23,155		21,736		22,634		21,529
Due after five years through ten years		36,990		33,779		19,830		18,092
Due after ten years		112,553		96,584		75,197		67,523
	$	173,458	$	152,857	$	148,351	$	137,614

Proceeds from maturities, calls, principal payments, and sales of secur ities available for sale during 2023 and 2022 were $12.5 million and $39.1 million, respectively. There were no gains or losses realized in 2023. Gross losses of $2.0 million were realized on calls and sales during 2023 .

Proceeds from maturities, calls, and principal payments of securities held to maturity during 2023 and 2022 were $7.6 million and $9.3 million, respectively. There were no sales of securities from the held to maturity portfolio for the years ended December 31, 2023 or 2022 . The Company did not realize any gross gains or gross losses on held to maturity securities during 2023 or 2022 .

Securities having a fair value of $184.4 million and $134.5 million at December 31, 2023 and 2022 were pledged to secure public deposits and for other purposes required by law.

During the third quarter of 2022, management continued to contemplate the accounting treatment of the Company’s securities portfolio. Given the rapidly rising interest rates, the resulting effects on capital and to better reflect management’s intention to hold certain securities until maturity, management approved the transfer of a portion of the portfolio from the available for sale accounting treatment to the held to maturity accounting treatment. Available for sale securities with a book value of $82.2 million and an associated unrealized loss of $7.8 million were transferred to the held to maturity classification at the fair value of $74.4 million.

Federal Home Loan Bank, Federal Reserve Bank, and Community Bankers’ Bank stock are generally viewed as long-term investments and as restricted securities, which are carried at cost, because there is a minimal market for the stock. Therefore, when evaluating restricted securities for impairment, their value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Company does not consider these investments to be impaired at December 31, 2023, and no impairment has been recognized.

The composition of restricted securities at December 31, 2023 and 2022 was as follows (in thousands):

	*2023*		*2022*
Federal Home Loan Bank stock	$	965	$	796
Federal Reserve Bank stock		981		980
Community Bankers’ Bank stock		132		132
	$	2,078	$	1,908

The Company also holds limited partnership investments in Small Business Investment Companies (SBICs), which are included in other assets in the Consolidated Balance Sheets. The limited partnership investments are measured as equity investments without readily determinable fair values at their cost, less any impairment. The amounts included in other assets for the limited partnership investments were $642 thousand and $599 thousand at December 31, 2023 and 2022, respectively.

Credit Quality Indicators & Allowance for Credit Losses - HTM

The Company monitors the credit quality of the debt securities held to maturity through the use of credit ratings from Moody's, S&P, and Egan-Jones. The Company monitors the credit ratings on a quarterly basis. The following table summarizes the amortized cost of debt securities held to maturity at December 31, 2023, and 2022 aggregated by credit quality indicators.

	U.S. Treasury securities		U.S. agency and mortgage-backed securities		Obligations of states and political subdivisions		Corporate debt securities		Total Held to Maturity Securities
December 31, 2023
Aaa	$	39,085	$	22,936	$	2,807	$	—	$	64,828
Aa1 / Aa2 / Aa3		—		—		8,842		—		8,842
A1 / A2 / A3		—		—		—		—		—
Baa1 / Baa2 / Baa3		—		—		—		3,000		3,000
Not rated - Agency (1)		—		71,681		—		—		71,681
Not rated - Non Agency		—		—		—		—		—
Total	$	39,085	$	94,617	$	11,649	$	3,000	$	148,351
December 31, 2022
Aaa	$	38,211	$	22,706	$	3,126	$	—	$	64,043
Aa1 / Aa2 / Aa3		—		—		9,447		—		9,447
Baa1 / Baa2 / Baa3		—		—		—		3,000		3,000
Not rated - Agency (1)		—		76,668		—		—		76,668
Not rated - Non Agency		—		—		—		—		—
Total	$	38,211	$	99,374	$	12,573	$	3,000	$	153,158

(1) Generally considered not to have credit risk given the implied governmental guarantees associated with these agencies.

The following table summarizes the change in the allowance for credit losses on held to maturity securities for the year ended December 31, 2023.

	U.S. Treasury securities		U.S. agency and mortgage-backed securities		Obligations of states and political subdivisions		Corporate debt securities			Total Held to Maturity Securities
Balance, December 31, 2022	$	—	$	—	$	—	$	—		$	—
Adjustment for adoption of ASU 2016-13		—		—		—		134			134
Provision for credit losses		—		—		—		10			10
Charge-offs of securities		—		—		—		—			—
Recoveries		—		—		—		(37	)		(37	)
Balance, December 31, 2023	$	—	$	—	$	—	$	107		$	107

At December 31, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal and interest payments. The Company had no securities held-to-maturity classified as nonaccrual as of December 31, 2023.