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Note 2 - Securities

6 Months Ended

Jun. 30, 2024

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 state and political subdivisions, and corporate debt securities. Amortized costs, gross unrealized gains and losses, allowance for credit losses, and fair values of debt securities at June 30, 2024 and December 31, 2023 were as follows (in thousands):

	June 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value		Allowance for Credit Losses
Securities available for sale:
U.S. Treasury securities	$	12,480	$	—	$	(1,019	)	$	11,461	$	—
U.S. agency and mortgage-backed securities		90,869		52		(12,091	)		78,830		—
Obligations of states and political subdivisions		63,377		2		(8,854	)		54,525		—
Total securities available for sale	$	166,726	$	54	$	(21,964	)	$	144,816	$	—
Securities held to maturity:
U.S. Treasury securities	$	19,404	$	—	$	(310	)	$	19,094	$	—
U.S. agency and mortgage-backed securities		89,911		—		(9,556	)		80,355		—
Obligations of states and political subdivisions		11,291		27		(1,039	)		10,279		(1	)
Corporate debt securities		3,000		—		(486	)		2,514		(108	)
Total securities held to maturity	$	123,606	$	27	$	(11,391	)	$	112,242	$	(109	)
Total securities	$	290,332	$	81	$	(33,355	)	$	257,058	$	(109	)

	December 31, 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	)

Information pertaining to available for sale 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):

	June 30, 2024
	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	$	—	$	—		$	11,461	$	(1,019	)	$	11,461	$	(1,019	)
U.S. agency and mortgage-backed securities		367		(6	)		73,849		(12,085	)		74,216		(12,091	)
Obligations of states and political subdivisions		5,288		(252	)		48,135		(8,602	)		53,423		(8,854	)
Total securities available for sale	$	5,655	$	(258	)	$	133,445	$	(21,706	)	$	139,100	$	(21,964	)

	December 31, 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	)

The tables above provide information about available for sale securities that have been in an unrealized loss position for less than twelve consecutive months and securities that have been in an unrealized loss position for twelve consecutive months or more. Management evaluates securities to determine whether the impairment is due to credit-related factors or noncredit-related factors at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value. Presently, the Company does not intend to sell any of these securities, does not expect to be required to sell these securities, and expects to recover the entire amortized cost of all the securities.

Accrued interest receivable on securities available for sale and securities held to maturity totaled $727 thousand and $450 thousand, respectively, at June 30, 2024. Accrued interest on debt securities is included in accrued interest receivable on the Company's consolidated balance sheets.

At June 30, 2024, there were three out of three available for sale U.S. Treasury securities, 91 out of 108 U.S. agency and mortgage-backed available for sale securities, and 97 out of 99 obligations of states and political subdivisions available for sale in an unrealized loss position. One hundred percent of the Company’s investment portfolio was considered investment grade. The weighted-average re-pricing term of the portfolio was 6.0 years at June 30, 2024. One hundred percent of the Company’s investment portfolio was considered investment grade at December 31, 2023. The weighted-average re-pricing term of the portfolio was 5.9 years at December 31, 2023. The unrealized losses at June 30, 2024 in the U.S. Treasury securities portfolio, U.S. agency and mortgage-backed securities portfolio, and obligations of states and political subdivisions portfolio were related to changes in market interest rates and not credit concerns of the issuers.

On September 1, 2022, the Bank transferred 24 securities designated as available for sale with a combined book value of $82.2 million, market value of $74.4 million, and unrealized loss of $7.8 million, to securities designated held to maturity. The unrealized loss is being amortized monthly over the life of the securities with an increase to the carrying value of securities and a decrease to the related accumulated other comprehensive loss, which is included in the shareholders’ equity section of the Company’s balance sheet. The amortization of the unrealized loss on the transferred securities totaled $687 thousand for the first six months of 2024. The securities selected for transfer had larger potential decreases in their fair market values in higher interest rate environments than most of the other securities in the available for sale portfolio and included U.S. Treasury, agency, municipal and commercial mortgage-backed securities. The securities were transferred to mitigate the potential unfavorable impact that higher market interest rates may have on the carrying value of the securities and on the related accumulated other comprehensive loss.

The amortized cost and fair value of securities at June 30, 2024 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	$	1,111	$	1,096	$	10,534	$	10,456
Due after one year through five years		30,939		28,641		23,167		21,987
Due after five years through ten years		31,574		28,077		17,399		15,655
Due after ten years		103,101		87,002		72,505		64,144
	$	166,726	$	144,816	$	123,606	$	112,242

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 composition of restricted securities at June 30, 2024 and December 31, 2023 was as follows (in thousands):

	June 30, 2024		December 31, 2023
Federal Home Loan Bank stock	$	999	$	965
Federal Reserve Bank stock		981		981
Community Bankers’ Bank stock		132		132
	$	2,112	$	2,078

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 at June 30, 2024 and December 31, 2023

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 June 30, 2024 and December 31, 2023, 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
June 30, 2024
Aaa	$	19,404	$	23,053	$	2,797	$	—	$	45,254
Aa1 / Aa2 / Aa3		—		—		8,494		—		8,494
Baa1 / Baa2 / Baa3		—		—		—		3,000		3,000
Not rated - Agency ⁽¹⁾		—		66,858		—		—		66,858
Total	$	19,404	$	89,911	$	11,291	$	3,000	$	123,606
December 31, 2023
Aaa	$	39,085	$	22,936	$	2,807	$	—	$	64,828
Aa1 / Aa2 / Aa3		—		—		8,842		—		8,842
Baa1 / Baa2 / Baa3		—		—		—		3,000		3,000
Not rated - Agency ⁽¹⁾		—		71,681		—		—		71,681
Total	$	39,085	$	94,617	$	11,649	$	3,000	$	148,351

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

The following tables summarize the change in the allowance for credit losses on held to maturity securities for the six months ended June 30, 2024 and 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, 2023	$	—	$	—	$	—	$	107	$	107
Provision for credit losses		—		—		1		1		2
Charge-offs of securities		—		—		—		—		—
Recoveries		—		—		—		—		—
Balance, June 30, 2024	$	—	$	—	$	1	$	108	$	109

	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 June 30, 2024, 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 June 30, 2024.