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Note 3 - Securities

12 Months Ended

Dec. 31, 2024

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

Note 3. 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, 2024 and 2023 were as follows (in thousands):

	*2024*
	*Amortized Cost*		*Gross Unrealized Gains*		*Gross Unrealized (Losses)*			*Fair Value*		*Allowance for Credit Losses*
Securities available for sale:
U.S. Treasury securities	$	12,483	$	—	$	(795	)	$	11,688	$	—
U.S. agency and mortgage-backed securities		110,480		57		(12,498	)		98,039		—
Obligations of states and political subdivisions		62,954		5		(8,839	)		54,120		—
Total securities available for sale	$	185,917	$	62	$	(22,132	)	$	163,847	$	—
Securities held to maturity:
U.S. Treasury securities	$	9,632	$	—	$	(125	)	$	9,507	$	—
U.S. agency and mortgage-backed securities		86,555		—		(9,282	)		77,273		—
Obligations of states and political subdivisions		10,649		8		(1,112	)		9,545		—
Corporate debt securities		3,000		—		(450	)		2,550		(95	)
Total securities held to maturity	$	109,836	$	8	$	(10,969	)	$	98,875	$	(95	)
Total securities	$	295,753	$	70	$	(33,101	)	$	262,722	$	(95	)

	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 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):

	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	$	—	$	—		$	11,688	$	(795	)	$	11,688	$	(795	)
U.S. agency and mortgage-backed securities		23,445		(237	)		67,800		(12,261	)		91,245		(12,498	)
Obligations of states and political subdivisions		4,839		(135	)		47,776		(8,704	)		52,615		(8,839	)
Total securities available for sale	$	28,284	$	(372	)	$	127,264	$	(21,760	)	$	155,548	$	(22,132	)

	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 Company has evaluated AFS securities in an unrealized loss position for credit related impairment at December 31, 2024 and 2023 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, 2024 and 2023, 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, 2024 and 2023, the allowance for credit losses on held to maturity securities was $95 thousand and $107 thousand, respectively.

At December 31, 2024, there were 3 out of 3 U.S. Treasury securities, 97 out of 116 U.S. agency and mortgage-backed securities, 95 out of 98 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 5.7 years at December 31, 2024. 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 and 85 out of 99 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, 2023. The weighted- average re-pricing term of the portfolio was 5.9 years at December 31, 2023. The unrealized losses at December 31, 2024 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, 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*
(in thousands)		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	1,630	$	1,621	$	206	$	204
Due after one year through five years		33,051		30,972		28,011		26,599
Due after five years through ten years		40,693		37,396		12,998		11,949
Due after ten years		110,543		93,858		68,621		60,123
	$	185,917	$	163,847	$	109,836	$	98,875

Proceeds from maturities, calls, principal payments, and sales of secur ities available for sale during 2024 and 2023 were $74.8 million an d $12.5 million, respectively. Gross losses of $154 thousand and $2.0 million were realized on calls and sales during 2024 and 2023, respectively.

Proceeds from maturities, calls, and principal payments of securities held to maturity during 2024 and 2023 were $39.7 million a nd $7.6 million, respectively. There were no sales of securities from the held to maturity portfolio for the years ended December 31, 2024 or 2023 . The Company did not realize any gross gains or gross losses on held to maturity securities during 2024 or 2023 .

Securities having a fair value of $175.0 million and $184.4 million at December 31, 2024 and 2023 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, 2024, and no impairment has been recognized.

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

	*2024*		*2023*
Federal Home Loan Bank stock	$	1,467	$	965
Federal Reserve Bank stock		2,010		981
Community Bankers’ Bank stock		264		132
	$	3,741	$	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 $2.4 million and $642 thousand at December 31, 2024 and 2023, 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, 2024, and 2023 aggregated by credit quality indicators.

(in thousands)		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, 2024
Aaa	$	9,632	$	23,173	$	2,487	$	—	$	35,292
Aa1 / Aa2 / Aa3		—		—		8,162		—		8,162
Baa1 / Baa2 / Baa3		—		—		—		3,000		3,000
Not rated - Agency (1)		—		63,382		—		—		63,382
Not rated - Non Agency		—		—		—		—		—
Total	$	9,632	$	86,555	$	10,649	$	3,000	$	109,836
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
Not rated - Non Agency		—		—		—		—		—
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 table summarizes the change in the allowance for credit losses on held to maturity securities for the year ended December 31, 2024.

(in thousands)		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		—		—		—		(12	)		(12	)
Charge-offs of securities		—		—		—		—			—
Recoveries		—		—		—		—			—
Balance, December 31, 2024	$	—	$	—	$	—	$	95		$	95

At December 31, 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 December 31, 2024.