Note 3 - Investment Securities

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Investments in Debt and Equity Instruments, Cash and Cash Equivalents, Unrealized and Realized Gains (Losses) [Text Block]

(3)         INVESTMENT SECURITIES

Investment securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at December 31, 2022 and 2021 are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
December 31, 2022
Securities available for sale:
Agency mortgage-backed securities	$	95,056	$	-	$	11,193	$	83,863
Agency CMO		9,682		20		349		9,353
Other debt securities:
Agency notes and bonds		151,143		-		13,162		137,981
Treasury notes and bonds		82,646		-		3,914		78,732
Municipal obligations		168,939		177		18,226		150,890
Total securities available for sale	$	507,466	$	197	$	46,844	$	460,819
Securities held to maturity:
Other debt securities:
Corporate notes	$	7,000	$	-	$	1,689	$	5,311
Total securities held to maturity	$	7,000	$	-	$	1,689	$	5,311
December 31, 2021
Securities available for sale:
Agency mortgage-backed securities	$	102,767	$	604	$	635	$	102,736
Agency CMO		7,863		98		-		7,961
Other debt securities:
Agency notes and bonds		130,641		489		2,034		129,096
Treasury notes and bonds		50,339		-		545		49,794
Municipal obligations		153,610		4,721		583		157,748
Total securities available for sale	$	445,220	$	5,912	$	3,797	$	447,335
Securities held to maturity:
Other debt securities:
Corporate notes	$	2,000	$	4	$	-	$	2,004
Total securities held to maturity	$	2,000	$	4	$	-	$	2,004

The amortized cost and fair value of debt securities as of December 31, 2022, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.

	Securities Available for Sale				Securities Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
(In thousands)
Due in one year or less	$	36,739	$	35,856	$	-	$	-
Due after one year through five years		218,647		201,651		-		-
Due after five years through ten years		42,163		39,334		2,000		1,507
Due after ten years		105,179		90,762		5,000		3,804
		402,728		367,603		7,000		5,311
Mortgage-backed securities and CMO		104,738		93,216		-		-
	$	507,466	$	460,819	$	7,000	$	5,311

At December 31, 2022, certain securities available for sale with an amortized cost of $112.1 million and fair value of $104.0 million were pledged to secure public fund deposits and a blanket collateral agreement with the FHLB.

At December 31, 2022 and 2021, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, with an aggregate book value greater that 10% of stockholders’ equity.

Information pertaining to investment securities with gross unrealized losses at December 31, 2022 and 2021, aggregated by investment category and the length of time that individual investment securities have been in a continuous loss position, follows.

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
December 31, 2022:
Securities available for sale:
Continuous loss position less than twelve months:
Agency mortgage-backed securities		69	$	27,561	$	2,214
Agency CMO		23		6,287		336
Agency notes and bonds		15		35,079		1,314
Treasury notes and bonds		17		31,615		997
Muncipal obligations		154		81,218		5,960
Total less than twelve months		278		181,760		10,821
Continuous loss position more than twelve months:
Agency mortgage-backed securities		28		56,303		8,979
Agency CMO		3		257		13
Agency notes and bonds		45		102,902		11,848
Treasury notes and bonds		13		47,117		2,917
Muncipal obligations		98		52,279		12,266
Total more than twelve months		187		258,858		36,023
Total securities available for sale		465	$	440,618	$	46,844
Securities held to maturity:
Continuous loss position less than twelve months:
Corporate notes		3	$	3,779	$	1,221
Total less than twelve months		3		3,779		1,221
Continuous loss position more than twelve months:
Corporate notes		1		1,532		468
Total more than twelve months		1		1,532		468
Total securities held to maturity		4	$	5,311	$	1,689

	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
December 31, 2021:
Continuous loss position less than twelve months:
Agency mortgage-backed securities		23	$	67,512	$	607
Agency notes and bonds		39		98,042		1,710
Treasury notes and bonds		11		49,190		545
Muncipal obligations		49		32,642		479
Total less than twelve months		122		247,386		3,341
Continuous loss position more than twelve months:
Agency mortgage-backed securities		1		1,357		28
Agency notes and bonds		4		13,676		324
Muncipal obligations		4		2,957		104
Total more than twelve months		9		17,990		456
Total securities available for sale		131	$	265,376	$	3,797

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At December 31, 2022, the municipal obligations and U.S. government agency debt securities, including agency mortgage-backed securities, Treasury notes and bonds, and agency notes and bonds, in a loss position had depreciated approximately 9.6% from the amortized cost basis. All of the U.S. government agency securities and municipal securities are issued by U.S. government agencies, government-sponsored enterprises, or municipal governments, and are secured by first mortgage loans or municipal project revenues. At December 31, 2022, the corporate notes classified as held to maturity in a loss position had depreciated approximately 24.1% from the amortized cost basis. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold all debt securities in an unrealized loss position until maturity, or the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

While management does not anticipate any credit-related impairment losses at December 31, 2022, additional deterioration in market and economic conditions may have an adverse impact on the credit quality in the future.

During the year ended December 31, 2021, the Company realized gross gains of $12,000 and gross losses of $5,000 on the sale of available for sale securities. During the years ended December 31, 2022 and 2020, the Company sold no available for sale securities.

Equity Securities

In September 2018, the Company acquired 90,000 shares of common stock in another bank holding company, representing approximately 5% of the outstanding common stock of the entity, for a total investment of $1.9 million. During the years ended December 31, 2022, 2021 and 2020, the Company recognized an unrealized loss of $414,000, an unrealized gain of $328,000 and an unrealized loss of $194,000, respectively, on this equity investment. At December 31, 2022 and 2021, the equity investment had a fair value of $1.5 million and $1.9 million, respectively, and is included in other assets on the consolidated balance sheets.

In October 2021 the Company entered into an agreement to invest in a bank technology fund through a limited partnership. At December 31, 2022 and 2021, the Company’s investment in the limited partnership was $1.0 million and is reflected in other assets on the consolidated balance sheets. The unfunded commitment related to the limited partnership investment at December 31, 2022 and 2021 was $780,000 and $880,000, respectively, and is reflected in other liabilities on the consolidated balance sheets. The Company expects to fulfill the commitment as capital calls are made through 2026. The investment is accounted for as an equity security without a readily determinable fair value, and has been recorded at cost, less any impairment, and adjustments resulting from observable price changes. There were no impairments or adjustments on equity securities without readily determinable fair values during the years ended December 31, 2022 or 2021.