Note 3 - Investment Securities

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

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

Note 3.  Investment Securities

The Company’s investment securities are classified as available-for-sale as of June 30, 2022 and December 31, 2021. Investment securities available-for-sale are reported at fair value with unrealized gains or losses included in stockholders’ equity, net of tax. Accordingly, the carrying value of such securities reflects their fair value as of June 30, 2022 and December 31, 2021. Fair value is based upon either quoted market prices, or in certain cases where there is limited activity in the market for a particular instrument, assumptions are made to determine their fair value. See Note 6 of the Notes to Consolidated Financial Statements for a further discussion.

The following tables present information related to the Company’s portfolio of securities available-for-sale as of June 30, 2022 and December 31, 2021.

										Allowance
										for
			Gross		Gross					Investment
	Amortized		Unrealized		Unrealized			Fair		Credit
	Cost		Gains		Losses			Value		Losses
	(dollars in thousands)
June 30, 2022
Securities available-for-sale
Federal agency obligations	$	58,375	$	3	$	(5,708	)	$	52,670	$	-
Residential mortgage pass-through securities		480,445		718		(36,883	)		444,280		-
Commercial mortgage pass-through securities		25,627		-		(2,769	)		22,858		-
Obligations of U.S. states and political subdivisions		158,545		252		(10,766	)		148,031		-
Corporate bonds and notes		5,480		20		(9	)		5,491		-
Asset-backed securities		2,165		-		(48	)		2,117
Other securities		494		-		-			494		-
Total securities available-for-sale	$	731,131	$	993	$	(56,183	)	$	675,941	$	-
December 31, 2021
Securities available-for-sale
Federal agency obligations	$	50,336	$	649	$	(625	)	$	50,360	$	-
Residential mortgage pass-through securities		317,111		1,868		(2,884	)		316,095		-
Commercial mortgage pass-through securities		10,814		118		(463	)		10,469		-
Obligations of U.S. states and political subdivisions		145,045		1,562		(982	)		145,625		-
Corporate bonds and notes		8,968		81		-			9,049		-
Asset-backed securities		2,563		3		(2	)		2,564		-
Certificates of deposit		150		-		-			150		-
Other securities		195		-		-			195		-
Total securities available-for-sale	$	535,182	$	4,281	$	(4,956	)	$	534,507	$	-

Investment securities having a carrying value of approximately $191.3 million and $71.2 million as of June 30, 2022 and December 31, 2021, respectively, were pledged to secure public deposits, borrowings, repurchase agreements, Federal Reserve Discount Window borrowings and Federal Home Loan Bank advances and for other purposes required or permitted by law. As of June 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

The following table presents information for investments in securities available-for-sale as of June 30, 2022, based on scheduled maturities. Actual maturities can be expected to differ from scheduled maturities due to prepayment or early call options of the issuer. Securities not due at a single maturity date are shown separately.

	June 30, 2022
	Amortized		Fair
	Cost		Value
	(dollars in thousands)
Securities available-for-sale:
Due in one year or less	$	3,450	$	3,444
Due after one year through five years		4,876		4,880
Due after five years through ten years		3,765		3,788
Due after ten years		212,474		196,197
Residential mortgage pass-through securities		480,445		444,280
Commercial mortgage pass-through securities		25,627		22,858
Other securities		494		494
Total securities available-for-sale	$	731,131	$	675,941

Gross gains and losses from the sales and redemptions of securities for periods presented were as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022		2021			2022		2021
	(dollars in thousands)
Proceeds	$	-	$	5,185		$	-	$	5,185
Gross gains on sales/redemptions of securities		-		195			-		195
Gross losses on sales/redemptions of securities		-		-			-		-
Net gain on sales/redemptions of securities		-		195			-		195
Less: tax provision on net gain		-		(48	)		-		(48	)
Net gain on sales/redemptions of securities, after taxes	$	-	$	147		$	-	$	147

Impairment Analysis of Available--for-sale Debt Securities

The following tables indicate gross unrealized losses in an unrealized loss position for which an allowance for credit losses (“ACL”) has not been recorded, aggregated by investment category and by the length of continuous time individual securities have been in an unrealized loss position as of June 30, 2022 and December 31, 2021.

	June 30, 2022
	Total					Less than 12 Months					12 Months or Longer
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(dollars in thousands)
Securities available-for-sale:
Federal agency obligations	$	52,432	$	(5,708	)	$	52,432	$	(5,708	)	$	-	$	-
Residential mortgage pass-through securities		379,001		(36,883	)		325,284		(28,304	)		53,717		(8,579	)
Commercial mortgage pass-through securities		22,858		(2,769	)		19,209		(1,731	)		3,649		(1,038	)
Obligations of U.S. states and political subdivisions		109,547		(10,766	)		99,802		(10,214	)		9,745		(552	)
Corporate bonds and notes		1,989		(9	)		1,989		(9	)		-		-
Asset-backed securities		2,117		(48	)		2,117		(48	)		-		-
Total temporarily impaired securities	$	567,944	$	(56,183	)	$	500,833	$	(46,014	)	$	67,111	$	(10,169	)

	December 31, 2021
	Total					Less than 12 Months					12 Months or Longer
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(dollars in thousands)
Securities available-for-sale:
Federal agency obligations	$	28,974	$	(625	)	$	28,974	$	(625	)	$	-	$	-
Residential mortgage pass-through securities		246,396		(2,884	)		214,701		(2,111	)		31,695		(773	)
Commercial mortgage pass-through securities		8,370		(463	)		4,682		(75	)		3,688		(388	)
Obligations of U.S. states and political subdivisions		89,473		(982	)		89,473		(982	)		-		-
Asset-backed securities		802		(2	)		802		(2	)		-		-
Total Temporarily Impaired Securities	$	374,015	$	(4,956	)	$	338,632	$	(3,795	)	$	35,383	$	(1,161	)

The Company has elected to exclude accrued interest from the amortized cost of its investment securities available-for-sale. Accrued interest receivable for investment securities available for sale as of June 30, 2022 and December 31, 2021, totaled $2.6 million and $1.6 million, respectively.

The Company evaluates securities in unrealized loss position for impairment related to credit losses on at least a quarterly basis. Securities in unrealized loss positions are first assessed as to whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Unrealized losses on asset backed securities and state and municipal securities have not been recognized into income because the issuers are of high credit quality, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.  The decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the securities. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale securities was recorded as of   June 30, 2022or as of December 31, 2021.

Federal agency obligations, residential mortgage backed pass-through securities and commercial mortgage backed pass-through securities are issued by U.S. Government agencies and U.S. Government sponsored enterprises. Although a government guarantee exists on these investments, these entities are not legally backed by the full faith and credit of the federal government, and the current support they receive is subject to a cap as part of the agreement entered into in 2008. Nonetheless, at this time we do not foresee any set of circumstances in which the government would not fund its commitments on these investments as the issuers are an integral part of the U.S. housing market in providing liquidity and stability. Therefore, we concluded that a zero-allowance approach for these investment securities is appropriate.