Note 3 - Securities

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

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

Note 3 – Securities

The amortized cost and fair value of investments in debt securities at June 30, 2020 were as follows (dollars in thousands):

	June 30, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	9,998	$	—	$	—	$	9,998
Federal agencies and GSEs		51,382		2,088		32		53,438
Mortgage-backed and CMOs		193,961		6,988		30		200,919
State and municipal		44,935		1,751		6		46,680
Corporate		11,512		44		68		11,488
Total securities available for sale	$	311,788	$	10,871	$	136	$	322,523

The Company had no remaining equity securities at June 30, 2020. The Company had equity securities with a fair value of $125,000 at  June 30, 2019 and recognized in income a $330,000 change in the fair value of equity securities during the first six months of 2019. During the 2019  six-month period, the Company sold $317,000 in equity securities at fair value.

The amortized cost and fair value of investments in debt securities at December 31, 2019 were as follows (dollars in thousands):

	December 31, 2019
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	14,992	$	—	$	5	$	14,987
Federal agencies and GSEs		126,829		1,504		219		128,114
Mortgage-backed and CMOs		182,732		1,901		393		184,240
State and municipal		41,427		769		42		42,154
Corporate		9,514		186		—		9,700
Total securities available for sale	$	375,494	$	4,360	$	659	$	379,195

Restricted Stock

Due to restrictions placed upon the Bank's common stock investment in the Federal Reserve Bank of Richmond ("FRB") and Federal Home Loan Bank of Atlanta ("FHLB"), these securities have been classified as restricted equity securities and carried at cost. The restricted securities are not subject to the investment security classification requirements and are included as a separate line item on the Company's consolidated balance sheets. The FRB requires the Bank to maintain stock with a par value equal to 3.00% of its outstanding capital and an additional 3.00% is on call.  The FHLB requires the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank's total assets. The cost of restricted stock at June 30, 2020 and  December 31, 2019 was as follows (dollars in thousands):

	June 30, 2020		December 31, 2019
FRB stock	$	6,437	$	6,415
FHLB stock		2,257		2,215
Total restricted stock	$	8,694	$	8,630

Temporarily Impaired Securities

The following table shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2020.  The reference point for determining when securities are in an unrealized loss position is month end.  Therefore, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.

Available for sale securities that have been in a continuous unrealized loss position, at June 30, 2020, are as follows (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Treasury	$	9,998	$	—	$	9,998	$	—	$	—	$	—
Federal agencies and GSEs		14,468		32		13,013		7		1,455		25
Mortgage-backed and CMOs		9,652		30		9,652		30		—		—
State and municipal		1,352		6		1,352		6		—		—
Corporate		8,631		68		—		—		8,631		68
Total	$	44,101	$	136	$	34,015	$	43	$	10,086	$	93

U.S. Treasury: The unrealized loss associated with one U.S. Treasury bill is due to normal market fluctuations. The contractual cash flows of this investment are guaranteed by the U.S. Government. Accordingly, it is expected that this security would not be settled at a price less than the amortized cost basis of the Company's investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider this investment to be other-than-temporarily impaired at June 30, 2020.

Federal agencies and GSEs: The unrealized losses on the Company's investment in 16 government sponsored entities ("GSE") securities were caused by normal market fluctuations. Twelve of these securities were in an unrealized loss position for 12 months or more. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Mortgage-backed securities: The unrealized losses on the Company's investment in two GSE mortgage-backed securities were caused by normal market fluctuations. None of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company's investments. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Collateralized Mortgage Obligations: The unrealized loss associated with one private GSE collateralized mortgage obligation ("CMO") was due to normal market fluctuations. The contractual cash flows of this investment is guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the security would not be settled at a price less than the amortized cost basis of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider the investment to be other-than-temporarily impaired at June 30, 2020.

State and municipal securities:  The unrealized losses on two state and municipal securities were caused by normal market fluctuations. Both of these securities are of high credit quality (rated A- or higher), and principal and interest payments have been made timely. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2020.

Corporate securities:  The unrealized losses on five corporate securities were caused by normal market fluctuations and not credit deterioration. The majority of these securities remain investment grade, and the Company’s analysis did not indicate the existence of credit loss. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at  June 30, 2020.

Restricted stock: When evaluating restricted stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Company does not consider restricted stock to be other-than-temporarily impaired at June 30, 2020, and no impairment has been recognized.

The table below shows estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, at December 31, 2019 (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Treasury	$	14,987	$	5	$	14,987	$	5	$	—	$	—
Federal agencies and GSEs		69,095		219		31,779		44		37,316		175
Mortgage-backed and CMOs		89,391		393		66,324		266		23,067		127
State and municipal		4,262		42		3,108		37		1,154		5
Total	$	177,735	$	659	$	116,198	$	352	$	61,537	$	307

Other-Than-Temporarily-Impaired Securities

As of June 30, 2020 and December 31, 2019, there were no securities classified as other-than-temporarily impaired.

Realized Gains and Losses

The following table presents the gross realized gains and losses on, and the proceeds from the sale of, securities available for sale during the three and six months ended June 30, 2020 and 2019 (dollars in thousands):

	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Realized gains (losses):
Gross realized gains	$	—	$	814
Gross realized losses		—		—
Net realized gains	$	—	$	814
Proceeds from sales of securities	$	—	$	5,811

	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Realized gains (losses):
Gross realized gains	$	190		$	194
Gross realized losses		(54	)		(54	)
Net realized gains	$	136		$	140
Proceeds from sales of securities	$	29,878		$	29,878