Note 2 - Securities

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

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

Note 2 – Securities

The amortized cost and fair value of investments in securities AFS at March 31, 2023 were as follows (dollars in thousands):

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	151,957	$	—	$	10,405	$	141,552
Federal agencies and GSEs		89,934		3		5,664		84,273
Mortgage-backed and CMOs		324,430		2		38,201		286,231
State and municipal		51,164		—		4,255		46,909
Corporate		31,301		—		3,859		27,442
Total securities available for sale	$	648,786	$	5	$	62,384	$	586,407

The amortized cost and fair value of investments in AFS securities at December 31, 2022 were as follows (dollars in thousands):

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	152,033	$	—	$	12,606	$	139,427
Federal agencies and GSEs		90,363		4		7,019		83,348
Mortgage-backed and CMOs		336,393		1		42,301		294,093
State and municipal		69,023		12		5,312		63,723
Corporate		31,299		—		3,828		27,471
Total securities available for sale	$	679,111	$	17	$	71,066	$	608,062

The adoption of ASU 2016-13 required evaluation of AFS securities for credit losses. At  March 31, 2023, there was no allowance for credit losses related to the AFS portfolio. Accrued interest receivable on the securities portfolio is excluded from the estimate of credit losses and totaled $1.6 million at March 31, 2023. Prior guidance was in effect at December 31, 2022.

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 3.75% of outstanding borrowings and a specific percentage of the Bank's total assets. The cost of restricted stock at March 31, 2023 and  December 31, 2022 was as follows (dollars in thousands):

	March 31, 2023		December 31, 2022
FRB stock	$	6,556	$	6,545
FHLB stock		2,763		6,106
Total restricted stock	$	9,319	$	12,651

Unrealized Losses on Securities

The following table shows estimated fair value and gross unrealized losses for which an allowance for credit losses has not been recorded, aggregated by category and length of time that securities have been in a continuous unrealized loss position, at March 31, 2023. 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.

AFS securities that have been in a continuous unrealized loss position, at March 31, 2023, were 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	$	141,552	$	10,405	$	—	$	—	$	141,552	$	10,405
Federal agencies and GSEs		83,941		5,664		15,187		346		68,754		5,318
Mortgage-backed and CMOs		285,938		38,201		22,631		596		263,307		37,605
State and municipal		46,062		4,255		9,841		118		36,221		4,137
Corporate		27,442		3,859		5,140		411		22,302		3,448
Total	$	584,935	$	62,384	$	52,799	$	1,471	$	532,136	$	60,913

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, 2022 (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	$	139,427	$	12,606	$	10,824	$	915	$	128,603	$	11,691
Federal agencies and GSEs		82,958		7,019		29,204		1,920		53,754		5,099
Mortgage-backed and CMOs		293,929		42,301		96,758		7,245		197,171		35,056
State and municipal		60,629		5,312		31,866		980		28,763		4,332
Corporate		27,471		3,828		18,991		2,556		8,480		1,272
Total	$	604,414	$	71,066	$	187,643	$	13,616	$	416,771	$	57,450

U.S. Treasury securities: The unrealized losses on the Company's investment in 22 U.S. Treasury securities were caused by normal market fluctuations. All 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 concluded there were no credit related losses related to these securities at March 31, 2023.

Federal agencies and GSEs: The unrealized losses on the Company's investment in 42 government sponsored entities ("GSE") securities were caused by normal market fluctuations. Thirty-seven 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 concluded there were no credit related losses related to these securities at March 31, 2023.

Mortgage-backed securities: The unrealized losses on the Company's investment in 130 GSE mortgage-backed securities were caused by normal market fluctuations. Ninety-three 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 concluded there were no credit losses related to these securities at March 31, 2023.

Collateralized Mortgage Obligations: The unrealized losses associated with 56 GSE collateralized mortgage obligations ("CMOs") were due to normal market fluctuations. Forty-nine of these securities were in an unrealized loss position for 12 months or more. The contractual cash flows of these 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 concluded there were no credit losses related to these securities at March 31, 2023.

State and municipal securities: The unrealized losses on 64 state and municipal securities were caused by normal market fluctuations. Fifty-six of these securities were in an unrealized loss position for 12 months or more. These securities are of high credit quality (rated AA- 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 concluded there were no credit losses related to these securities at March 31, 2023.

Corporate securities: The unrealized losses on 13 corporate securities were caused by normal market fluctuations and not credit deterioration. Seven of these securities were in an unrealized loss position for 12 months or more. One of these securities is rated Aaa by Moody's, and another is rated Baa2. The remaining eleven securities are not rated, and the Company conducts thorough internal quarterly credit reviews to assess ongoing financial strength including asset quality, capital and liquidity including independent evaluation of risk profiles. The contractual terms of these investments do not permit the issuer to settle the security at a price less than the amortized cost basis of the investment. 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 its amortized cost basis, which may be maturity, the Company concluded there were no credit losses related to these securities at  March 31, 2023.

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 concluded there were no credit losses related to restricted stock at March 31, 2023

Allowance for Credit Losses-Available for Sale Securities

As of March 31, 2023 and December 31, 2022, there were no allowances for credit losses-securities available for sale. The Company evaluated the portfolio for credit losses and determined it consists of securities with high credit ratings and/or are backed by the U. S. Government and has no history of losses, therefore, no allowance was required.

Realized Gains and Losses

The Company had net  proceeds from sales of AFS securities totaling $13.2 million for the three months ended March 31, 2023. Gross realized gains on sales for the period were $55 thousand, while gross realized losses were $123 thousand, which resulted in a net realized loss of $68 thousand. The Company did not have any sales of AFS securities during the three months ended  March 31, 2022.