Note 3 - Securities

12 Months Ended

Dec. 31, 2023

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 estimated fair value of investments in securities at December 31, 2023 and 2022 were as follows (dollars in thousands):

	December 31, 2023
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available for sale:
U.S. Treasury	$	131,731	$	—	$	7,964	$	123,767
Federal agencies and GSEs		76,702		3		4,472		72,233
Mortgage-backed and CMOs		292,590		1		35,827		256,764
State and municipal		45,999		—		3,577		42,422
Corporate		30,812		—		4,479		26,333
Total securities available for sale	$	577,834	$	4	$	56,319	$	521,519

The Company had no equity securities at December 31, 2023 or  December 31, 2022.

(Dollars in thousands)	December 31, 2022
	Amortized		Unrealized		Unrealized
	Cost		Gains		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 amortized cost and estimated fair value of investments in debt securities at December 31, 2023, by contractual maturity, are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because mortgage-backed securities have both known principal repayment terms as well as unknown principal repayments due to potential borrower pre-payments, it is difficult to accurately predict the final maturity of these investments. Mortgage-backed securities are shown separately (dollars in thousands):

	Available for Sale
	Amortized
	Cost		Fair Value
Due in one year or less	$	66,221	$	64,528
Due after one year through five years		155,815		144,776
Due after five years through ten years		52,229		45,302
Due after ten years		10,979		10,148
Mortgage-backed and CMOs		292,590		256,765
	$	577,834	$	521,519

Gross realized gains and losses on, and the proceeds from the sale of, securities available for sale were as follows (dollars in thousands):

	For the Year Ended December 31,
	2023			2022		2021
Gross realized gains	$	55		$	—	$	35
Gross realized losses		(123	)		—		—
Proceeds from sales of securities		13,180			—		561

Securities with a carrying value of approximately $202.0 million and $118.9 million at December 31, 2023 and 2022, respectively, were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. FHLB letters of credit were used as additional collateral in the amounts of $210.0 million at December 31, 2023 and $170.0 million at December 31, 2022.

Unrealized Losses on Securities

The following table shows estimated fair value and gross unrealized losses for which an ACL has not been recorded, aggregated by category and length of time that securities have been in a continuous unrealized loss position, at December 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 December 31, 2023, were as follows (dollars in thousands):

	Total				Less than 12 Months				12 Months or More
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury	$	123,767	$	7,964	$	—	$	—	$	123,767	$	7,964
Federal agencies and GSEs		71,975		4,472		210		—		71,765		4,472
Mortgage-backed and CMOs		256,615		35,827		111		2		256,504		35,825
State and municipal		42,377		3,577		1,621		15		40,756		3,562
Corporate		26,333		4,479		1,506		194		24,827		4,285
Total	$	521,067	$	56,319	$	3,448	$	211	$	517,619	$	56,108

U.S. Treasury: The unrealized losses on the Company's investment in 19 U.S. Treasury securities were caused by normal market fluctuations. Nineteen 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 bases 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 bases, which may be maturity, the Company concluded there were no credit related losses at December 31, 2023.

Federal agencies and GSEs: The unrealized losses on the Company's investment in 38 government sponsored entities ("GSEs") 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 bases 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 bases, which may be maturity, the Company concluded there were no credit related losses at December 31, 2023.

Mortgage-backed securities: The unrealized losses on the Company's investment in 131 GSE mortgage-backed securities were caused by normal market fluctuations. One hundred twenty-one 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 bases 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 bases, which may be maturity, the Company concluded there were no credit related losses at December 31, 2023.

Collateralized Mortgage Obligations: The unrealized losses associated with 53 GSE collateralized mortgage obligations ("CMOs") were due to normal market fluctuations. All 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 bases 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 its amortized cost bases, which may be maturity, the Company concluded there were no credit related losses at December 31, 2023.

State and municipal securities: The unrealized losses on 59 state and municipal securities were caused by normal market fluctuations. Fifty-seven of these securities were in an unrealized loss position for 12 months or more. These securities are of high credit quality (rated A- or higher), and principal and interest payments have been made timely. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases 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 bases, which may be maturity, the Company concluded there were no credit related losses at December 31, 2023.

Corporate securities: The unrealized losses on 12 corporate securities were caused by normal market fluctuations and not credit deterioration. All of these securities were in an unrealized loss position for 12 months or more. These securities are not rated, but the Company conducted thorough internal credit reviews prior to purchase and conducts ongoing quarterly reviews of these companies as well, and the Company's analysis did not indicate the existence of credit loss. The contractual terms of these 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 at December 31, 2023.

Due to restrictions placed upon the Bank's common stock investment in the Federal Reserve Bank of Richmond and FHLB, these securities have been classified as restricted equity securities and carried at cost. These 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 sheet. Restricted equity securities consist of Federal Reserve Bank of Richmond stock in the amount of $6.6 million and $6.5 million as of  December 31, 2023 and 2022 respectively, and FHLB stock in the amount of $4.0 million and $6.1 million as of December 31, 2023 and 2022, respectively.

Allowance for Credit Losses-Available for Sale Securities

As of  December 31, 2023 and 2022, there were no allowances for credit losses-securities available for sale. The Company does not believe that the AFS debt securities that were in an unrealized loss position as of December 31, 2023, which were comprised of 312 individual securities, represent a credit loss impairment. As of December 31, 2023 and 2022, the gross unrealized loss positions were primarily related to mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as "risk free," and have a long history of zero credit losses. Total gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

Realized Gains and Losses

Net proceeds from sales of AFS securities for the year ended December 31, 2023 totaled $13.2 million. Gross realized gains on these sales 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 year ended December 31, 2022 and recorded realized gains of $35 thousand for the year ended December 31, 2021.

The table below shows gross unrealized losses and fair value, 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		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		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