Note 3 - Securities

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

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

Note 3. SECURITIES

Debt Securities

The following tables present the amortized cost, gross unrealized gains and losses, and the fair value of FNCB’s available-for-sale debt securities at December 31, 2022 and 2021:

	December 31, 2022
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
(in thousands)	Cost		Gains		Losses		Value
Available-for-sale debt securities:
U.S. Treasury	$	36,801	$	-	$	4,667	$	32,134
Obligations of state and political subdivisions		250,244		90		29,552		220,782
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		93,577		-		13,170		80,407
Collateralized mortgage obligations - commercial		3,649		-		320		3,329
Mortgage-backed securities		23,332		1		2,670		20,663
Private collateralized mortgage obligations		80,648		-		8,141		72,507
Corporate debt securities		33,630		-		2,958		30,672
Asset-backed securities		15,287		5		351		14,941
Negotiable certificates of deposit		744		-		88		656
Total available-for-sale debt securities	$	537,912	$	96	$	61,917	$	476,091

	December 31, 2021
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
(in thousands)	Cost		Gains		Losses		Value
Available-for-sale debt securities:
U.S. Treasury	$	36,751	$	1	$	397	$	36,355
Obligations of state and political subdivisions		235,489		9,651		768		244,372
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		101,321		1,158		1,769		100,710
Collateralized mortgage obligations - commercial		3,685		87		45		3,727
Mortgage-backed securities		25,467		263		224		25,506
Private collateralized mortgage obligations		68,137		60		1,032		67,165
Corporate debt securities		31,300		940		177		32,063
Asset-backed securities		11,907		42		17		11,932
Negotiable certificates of deposit		744		-		8		736
Total available-for-sale debt securities	$	514,801	$	12,202	$	4,437	$	522,566

Except for securities of U.S. government and government-sponsored agencies, there were no securities of any individual issuer that exceeded 10.0% of shareholders’ equity at December 31, 2022 or 2021.

The following table presents the maturity information of FNCB’s available-for-sale debt securities at December 31, 2022. Expected maturities will differ from contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because collateralized mortgage obligations, mortgage-backed securities and asset-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

	December 31, 2022
	Amortized		Fair
(in thousands)	Cost		Value
Available -for-sale debt securities:
Amounts maturing in:
One year or less	$	17,709	$	17,535
After one year through five years		65,344		61,839
After five years through ten years		112,971		97,101
After ten years		125,395		107,769
Collateralized mortgage obligations		177,874		156,243
Mortgage-backed securities		23,332		20,663
Asset-backed securities		15,287		14,941
Total	$	537,912	$	476,091

The following table presents the gross proceeds received and gross realized gains and losses on the sale and redemption of available-for-sale debt securities for the years ended December 31, 2022 and 2021:

	Year Ended December 31,
(in thousands)	2022			2021
Available-for-sale debt securities:
Gross proceeds received on sales	$	14,004		$	2,981
Gross proceeds received on redemption		-			1,000
Gross realized gains on sales		78			213
Gross realized losses on sales		(301	)		-

The following tables present the number, fair value and gross unrealized losses of available-for-sale debt securities in an unrealized loss position at  December 31, 2022 and 2021, aggregated by investment category and length of time the securities have been in an unrealized loss position:

	December 31, 2022
	Less than 12 Months						12 Months or Longer						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
U.S. Treasuries		-	$	-	$	-		17	$	32,134	$	4,667		17	$	32,134	$	4,667
Obligations of state and political subdivisions		128		146,932		12,751		94		69,872		16,801		222		216,804		29,552
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		16		26,826		3,407		26		53,581		9,763		42		80,407		13,170
Collateralized mortgage obligations - commercial		2		1,911		94		1		1,418		226		3		3,329		320
Mortgage-backed securities		7		8,569		219		7		11,998		2,451		14		20,567		2,670
Private collateralized mortgage obligations		29		27,705		1,213		28		42,819		6,928		57		70,524		8,141
Corporate debt securities		18		21,325		1,805		11		9,347		1,153		29		30,672		2,958
Asset-backed securities		5		7,295		179		5		3,988		172		10		11,283		351
Negotiable certificates of deposit		-		-		-		3		656		88		3		656		88
Total		205	$	240,563	$	19,668		192	$	225,813	$	42,249		397	$	466,376	$	61,917

	December 31, 2021
	Less than 12 Months						12 Months or Longer						Total
	Number				Gross		Number				Gross		Number				Gross
	of		Fair		Unrealized		of		Fair		Unrealized		of		Fair		Unrealized
(dollars in thousands)	Securities		Value		Losses		Securities		Value		Losses		Securities		Value		Losses
U.S. Treasuries		16	$	35,394	$	397		-	$	-	$	-		16	$	35,394	$	397
Obligations of state and political subdivisions		41		36,107		702		2		1,257		66		43		37,364		768
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		20		58,848		1,530		2		5,713		239		22		64,561		1,769
Collateralized mortgage obligations - commercial		1		1,632		45		-		-		-		1		1,632		45
Mortgage-backed securities		6		14,585		204		1		1,596		20		7		16,181		224
Private collateralized mortgage obligations		22		44,425		897		3		6,213		135		25		50,638		1,032
Corporate debt securities		9		7,643		107		2		2,180		70		11		9,823		177
Asset-backed securities		4		3,810		14		2		1,293		3		6		5,103		17
Negotiable certificates of deposit		3		736		8		-		-		-		3		736		8
Total		122	$	203,180	$	3,904		12	$	18,252	$	533		134	$	221,432	$	4,437

Management evaluates individual securities in an unrealized loss position quarterly for OTTI. As part of its evaluation, management considers, among other things, the length of time a security’s fair value is less than its amortized cost, the severity of decline, any credit deterioration of the issuer, whether or not management intends to sell the security, and whether it is more likely than not that FNCB will be required to sell the security prior to recovery of its amortized cost.

Management performed a review of all securities in an unrealized loss position as of December 31, 2022 and determined that changes in the fair values of the securities were consistent with movements in market interest rates and spreads or general market conditions. In addition, as part of its review, management noted that there was no material change in the credit quality of any of the issuers or any other event or circumstance that may cause a significant adverse effect on the fair value of these securities. Moreover, to date, FNCB has received all scheduled principal and interest payments and expects to fully collect all future contractual principal and interest payments on all securities in an unrealized loss position at December 31, 2022. FNCB does not intend to sell the securities, nor is it more likely than not that it will be required to sell the securities, prior to recovery of their amortized cost. Based on the results of its review and considering the attributes of these debt securities, management concluded that the individual unrealized losses were temporary and OTTI did not exist at  December 31, 2022. 

Equity Securities 

Included in equity securities with readily determinable fair values at December 31, 2022 and December 31, 2021 were investments in the common or preferred stock of publicly traded bank holding companies and an investment in a mutual fund comprised of 1-4 family residential mortgage-backed security collateralized by properties within FNCB's market area. Equity securities with readily determinable fair values are reported at fair value with net unrealized gains and losses recognized in the consolidated statements of income.

The following table presents unrealized and realized gains and losses recognized in net income on equity securities for the years ended  December 31, 2022 and 2021:

	Year Ended December 31,
(in thousands)	2022			2021
Net (loss) gain recognized on equity securities	$	(34	)	$	701
Less: net gains recognized on equity securities sold/acquired		118			-
Unrealized (loss) gain recognized on equity securities	$	(152	)	$	701

Equity Securities and Equity Securities without Readily Determinable Fair Value

At December 31, 2022 and December 31, 2021, equity securities without readily determinable fair values consisted of a $500 thousand investment in a fixed-rate, non-cumulative perpetual preferred stock of a privately-held bank holding company, which is included in other assets in the consolidated statement of financial condition. The preferred stock pays quarterly dividends at an annual rate of 8.25%, which commenced on March 30, 2021. The preferred stock of this bank holding company is not traded on any established market and is accounted for as an equity security without a determinable fair value. Under GAAP, an equity security without a readily determinable fair value shall be written down to its fair values if a qualitative assessment indicates that the investment is impaired, and the fair value of the investment is less than its carrying value. As part of its qualitative assessment, management engaged an independent third party to provide valuations of this investment as of December 31, 2022 and 2021, which indicated that the investment was not impaired. Accordingly, management determined that no adjustment for impairment was required at December 31, 2022 and December 31, 2021.

Restricted Stock

The following table presents FNCB's investment in restricted securities at  December 31, 2022 and 2021. Restricted securities have limited marketability and are carried at cost. Management noted no indicators of impairment for FHLB of Pittsburgh or ACBB stock at December 31, 2022 and 2021:

	December 31,
(in thousands)	2022		2021
Stock in Federal Home Loan Bank of Pittsburgh	$	8,535	$	1,901
Stock in Atlantic Community Bankers Bank		10		10
Total restricted securities, at cost	$	8,545	$	1,911