Note 3 - Securities

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

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

Note 3. Securities

Available-for-Sale 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 March 31, 2024 and December 31, 2023:

	March 31, 2024
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
(in thousands)	Cost		Gains		Losses		Value
Available-for-sale debt securities:
U.S. treasuries	$	36,864	$	-	$	3,950	$	32,914
Obligations of state and political subdivisions		217,185		25		21,470		195,740
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		85,865		-		13,062		72,803
Collateralized mortgage obligations - commercial		3,604		-		234		3,370
Mortgage-backed securities		18,241		2		2,712		15,531
Private collateralized mortgage obligations		72,680		54		6,432		66,302
Corporate debt securities		35,050		-		3,486		31,564
Asset-backed securities		23,127		134		47		23,214
Negotiable certificates of deposit		744		-		62		682
Total available-for-sale debt securities	$	493,360	$	215	$	51,455	$	442,120

	December 31, 2023
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
(in thousands)	Cost		Gains		Losses		Value
Available-for-sale debt securities:
U.S. treasuries	$	36,852	$	-	$	3,675	$	33,177
Obligations of state and political subdivisions		220,181		52		20,437		199,796
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		87,405		-		13,198		74,207
Collateralized mortgage obligations - commercial		3,613		-		227		3,386
Mortgage-backed securities		18,872		4		2,430		16,446
Private collateralized mortgage obligations		76,912		78		6,838		70,152
Corporate debt securities		35,055		-		3,769		31,286
Asset-backed securities		21,768		67		145		21,690
Negotiable certificates of deposit		744		-		70		674
Total available-for-sale debt securities	$	501,402	$	201	$	50,789	$	450,814

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 March 31, 2024 and December 31, 2023.

The following table presents the maturity information of FNCB’s available-for-sale debt securities at March 31, 2024.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because collateralized mortgage obligations ("CMOs"), 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.

	March 31, 2024
	Amortized		Fair
(in thousands)	Cost		Value
Amounts maturing in:
One year or less	$	19,976	$	19,739
After one year through five years		74,125		68,842
After five years through ten years		90,604		78,344
After ten years		105,138		93,975
Collateralized mortgage obligations		162,149		142,475
Mortgage-backed securities		18,241		15,531
Asset-backed securities		23,127		23,214
Total available-for-sale debt securities	$	493,360	$	442,120

The following table presents the gross proceeds received, and gross realized gains and losses, on sales of available-for-sale debt securities for the three months ended March 31, 2024 and 2023. Gains and losses realized on sales of available-for-sale debt securities are included in non-interest income in the consolidated statements of income.

	Three Months Ended March 31,
(in thousands)	2024		2023
Available-for-sale debt securities:
Gross proceeds received on sales	$	-	$	7,054
Gross realized gains		-		162
Gross realized losses		-		-

The following tables present the number, fair value and gross unrealized losses of available-for-sale debt securities in an unrealized loss position at March 31, 2024 and December 31, 2023, aggregated by investment category and length of time the securities have been in an unrealized loss position.

	March 31, 2024
	Less than 12 Months						12 Months or Greater						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	$	32,914	$	3,950		17	$	32,914	$	3,950
Obligations of state and political subdivisions		-		-		-		192		193,356		21,470		192		193,356		21,470
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		-		-		-		42		72,803		13,062		42		72,803		13,062
Collateralized mortgage obligations - commercial		-		-		-		3		3,370		234		3		3,370		234
Mortgage-backed securities		-		-		-		12		15,440		2,712		12		15,440		2,712
Private collateralized mortgage obligations		5		4,551		23		51		56,630		6,409		56		61,181		6,432
Corporate debt securities		-		-		-		29		30,564		3,486		29		30,564		3,486
Asset-backed securities		-		-		-		8		6,057		47		8		6,057		47
Negotiable certificates of deposit		-		-		-		3		682		62		3		682		62
Total available-for-sale debt securities		5	$	4,551	$	23		357	$	411,816	$	51,432		362	$	416,367	$	51,455

	December 31, 2023
	Less than 12 Months						12 Months or Greater						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	$	33,177	$	3,675		17	$	33,177	$	3,675
Obligations of state and political subdivisions		1		2,121		16		193		195,153		20,421		194		197,274		20,437
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		-		-		-		42		74,207		13,198		42		74,207		13,198
Collateralized mortgage obligations - commercial		-		-		-		3		3,386		227		3		3,386		227
Mortgage-backed securities		1		3,800		54		12		12,552		2,376		13		16,352		2,430
Private collateralized mortgage obligations		3		5,670		131		52		58,846		6,707		55		64,516		6,838
Corporate debt securities		1		1,467		33		29		29,819		3,736		30		31,286		3,769
Asset-backed securities		2		3,482		15		10		9,660		130		12		13,142		145
Negotiable certificates of deposit		-		-		-		3		674		70		3		674		70
Total available-for-sale debt securities		8	$	16,540	$	249		361	$	417,474	$	50,540		369	$	434,014	$	50,789

Evaluation for Credit Impairment

Quarterly, or more frequently if market conditions warrant, management evaluates securities for impairment where there has been a decline in fair value of a security below its amortized cost basis to determine whether the decline in fair value has resulted from a credit loss, or if it is entirely the result of noncredit related factors. At March 31, 2024, there were 362 available-for-sale debt securities in an unrealized loss position. As part of its quarterly evaluation of these securities for impairment at March 31, 2024, management first determined that FNCB did not intend to sell, nor was it more likely than not that it would be required to sell, any security in an unrealized loss position prior to recovery of its amortized cost. Management then considered, among other things, the length of time a security’s fair value is less than its amortized cost, the severity of decline, any adverse conditions related to the security, an industry or geographic area, any adverse changes to the rating of any security by a rating agency, whether or not any issuer has failed to make contractual principal and interest payments, or if there are any indications that an issuer would not be able to make future contractual principal and interest payments. Management also 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. 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 March 31, 2024. Based on the results of its review and considering the attributes of these debt securities, management concluded that changes in the fair values of the securities were consistent with movements in market interest rates and spreads relative to when the securities were purchased and not due to the credit quality of the securities or issuers. Accordingly, management determined that FNCB was not required to establish an ACL on available-for-sale debt securities in an unrealized loss position at March 31, 2024.

Equity Securities

Included in equity securities with readily determinable fair values at March 31, 2024 and December 31, 2023 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 securities 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 three months ended March 31, 2024 and 2023.

	Three Months Ended March 31,
(in thousands)	2024			2023
Net losses recognized on equity securities	$	(413	)	$	(508	)
Less: net (losses) gains realized on equity securities sold		-			-
Unrealized losses on equity securities	$	(413	)	$	(508	)

Equity Securities without Readily Determinable Fair Values

At March 31, 2024 and  December 31, 2023, 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%. 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 value 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 March 31, 2024 and December 31, 2023. Based on the results of its assessment, management determined that no adjustment for impairment was required at March 31, 2024 and  December 31, 2023.

Restricted Stock

The following table presents FNCB's investment in restricted stock at March 31, 2024 and  December 31, 2023.  Restricted stock has limited marketability and is carried at cost. Management noted no indicators of impairment for the Federal Home Loan Bank ("FHLB") of Pittsburgh and Atlantic Community Bankers Bank stock at either  March 31, 2024 or  December 31, 2023.

	March 31,		December 31,
(in thousands)	2024		2023
Stock in Federal Home Loan Bank of Pittsburgh	$	9,354	$	8,804
Stock in Atlantic Community Bankers Bank		10		10
Total restricted securities, at cost	$	9,364	$	8,814