Note 2 - Investment Securities

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

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

Note 2. Investment Securities

Investment securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities and their approximate fair values at September 30, 2021 and December 31, 2020 follow:

(dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2021
Available for sale:
U.S. Government agencies	$	15,295	$	28	$	(84	)	$	15,239
Mortgage-backed securities		56,124		377		(795	)		55,706
Corporate securities		1,500		-		-			1,500
State and municipal securities		35,062		297		(382	)		34,977
	$	107,981	$	702	$	(1,261	)	$	107,422
December 31, 2020
Available for sale:
Mortgage-backed securities	$	15,212	$	472	$	-		$	15,684
Corporate securities		1,500		-		-			1,500
State and municipal securities		16,059		295		(31	)		16,323
	$	32,771	$	767	$	(31	)	$	33,507

Restricted equity securities totaled $2.2 million and $2.4 million at September 30, 2021 and December 31, 2020, respectively. Restricted equity securities consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”), CBB Financial Corp., Pacific Coast Bankers Bank, and the Federal Reserve Bank of Richmond, all of which are carried at cost. All of these entities are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Bank is required to hold that stock so long as it borrows from the FHLB. The Federal Reserve requires banks to purchase stock as a condition for membership in the Federal Reserve System. The Bank’s stock in CBB Financial Corp. and Pacific Coast Bankers Bank is restricted only in the fact that the stock may only be repurchased by the respective banks.

The following tables details unrealized losses and related fair values in the Company’s available for sale investment securities portfolios. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2021 and December 31, 2020.

	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2021
Available for sale:
U.S. Government agencies	$	10,927	$	(84	)	$	-	$	-		$	10,927	$	(84	)
Mortgage-backed securities		40,501		(795	)		-		-			40,501		(795	)
Corporate securities		-		-			-		-			-		-
State and municipal securities		15,762		(356	)		1,509		(26	)		17,271		(382	)
Total securities available for sale	$	67,190	$	(1,235	)	$	1,509	$	(26	)	$	68,699	$	(1,261	)
December 31, 2020
Available for sale:
U.S. Government agencies	$	-	$	-		$	-	$	-		$	-	$	-
Mortgage-backed securities		-		-			-		-			-		-
Corporate securities		-		-			-		-			-		-
State and municipal securities		3,694		(31	)		-		-			3,694		(31	)
Total securities available for sale	$	3,694	$	(31	)	$	-	$	-		$	3,694	$	(31	)

At September 30, 2021, 32 debt securities with unrealized losses had depreciated 1.80 percent from their total amortized cost basis. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, and the financial condition and near-term prospects of the issuer. The relative significance of these and other factors will vary on a case-by-case basis. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition and the issuer’s anticipated ability to pay the contractual cash flows of the investments. Since the Company intends to hold all of its investment securities until maturity, and it is more likely than not that the Company will not have to sell any of its investment securities before unrealized losses have been recovered, and the Company expects to recover the entire amount of the amortized cost basis of all its securities, none of the securities are deemed other than temporarily impaired at September 30, 2021. Management continues to monitor all of these securities with a high degree of scrutiny. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities are other than temporarily impaired, which could require a charge to earnings in such periods.

Proceeds from sales of investment securities available for sale were $8.62 million and $10.74 million for the nine-month periods ended September 30, 2021 and 2020 and $8.62 million and $2.94 million for the three-month periods ended September 30, 2021 and 2020, respectively. Gross proceeds from called securities totaled $500 thousand and $1.29 million for the nine-month periods ended September 30, 2021 and 2020, respectively. Gains and losses on the sale of investment securities are recorded on the trade date and are determined using the specific identification method. Gross realized gains and losses for the nine-month and three-month periods ended September 30, 2021 and 2020 are as follows:

	Nine Months Ended September 30				Three Months Ended September 30
(dollars in thousands)	2021		2020		2021		2020
Realized gains	$	265	$	315	$	265	$	103
Realized losses		-		-		-		-
	$	265	$	315	$	265	$	103

There were no securities transferred between the available for sale and held to maturity portfolios or other sales of held to maturity securities during the periods presented. In the future management may elect to classify securities as held to maturity based upon such considerations as the nature of the security, the Bank’s ability to hold the security until maturity, and general economic conditions.

The scheduled maturities of securities available for sale at September 30, 2021 were as follows:

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	2,810	$	2,847
Due after one year through five years		4,777		4,835
Due after five years through ten years		26,891		26,743
Due after ten years		73,503		72,997
	$	107,981	$	107,422

Maturities of mortgage-backed securities are based on contractual amounts. Actual maturity will vary as loans underlying the securities are prepaid.

Investment securities with amortized cost of approximately $23.2 million and $14.1 million at September 30, 2021 and December 31, 2020, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.