Note 3 - Investment Securities

9 Months Ended

Sep. 30, 2025

Notes to Financial Statements

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

3. Investment Securities

Investments in debt securities are summarized as follows:

(dollars in thousands)	Amortized		Unrealized		Unrealized		Fair		Allowance for		Net Carrying
September 30, 2025	cost (1)		gains		losses		value		Credit Losses		Amount
Available for sale
State and municipal	$	455	$	-	$	3	$	452	$	-	$	452
SBA pools		542		1		4		539		-		539
Corporate bonds		7,047		-		719		6,328		-		6,328
Mortgage-backed securities		131,068		162		17,411		113,819		-		113,819
	$	139,112	$	163	$	18,137	$	121,138	$	-	$	121,138
Held to maturity
State and municipal	$	21,207	$	-	$	956	$	20,251	$	79	$	21,128

(dollars in thousands)	Amortized		Unrealized		Unrealized		Fair		Allowance for		Net Carrying
December 31, 2024	cost (1)		gains		losses		value		Credit Losses		Amount
Available for sale
State and municipal	$	500	$	-	$	13	$	487	$	-	$	487
SBA pools		634		1		6		629		-		629
Corporate bonds		8,054		-		869		7,185		-		7,185
Mortgage-backed securities		139,853		13		22,454		117,412		-		117,412
	$	149,041	$	14	$	23,342	$	125,713	$	-	$	125,713
Held to maturity
State and municipal	$	20,559	$	1	$	1,628	$	18,932	$	60	$	20,499

(1) Exluded from the amortized cost of securities available for sale are basis adjustments for securities designated in active fair value hedges. Basis adjustments totaled $222 thousand and ($556) thousand as of September 30, 2025 and December 31, 2024, respectively.

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation allowance that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to securities issued by states and political subdivisions, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Unrated bonds were underwritten similar to commercial loans and the financial condition of the issuer is monitored periodically. Expected credit losses on commercial loans are applied to unrated bonds. The duration of each bond is used as the remaining life in the calculation of expected credit losses.

The following table summarizes Moody's and/or Standard & Poor's bond ratings (the Company’s primary credit quality indicators) for our portfolio of held-to-maturity securities issued by states and political subdivisions as of September 30, 2025 and December 31, 2024 at amortized cost:

(dollars in thousands)	September 30, 2025		December 31, 2024
AAA	$	2,816	$	2,803
AA		12,443		12,603
A		1,202		1,811
Not rated		4,746		3,342
Total	$	21,207	$	20,559

Generally, the historical loss rates associated with securities having similar grades as those in our portfolio have not been significant. Furthermore, as of September 30, 2025, there were no past due principal or interest payments associated with these securities and none were on nonaccrual status.

The following table details activity in the allowance for credit losses on held-to-maturity securities for the three- and nine-month periods ended September 30, 2025 and 2024:

	Three Months			Nine Months		Three Months			Nine Months
	Ended			Ended		Ended			Ended
(dollars in thousands)	September 30, 2025			September 30, 2025		September 30, 2024			September 30, 2024
Beginning balance	$	81		$	60	$	127		$	36
Credit loss provision		(2	)		19		(90	)		1
Ending balance	$	79		$	79	$	37		$	37

Accrued interest receivable on available for sale securities totaled $281.1 thousand and $302.5 thousand as of September 30, 2025 and December 31, 2024, respectively, and accrued interest receivable on held to maturity securities totaled $120.2 thousand and $122.0 thousand as of September 30, 2025 and December 31, 2024, respectively.  Both are grouped in accrued interest receivable on the consolidated balance sheets.

Contractual maturities, shown below, will differ from actual maturities because borrowers and issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized		Fair		Amortized		Fair
September 30, 2025	cost (1)		value		cost		value
Within one year	$	250	$	250	$	181	$	181
Over one to five years		752		707		1,577		1,595
Over five to ten years		6,500		5,822		8,104		7,883
Over ten years		-		-		11,345		10,592
		7,502		6,779		21,207		20,251
Mortgage-backed securities and SBA pools, due in monthly installments		131,610		114,359		-		-
	$	139,112	$	121,138	$	21,207	$	20,251

(1) Exluded from the amortized cost of securities available for sale are basis adjustments for securities designated in active fair value hedges. Basis adjustments totaled $222 thousand as of September 30, 2025.

Securities with a carrying value of $21.5 million and $26.3 million as of September 30, 2025 and December 31, 2024, respectively, were pledged as collateral for borrowings, securities sold under repurchase agreements and other collateralized deposits.

During the three- and nine-month periods ended September 30, 2025, there were no sales of available for sale securities. The Bank settled a fair value hedge during the first quarter of 2025 which resulted in a gain of $94 thousand. There were no sales of available for sale securities during the three and nine- month periods ended September 30, 2024.

The following table sets forth the Company’s gross unrealized losses on a continuous basis for available for sale debt securities, by category and length of time.

(dollars in thousands)
September 30, 2025	Less than 12 months				12 months or more				Total
Description of investments	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
State and municipal	$	-	$	-	$	452	$	3	$	452	$	3
SBA pools		148		-		326		4		474		4
Corporate bonds		-		-		6,327		719		6,327		719
Mortgage-backed securities		9,059		89		89,099		17,322		98,158		17,411
Total	$	9,207	$	89	$	96,204	$	18,048	$	105,411	$	18,137

(dollars in thousands)
December 31, 2024	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
Description of investments	Fair value		losses		Fair value		losses		Fair value		losses
State and municipal	$	-	$	-	$	487	$	13	$	487	$	13
SBA pools		162		-		372		6		534		6
Corporate bonds		-		-		7,185		869		7,185		869
Mortgage-backed securities		22,141		552		91,991		21,902		114,132		22,454
Total	$	22,303	$	552	$	100,035	$	22,790	$	122,338	$	23,342

As of September 30, 2025, management did not have the intent to sell any of the securities before the recovery of cost and it is not more likely than not that the Company will be required to sell before the recovery of the amortized cost basis. The unrealized losses as of September 30, 2025 were due to increases in market interest rates over the yields available at the time the underlying securities were purchased as well as other market conditions for each particular security based upon the structure and remaining principal balance. The fair values of the investment securities are expected to recover as the securities approach their maturity dates or repricing dates or if market yields for such investments decline. Based on these factors, as of September 30, 2025, management believes that the unrealized losses detailed in the table above are temporary and, accordingly, none of these unrealized losses have been recognized in the Company’s consolidated statement of income.