Securities

12 Months Ended

Dec. 31, 2023

Securities

Securities

NOTE 3: Securities

On January 1, 2023, the Corporation adopted ASC 326, which made changes to accounting for available for sale debt securities whereby credit losses should be presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity. In

addition, ASC 326 requires financial assets measured at amortized cost to measure an expected credit loss under the CECL methodology that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. All securities information presented as of December 31, 2023 is in accordance with ASC 326. All securities information presented as of December 31, 2022 or a prior date is presented in accordance with previously applicable GAAP. For further discussion on the Corporation’s accounting policies and policy elections related to the accounting standard update refer to Note 1 and Note 2.

The Corporation’s debt securities, all of which are classified as available for sale, are summarized as follows:

	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
U.S. Treasury securities	$	45,883	$	—	$	(780)	$	45,103
U.S. government agencies and corporations		96,407		—		(9,313)		87,094
Mortgage-backed securities		177,734		185		(16,223)		161,696
Obligations of states and political subdivisions		148,875		2,280		(4,044)		147,111
Corporate and other debt securities		25,193		—		(3,753)		21,440
	$	494,092	$	2,465	$	(34,113)	$	462,444

	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
U.S. Treasury securities	$	60,886	$	—	$	(2,053)	$	58,833
U.S. government agencies and corporations		143,241		—		(12,967)		130,274
Mortgage-backed securities		200,393		65		(20,540)		179,918
Obligations of states and political subdivisions		127,317		300		(6,790)		120,827
Corporate and other debt securities		25,291		—		(2,552)		22,739
	$	557,128	$	365	$	(44,902)	$	512,591

The amortized cost and estimated fair value of securities at December 31, 2023 and 2022, by the earlier of contractual maturity or expected maturity, are shown below. The Corporation has elected to exclude accrued interest receivable, totaling $2.73 million at December 31, 2023, from the amortized cost basis of securities. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	December 31, 2023
	Amortized
(Dollars in thousands)	Cost		Fair Value
Due in one year or less	$	113,791	$	110,669
Due after one year through five years		181,243		166,910
Due after five years through ten years		118,265		105,879
Due after ten years		80,793		78,986
	$	494,092	$	462,444

The following table presents the gross realized gains and losses on and the proceeds from the sales, maturities and calls of securities. There were no sales of securities during the years ended December 31, 2023 and 2022. During the year ended December 31, 2021, $2.30 million of proceeds were related to sales of securities.  

	Year Ended December 31,
(Dollars in thousands)	2023		2022		2021
Realized gains from sales, maturities and calls of securities:
Gross realized gains	$	—	$	—	$	42
Gross realized losses		(5)		—		—
Net realized losses	$	(5)	$	—	$	42
Proceeds from sales, maturities, calls and paydowns of securities	$	100,812	$	55,328	$	114,019

The Corporation pledges securities primarily to secure municipal deposits, repurchase agreements and lines of credit that provide liquidity to the Corporation and C&F Bank. Securities with an aggregate amortized cost of $215.97 million and an aggregate fair value of $198.85 million were pledged at December 31, 2023. Securities with an aggregate amortized cost of $237.15 million and an aggregate fair value of $213.58 million were pledged at December 31, 2022.

Securities in an unrealized loss position at December 31, 2023, by duration of the period of the unrealized loss, are shown below.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury securities	$	—		—	$	45,103	$	780	$	45,103	$	780
U.S. government agencies and corporations		—		—		87,094		9,313		87,094		9,313
Mortgage-backed securities		5,528		68		150,023		16,155		155,551		16,223
Obligations of states and political subdivisions		4,659		72		65,630		3,972		70,289		4,044
Corporate and other debt securities		3,386		364		18,054		3,389		21,440		3,753
Total temporarily impaired securities	$	13,573	$	504	$	365,904	$	33,609	$	379,477	$	34,113

There were 492 debt securities with a fair value below the amortized cost basis, totaling $379.48 million of aggregate fair value as of December 31, 2023. The Corporation concluded that a credit loss did not exist in its securities portfolio at December 31, 2023, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Corporation intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Corporation will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Corporation’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. government-sponsored enterprises.  Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.   

Securities in an unrealized loss position at December 31, 2022, by duration of the period of the unrealized loss, are shown below.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. Treasury securities	$	50,556	$	1,368	$	8,277	$	685	$	58,833	$	2,053
U.S. government agencies and corporations		71,948		1,578		58,326		11,389		130,274		12,967
Mortgage-backed securities		73,301		5,441		104,563		15,099		177,864		20,540
Obligations of states and political subdivisions		60,838		2,434		32,120		4,356		92,958		6,790
Corporate and other debt securities		15,049		1,702		6,681		850		21,730		2,552
Total temporarily impaired securities	$	271,692	$	12,523	$	209,967	$	32,379	$	481,659	$	44,902

The Corporation’s investment in restricted stock totaled $2.93 million at December 31, 2023 and consisted of FHLB stock.  Restricted stock is generally viewed as a long-term investment, which is carried at cost because there is no market for the stock other than the FHLBs. Therefore, when evaluating restricted stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing any temporary decline in value. The Corporation did not consider its investment in restricted stock to be impaired at December 31, 2023 and no impairment has been recognized.