10-Q 1 fxnc20240630_10q.htm FORM 10-Q fxnc20240630_10q.htm
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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

 

FORM 10-Q

 

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

or

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission File Number: 1-38874

 

first1nationalcorporationa09.jpg

 

 (Exact name of registrant as specified in its charter)

 

 

Virginia

54-1232965

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

112 West King Street, Strasburg, Virginia

22657

(Address of principal executive offices)

(Zip Code)

 

(540) 465-9121

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, par value $1.25 per share

FXNC

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

☐

  

Accelerated filer

 

☐

Non-accelerated filer

 

☒

  

Smaller reporting company

 

☒

 

 

 

  

Emerging growth company

 

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 9, 2024, 6,280,406 shares of common stock, par value $1.25 per share, of the registrant were outstanding.

 

 
Table of Contents

  

 

TABLE OF CONTENTS

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023

3

 

 

 

 

Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023 (unaudited)

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (unaudited)

6

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)

7

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)

9

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

11

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

 

 

 

Item 4.

Controls and Procedures

42

 

PART II – OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

43

 

 

 

Item 1A.

Risk Factors

43

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

 

 

 

Item 3.

Defaults Upon Senior Securities

44

 

 

 

Item 4.

Mine Safety Disclosures

44

 

 

 

Item 5.

Other Information

44

 

 

 

Item 6.

Exhibits

44
 

 

2
Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

FIRST NATIONAL CORPORATION

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

  

(unaudited)

     
  June 30,  December 31, 
  2024  2023* 

Assets

        

Cash and due from banks

 $16,729  $17,194 

Interest-bearing deposits in banks

  118,906   69,967 

Cash and cash equivalents

 $135,635  $87,161 

Securities available for sale, at fair value

  144,816   152,857 

Securities held to maturity, at amortized cost (net of allowance for credit losses, 2024, $109; 2023, $107)

  123,497   148,244 

Restricted securities, at cost

  2,112   2,078 

Loans, net of allowance for credit losses, 2024, $12,553; 2023, $11,974

  977,423   957,456 

Premises and equipment, net

  22,205   22,142 

Accrued interest receivable

  4,916   4,655 

Bank owned life insurance

  24,802   24,902 

Goodwill

  3,030   3,030 

Core deposit intangibles, net

  108   117 

Other assets

  18,984   16,653 

Total assets

 $1,457,528  $1,419,295 
         

Liabilities and Shareholders’ Equity

        
         

Liabilities

        

Deposits:

        

Noninterest-bearing demand deposits

 $397,770  $379,208 

Savings and interest-bearing demand deposits

  665,208   662,169 

Time deposits

  202,818   192,349 

Total deposits

 $1,265,796  $1,233,726 

Other borrowings

  50,000   50,000 

Subordinated debt, net of issuance cost

  4,998   4,997 

Junior subordinated debt

  9,279   9,279 

Accrued interest payable and other liabilities

  7,564   5,022 

Total liabilities

 $1,337,637  $1,303,024 
         

Commitments and contingencies

          
         

Shareholders’ Equity

        

Preferred stock, par value $1.25 per share; authorized 1,000,000 shares; none issued and outstanding

 $—  $— 

Common stock, par value $1.25 per share; authorized 8,000,000 shares; issued and outstanding, 2024, 6,280,406 shares; 2023, 6,263,102 shares

  7,851   7,829 

Surplus

  33,116   32,950 

Retained earnings

  97,966   94,198 

Accumulated other comprehensive loss, net

  (19,042)  (18,706)

Total shareholders’ equity

 $119,891  $116,271 

Total liabilities and shareholders’ equity

 $1,457,528  $1,419,295 

 

*Derived from audited consolidated financial statements.

 

See Notes to Consolidated Financial Statements

3
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FIRST NATIONAL CORPORATION

Consolidated Statements of Income (Unaudited)

(in thousands, except per share data)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

  

June 30,

  

June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Interest and Dividend Income

                

Interest and fees on loans

 $14,004  $11,886  $27,488  $23,398 

Interest on deposits in banks

  1,579   759   2,867   1,103 

Interest and dividends on securities:

                

Taxable interest

  1,134   1,306   2,358   2,645 

Tax-exempt interest

  306   307   611   613 

Dividends

  32   28   65   55 

Total interest and dividend income

 $17,055  $14,286  $33,389  $27,814 

Interest Expense

                

Interest on deposits

 $4,820  $3,402  $9,591  $5,618 

Interest on subordinated debt

  69   69   138   138 

Interest on junior subordinated debt

  66   67   134   134 

Interest on other borrowings

  606   3   1,182   3 

Total interest expense

 $5,561  $3,541  $11,045  $5,893 

Net interest income

 $11,494  $10,745  $22,344  $21,921 

Provision for credit losses

  400   100   1,400   100 

Net interest income after provision for credit losses

 $11,094  $10,645  $20,944  $21,821 

Noninterest Income

                

Service charges on deposit accounts

 $612  $683  $1,266  $1,329 

ATM and check card fees

  809   848   1,579   1,648 

Wealth management fees

  879   749   1,762   1,525 

Fees for other customer services

  178   220   373   416 

Brokered mortgage fees

  32   35   70   35 

Income from bank owned life insurance

  149   135   300   284 

Other operating income

  27   214   1,383   425 

Total noninterest income

 $2,686  $2,884  $6,733  $5,662 

Noninterest Expense

                

Salaries and employee benefits

 $5,839  $5,189  $11,710  $10,535 

Occupancy

  548   524   1,083   1,052 

Equipment

  691   571   1,282   1,158 

Marketing

  273   248   468   516 

Supplies

  115   147   231   295 

Legal and professional fees

  1,124   422   1,576   765 

ATM and check card expense

  368   425   729   825 

FDIC assessment

  203   212   380   318 

Bank franchise tax

  261   262   523   516 

Data processing expense

  163   252   409   454 

Amortization expense

  5   4   9   9 

Other real estate owned (income), net

  —   (219)  —   (216)

Net losses (gains) on disposal of premises and equipment

  —   —   49   (2)

Other operating expense

  1,069   1,121   2,097   2,133 

Total noninterest expense

 $10,659  $9,158  $20,546  $18,358 

 

See Notes to Consolidated Financial Statements

 

4
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FIRST NATIONAL CORPORATION

Consolidated Statements of Income (Unaudited)

(Continued)

(in thousands, except per share data)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

  

June 30,

  

June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Income before income taxes

 $3,121  $4,371  $7,131  $9,125 

Income tax expense

  679   866   1,480   1,771 

Net income

 $2,442  $3,505  $5,651  $7,354 

Earnings per common share

                

Basic

 $0.39  $0.56  $0.90  $1.17 

Diluted

 $0.39  $0.56  $0.90  $1.17 

 

See Notes to Consolidated Financial Statements

 

5
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FIRST NATIONAL CORPORATION

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

  

June 30,

  

June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Net income

 $2,442  $3,505  $5,651  $7,354 

Other comprehensive income (loss), net of tax,

                

Unrealized holding gains (losses) on available for sale securities, net of tax $56 and ($421) for the three months and ($274) and $155 for the six months ended June 30, 2024 and 2023, respectively

  211   (1,579)  (1,035)  583 

Amortization of unrealized holding losses on available-for-sale securities transferred to held to maturity, net of tax of $67 and $88 for the three months and $144 and $172 for the six months ended June 30, 2024 and 2023, respectively

  253   333   543   649 

Change in fair value of cash flow hedges, net of tax $3 and $29 for the three months and $41 and ($31) for the six months ended June 30, 2024 and 2023, respectively

  11   103   156   (120)

Total other comprehensive income (loss)

  475   (1,143)  (336)  1,112 

Total comprehensive income

 $2,917  $2,362  $5,315  $8,466 

 

See Notes to Consolidated Financial Statements

 

6
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FIRST NATIONAL CORPORATION

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

  

Six Months Ended

 
  June 30,  June 30, 
  2024  2023 

Cash Flows from Operating Activities

        

Net income

 $5,651  $7,354 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization of premises and equipment

  846   795 

Amortization of core deposit intangibles

  9   9 

Amortization of debt issuance costs

  1   1 

Provision for credit losses on loans

  1,424   45 

Provision for credit losses on securities held to maturity

  2   11 

(Recovery) provision for credit losses on unfunded commitments

  (26)  44 

Net (gain) on sale of other real estate owned

  —   (246)

Increase in cash value of bank owned life insurance

  (301)  (284)

Accretion of discounts and amortization of premiums on securities, net

  441   507 

Accretion of premium on time deposits

  (32)  (48)

Accretion of certain acquisition-related loan discounts, net

  (191)  (303)

Stock-based compensation

  202   407 

Excess tax benefits on stock-based compensation

  1   4 

Loss (gain) on disposal of premises and equipment, net

  49   (2)

Deferred income tax (benefit) expense

  (53)  274 

Changes in assets and liabilities:

        

(Increase) decrease in interest receivable

  (261)  295 

(Increase) in other assets

  (1,993)  (108)

Increase (decrease) in accrued interest payable and other liabilities

  2,567   (893)

Net cash provided by operating activities

 $8,336  $7,862 

Cash Flows from Investing Activities

        

Proceeds from maturities, calls, and principal payments of securities available for sale

 $6,318  $6,422 

Proceeds from maturities, calls, and principal payments of securities held to maturity

  25,405   4,220 

Purchases of securities held to maturity

  —   (2,091)

Net (purchase) redemption of restricted securities

  (34)  105 

Purchase of premises and equipment

  (958)  (475)

Proceeds from sale of premises and equipment

  —   2 

Proceeds from sale of other real estate owned

  —   385 

Proceeds from cash value of bank owned life insurance

  401   256 

Net (increase) in loans

  (21,200)  (10,187)

Net cash provided by (used in) investing activities

 $9,932  $(1,363)

 

See Notes to Consolidated Financial Statements

 

7
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FIRST NATIONAL CORPORATION

Consolidated Statements of Cash Flows (Unaudited)

(Continued)

(in thousands)

 

  

Six Months Ended

 
  June 30,  June 30, 
  2024  2023 

Cash Flows from Financing Activities

        

Net increase (decrease) in demand deposits and savings accounts

 $21,601  $(38,341)

Net increase in time deposits

  10,501   39,425 

Cash dividends paid on common stock, net of reinvestment

  (1,799)  (1,801)

Repurchase of common stock, stock incentive plan

  (98)  (113)

Repurchase of common stock, stock repurchase plan

  —   (507)

Net cash provided by (used in) financing activities

 $30,205  $(1,337)

Increase in cash and cash equivalents

 $48,473  $5,162 

Cash and Cash Equivalents

        

Beginning

 $87,161  $66,914 

Ending

 $135,634  $72,076 

Supplemental Disclosures of Cash Flow Information

        

Cash payments for:

        

Interest

 $10,999  $5,622 

Income taxes

 $1,230  $1,626 

Supplemental Disclosures of Noncash Investing and Financing Activities

        

Unrealized gains (losses) on securities available for sale

 $(1,309) $738 

Amortization of unrealized losses on securities transferred from available for sale to held to maturity

 $687  $— 

Change in fair value of cash flow hedges

 $197  $(151)

Issuance of common stock, dividend reinvestment plan

 $84  $80 

 

See Notes to Consolidated Financial Statements

 

8
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FIRST NATIONAL CORPORATION

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(in thousands, except share and per share data)

 

  

Common Stock

  

Surplus

  

Retained Earnings

  Accumulated Other Comprehensive (Loss)  

Total

 

Balance, March 31, 2023

 $7,851  $32,937  $91,239  $(20,216) $111,811 

Net income

  —   —   3,505   —   3,505 

Other comprehensive loss

  —   —   —   (1,143)  (1,143)

Cash dividends on common stock ($0.15 per share)

  —   —   (939)  —   (939)

Stock-based compensation

  —   69   —   —   69 

Issuance of 2,536 shares of common stock, dividend reinvestment plan

  3   36   —   —   39 

Repurchase of 32,301 shares of common stock, stock repurchase plan

  (41)  (441)  —   —   (482)

Balance, June 30, 2023

 $7,813  $32,601  $93,805  $(21,359) $112,860 

 

  

Common Stock

  

Surplus

  

Retained Earnings

  

Accumulated Other Comprehensive (Loss)

  

Total

 

Balance, March 31, 2024

 $7,847  $33,021  $96,465  $(19,517) $117,816 

Net income

  —   —   2,442   —   2,442 

Other comprehensive income

  —   —   —   475   475 

Cash dividends on common stock ($0.15 per share)

  —   —   (941)  —   (941)

Stock-based compensation

  —   60   —   —   60 

Issuance of 2,710 shares common stock, dividend reinvestment plan

  3   39   —   —   42 

Issuance of 500 shares common stock, stock incentive plan

  1   (1)  —   —   — 

Repurchase of 177 shares common stock, stock incentive plan

  —   (3)  —   —   (3)

Balance, June 30, 2024

 $7,851  $33,116  $97,966  $(19,042) $119,891

 

9
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FIRST NATIONAL CORPORATION

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(Continued)

(in thousands, except share and per share data)

 

 

  

Common Stock

  

Surplus

  

Retained Earnings

  

Accumulated Other Comprehensive (Loss)

  

Total

 

Balance, December 31, 2022

 $7,831  $32,716  $90,284  $(22,471) $108,360 

Adoption of new accounting standard (ASU 2016-13)

  —   —   (1,952)  —   (1,952)

Net income

  —   —   7,354   —   7,354 

Other comprehensive income

  —   —   —   1,112   1,112 

Cash dividends on common stock ($0.30 per share)

  —   —   (1,881)  —   (1,881)

Stock-based compensation

  —   407   —   —   407 

Issuance of 4,752 shares common stock, dividend reinvestment plan

  6   74   —   —   80 

Issuance of 21,302 shares common stock, stock incentive plan

  27   (27)  —   —   — 

Repurchase of 6,495 shares common stock, stock incentive plan

  (8)  (105)  —   —   (113)

Repurchase of 33,858 shares common stock, stock repurchase plan

  (43)  (464)  —   —   (507)

Balance, June 30, 2023

 $7,813  $32,601  $93,805  $(21,359) $112,860 

 

 

  

Common Stock

  

Surplus

  

Retained Earnings

  

Accumulated Other Comprehensive (Loss)

  

Total

 

Balance, December 31, 2023

 $7,829  $32,950  $94,198  $(18,706) $116,271 

Net income

  —   —   5,651   —   5,651 

Other comprehensive loss

  —   —   —   (336)  (336)

Cash dividends on common stock ($0.30 per share)

  —   —   (1,883)  —   (1,883)

Stock-based compensation

  —   202   —   —   202 

Issuance of 5,060 shares common stock, dividend reinvestment plan

  6   78   —   —   84 

Issuance of 16,762 shares common stock, stock incentive plan

  22   (22)  —   —   — 

Repurchase of 5,019 shares common stock, stock incentive plan

  (6)  (92)  —   —   (98)

Balance, June 30, 2024

 $7,851  $33,116  $97,966  $(19,042) $119,891 

 

See Notes to Consolidated Financial Statements

 

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FIRST NATIONAL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

 

 

Note 1. General

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of First National Corporation (the Company) and its subsidiary, First Bank (the Bank), have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and in accordance with guidance provided by the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for annual year-end financial statements. All significant intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications of a normal and recurring nature considered necessary to present fairly the financial positions at June 30, 2024 and December 31, 2023, the statements of income and comprehensive income for the six months ended June 30, 2024 and 2023, the cash flows for the six months ended June 30, 2024 and 2023, and the changes in shareholders’ equity for the three and  six months ended June 30, 2024 and 2023. The statements should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.  Certain items in the prior period financial statements have been reclassified to conform to the current presentation. These reclassifications had no effect on prior year net income or shareholders' equity.

 

Significant Accounting Policies and Estimates
 
Application of the principles of GAAP and practices within the banking industry requires management to make estimates, assumptions, and judgements that affect the amounts reported in the financial statements and accompanying notes.  These estimates, assumptions, and judgements are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions and judgements.  Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgements and as such may have a greater possibility of producing results that could be materially different than originally reported.    Material estimates that are particularly susceptible to significant changes in the near term include estimates related to the determination of the allowance for credit losses.
 
The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the audited financial statements and notes for the year ended December 31, 2023 and are contained in the Company’s 2023 Annual Report on Form 10-K. 
 
Business Combination
 

On March 25, 2024, the Company entered into an agreement to acquire Touchstone Bankshares, Inc. (Touchstone) for an aggregate purchase price of $47.0 million in stock. The financial position and results of operations of Touchstone are not reflected in the Company’s financial statements as of June 30, 2024. At the time of closing of the acquisition, Touchstone is expected to have twelve retail bank offices serving south-central Virginia and northern North Carolina, and an administrative office in Prince George, Virginia. The Company has received regulatory approvals from the Federal Reserve Bank of Richmond, acting under authority delegated by the Board of Governors of the Federal Reserve System, and the Bureau of Financial Institutions division of the State Corporation Commission of the Commonwealth of Virginia. The closing of the acquisition is subject to customary closing conditions, including shareholder approval.  As of June 30, 2024, Touchstone reported total assets of $662.7 million, gross loans of $500.6 million, and total deposits of $546.7 million.

 

In connection with the transaction, the Company expects to issue approximately 2.7 million shares of its common stock to the shareholders of Touchstone. Upon completion of the transaction, Touchstone Bank, which is Touchstone’s wholly owned banking subsidiary, is expected to be merged with and into First Bank. The acquisition will be accounted for as a business combination under ASC 805, Business Combinations. Under acquisition accounting, assets acquired and liabilities assumed are recorded at their acquisition date fair values, and any excess of the aggregate fair value of the net assets acquired over the purchase price is recognized as bargain purchase gain.

 

Recent Accounting Pronouncements

 

In March 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-01, “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards”. This ASU provides an illustrative example intended to demonstrate how entities that account for profits interest and similar awards would determine whether a profits interest award should be accounted for in accordance with Topic 718. This ASU is effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the annual period that includes that interim period. Transition can be done either retrospectively or prospectively. The Company does not expect the adoption of ASU 2024-01 to have a material impact on its (consolidated) financial statements.

 

In March 2024, the FASB issued ASU 2024-02, “Codification Improvements – Amendments to Remove References to the Concepts Statements”. This ASU contains amendments to the Codification that remove references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Statements to provide guidance in certain topical areas. This ASU is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively to all new transactions recognized on or after the date that the entity first applies the amendments or retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. If an entity adopts the amendments retrospectively, it should adjust the opening balance of retained earnings as of the beginning of the earliest comparative period presented. The Company does not expect the adoption of ASU 2024-02 to have a material impact on its (consolidated) financial statements.

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disa

ggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its (consolidated) financial statements.

 

 

Note 2. Securities

 

The Company invests in U.S. Treasury securities, U.S. agency and mortgage-backed securities, obligations of state and political subdivisions, and corporate debt securities. Amortized costs, gross unrealized gains and losses, allowance for credit losses, and fair values of debt securities at June 30, 2024 and December 31, 2023 were as follows (in thousands):

 

  

June 30, 2024

 
  

Amortized Cost

  

Gross Unrealized Gains

  

Gross Unrealized (Losses)

  

Fair Value

  

Allowance for Credit Losses

 

Securities available for sale:

                    

U.S. Treasury securities

 $12,480  $—  $(1,019) $11,461  $— 

U.S. agency and mortgage-backed securities

  90,869   52   (12,091)  78,830   — 

Obligations of states and political subdivisions

  63,377   2   (8,854)  54,525   — 

Total securities available for sale

 $166,726  $54  $(21,964) $144,816  $— 

Securities held to maturity:

                    

U.S. Treasury securities

 $19,404  $—  $(310) $19,094  $— 

U.S. agency and mortgage-backed securities

  89,911   —   (9,556)  80,355   — 

Obligations of states and political subdivisions

  11,291   27   (1,039)  10,279   (1)

Corporate debt securities

  3,000   —   (486)  2,514   (108)

Total securities held to maturity

 $123,606  $27  $(11,391) $112,242  $(109)

Total securities

 $290,332  $81  $(33,355) $257,058  $(109)

 

 

  

December 31, 2023

 
  

Amortized Cost

  

Gross Unrealized Gains

  

Gross Unrealized (Losses)

  

Fair Value

  

Allowance for Credit Losses

 

Securities available for sale:

                    

U.S. Treasury securities

 $12,476  $—  $(1,026) $11,450  $— 

U.S. agency and mortgage-backed securities

  96,937   55   (12,192)  84,800   — 

Obligations of states and political subdivisions

  64,045   6   (7,444)  56,607   — 

Total securities available for sale

 $173,458  $61  $(20,662) $152,857  $— 

Securities held to maturity:

                    

U.S. Treasury securities

 $39,085  $—  $(389) $38,696