NOTE 5 – SECURITIES

Available for Sale

The amortized cost and fair value of securities available for sale as of December 31, 2019 and 2018 are summarized as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
December 31, 2019
U.S. government agencies	$	8,758	$	5	$	(84)	$	8,679
U.S. government-sponsored enterprises		54,338		—		(1,089)		53,249
State and political subdivisions		31,501		938		(225)		32,214
Mortgage-backed securities -
U.S. government-sponsored enterprises		81,449		1,198		(178)		82,469
Private mortgage-backed securities		22,110		368		(33)		22,445
Corporate Debt		13,019		113		(7)		13,125
	$	211,175	$	2,622	$	(1,616)	$	212,181
December 31, 2018
U.S. government agencies	$	25,161	$	4	$	(371)	$	24,794
U.S. government-sponsored enterprises		20,404		38		(80)		20,362
State and political subdivisions		60,457		445		(540)		60,362
Mortgage-backed securities -
U.S. government-sponsored enterprises		74,670		100		(1,157)		73,613
Corporate Debt		3,000		8		—		3,008
	$	183,692	$	595	$	(2,148)	$	182,139

Securities with a carrying value of approximately $4.3 million and $2.5 million at December 31, 2019 and 2018, respectively, were pledged to secure public deposits and for borrowings at the Federal Reserve Bank as required or permitted by applicable laws and regulations.

The amortized cost and fair value of securities available for sale at December 31, 2019 are shown below by contractual maturity. Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments which pay principal on a periodic basis are not included in the maturity categories.


	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	—	$	—
Due after one year through five years		—		—
Due after five years through ten years		12,932		13,167
Due after ten years		31,588		32,172
Total bonds and obligations		44,520		45,339
U.S. government agencies		8,758		8,679
U.S. government-sponsored enterprises		54,338		53,249
Mortgage-backed securities:
U.S. government-sponsored enterprises		81,449		82,469
Private mortgage-backed securities (1)		22,110		22,445
Total available for sale securities	$	211,175	$	212,181

(1) Private mortgage-backed securities are non-industry specific

Gross gains on sales of securities available for sale were $2.1 million and $46 thousand and gross losses were $393 thousand and $10 thousand for the years ended December 31, 2019 and 2018, respectively.

Temporarily Impaired Securities

The following table shows our investments’ gross unrealized losses and fair values with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by investment category and length of time that individual available for sale securities have been in a continuous unrealized loss position, at December 31, 2019 and 2018.


	Less Than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
December 31, 2019
U.S. government agencies	$	—	$	—	$	5,966	$	(84)	$	5,966	$	(84)
U.S. government-sponsored enterprises		44,110		(770)		9,139		(319)		53,249		(1,089)
State and political subdivisions		17,421		(225)		—		—		17,421		(225)
Mortgage-backed securities -
U.S. government-sponsored enterprises		17,205		(113)		4,973		(65)		22,178		(178)
Private mortgage-backed securities		6,973		(33)		—		—		6,973		(33)
Corporate Debt		2,142		(7)		—		—		2,142		(7)
Total temporarily impaired securities	$	87,851	$	(1,148)	$	20,078	$	(468)	$	107,929	$	(1,616)
December 31, 2018
U.S. government agencies	$	18,998	$	(316)	$	2,593	$	(55)	$	21,591	$	(371)
U.S. government-sponsored enterprises		10,348		(80)		—		—		10,348		(80)
State and political subdivisions		17,164		(204)		18,785		(336)		35,949		(540)
Mortgage-backed securities -
U.S. government-sponsored enterprises		30,547		(271)		28,773		(886)		59,320		(1,157)
Total temporarily impaired securities	$	77,057	$	(871)	$	50,151	$	(1,277)	$	127,208	$	(2,148)

As of December 31, 2019, we reviewed our investment portfolio for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security. The intent and likelihood of sale of debt securities is evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. For each security (including but not limited to those whose fair value is less than their amortized cost basis), a review is conducted to determine if an other-than-temporary impairment has occurred.

U.S. Government Agencies

At December 31, 2019 and 2018, the decline in fair value and the unrealized losses for our U.S. government agencies securities were primarily due to changes in spreads and market conditions and not credit quality. At December 31, 2019, there were six securities with a fair value of $6.0 million that had an unrealized loss that amounted to $84 thousand. As of December 31, 2019, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of the U.S. government agency securities at December 31, 2019, were deemed to be other-than-temporarily impaired.

At December 31, 2018, there were eighteen securities with a fair value of $21.6 million that had an unrealized loss that amounted to $371 thousand.

U.S. Government Sponsored Agencies

At December 31, 2019, the decline in fair value and the unrealized losses for our U.S. government sponsored agencies securities were primarily due to changes in spreads and market conditions and not credit quality. At December 31, 2019, there were 26 securities with a fair value of $53.2 million that had an unrealized loss that amounted to $1.1 million. As of December 31, 2019, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of the U.S. government sponsored agency securities at December 31, 2019, were deemed to be other-than-temporarily impaired.

At December 31, 2018, there were six securities with a fair value of $10.3 million that had an unrealized loss that amounted to $80 thousand.

State and Political Subdivisions

At December 31, 2019 and 2018, the decline in fair value and the unrealized losses for our state and political subdivisions securities were caused by changes in interest rates and spreads and were not the result of credit quality. At December 31, 2019, there were fourteen securities with a fair value of $17.4 million that had an unrealized loss that amounted to $225 thousand. These securities typically have maturity dates greater than 10 years and the fair values are more sensitive to changes in market interest rates. As of December 31, 2019, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of our state and political subdivision securities at December 31, 2019, were deemed to be other-than-temporarily-impaired.

At December 31, 2018, there were 34 securities with a fair value of $35.9 million that had an unrealized loss of $540 thousand.

Mortgage-Backed Securities – U.S. government-sponsored enterprises

At December 31, 2019 and 2018, the decline in fair value and the unrealized losses for our mortgaged-backed securities guaranteed by U.S. government-sponsored enterprises were primarily due to changes in spreads and market conditions and not credit quality. At December 31, 2019, there were 13 securities with a fair value of $22.2 million that had an unrealized loss of $178 thousand. As of December 31, 2019, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of our mortgage-backed securities at December 31, 2019, were deemed to be other-than-temporarily impaired.

At December 31, 2018, there were 38 securities with a fair value of $59.3 million that had an unrealized loss of $1.2 million.

Mortgage-Backed Securities – Private mortgage-backed securities

At December 31, 2019, the decline in fair value and the unrealized losses for our private mortgaged-backed securities were primarily due to changes in spreads and market conditions and not credit quality. At December 31, 2019, there were three securities with a fair value of $7.0 million that had an unrealized loss of $33 thousand. As of December 31, 2019, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of our mortgage-backed securities at December 31, 2019, were deemed to be other-than-temporarily impaired.

There were no Mortgage-Backed Securities – Private mortgage-backed securities as of December 31, 2018.

Corporate Debt

At December 31, 2019, there was one security with a fair value of $2.1 million that had an unrealized loss of $7 thousand. These securities typically have maturity dates greater than 5 years and the fair values are more sensitive to changes in market interest rates. As of December 31, 2019, we did not intend to sell and it was more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of our corporate debt securities at December 31, 2019, were deemed to be OTTI.

At December 31, 2018, there were no securities with an unrealized loss.

Held to Maturity Securities

The amortized cost and fair value of securities held to maturity as of December 31, 2019 and 2018 are summarized as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
December 31, 2019
State and political subdivisions	$	4,012	$	71	$	—	$	4,083
December 31, 2018
State and political subdivisions	$	4,078	$	74	$	—	$	4,152

During the twelve months ended December 31, 2019 and 2018, the Company did not sell any securities out of its held to maturity portfolio.

The amortized cost and fair value of securities held to maturity at December 31, 2019 are shown below by contractual maturity. Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in one year or less	$	1,490	$	1,490
Due after one year through five years		1,505		1,537
Due after five years through ten years		1,017		1,056
Due after ten years		—		—
Total held to maturity securities	$	4,012	$	4,083

Temporarily Impaired Securities

For each security whose fair value is less than its amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred. As of December 31, 2019, there were no securities that had an unrealized loss. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near- term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security. The intent and likelihood of sale of debt securities is evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other- than-temporary impairment has occurred.

At December 31, 2018, there were no held to maturity securities with an unrealized loss.