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NOTE 3 - SECURITIES

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

NOTE 3 - SECURITIES

NOTE 3 - SECURITIES

The composition of securities is as follows:

(in thousands)		Amortized cost basis				Gross un- realized gains				Gross un- realized losses				Fair value
December 31, 2020
Available-for-sale
U.S. Government Agency notes		$	7,735			$	153			$	37			$	7,851
Municipal bonds			25,831				1,787				1				27,617
Mortgage-backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises			35,240				1,376				43				36,573
Collateralized mortgage obligations:
U.S. Government agencies			17,054				400				-				17,454
Corporate bonds			8,750				166				-				8,916
Total securities available-for-sale		$	94,610			$	3,882			$	81			$	98,411
CRA mutual fund														$	917
Non-marketable securities
Federal Home Loan Bank of Boston stock		$	1,713			$	-			$	-			$	1,713

(in thousands)		Amortized cost basis				Gross un- realized gains				Gross un- realized losses				Fair value
December 31, 2019
Available-for-sale
U.S. Government Agency notes		$	4,520			$	125			$	1			$	4,644
Municipal bonds			26,562				704				73				27,193
Mortgage-backed securities:
U.S. Government agencies and U.S. Government sponsored enterprises			28,961				420				24				29,357
Collateralized mortgage obligations:
U.S. Government agencies			25,041				468				10				25,499
Corporate bonds			5,000				108				-				5,108
Total securities available-for-sale		$	90,084			$	1,825			$	108			$	91,801
CRA mutual fund														$	882
Non-marketable securities
Federal Home Loan Bank of Boston stock		$	3,242			$	-			$	-			$	3,242

Sales of securities available-for-sale and gross gains and gross losses realized are as follows:

Years ended December 31, (in thousands)			2020				2019				2018
Proceeds		$	15,589			$	41,814			$	10,036
Gains realized			293				371				361
Losses realized			(97	)			(108	)			(43	)
Net gains realized			196				263				318
Income tax provision			41				55				67

The following table summarizes the aggregate fair value and gross unrealized loss of securities that have been in a continuous unrealized loss position as of the dates presented:


		Less than 12 Months								12 Months or Longer								Total
December 31, 2020 (in thousands)		Fair value				Unrealized losses				Fair value				Unrealized losses				Fair Value				Unrealized losses
Available-for-sale
U.S. Government Agency notes		$	2,553			$	36			$	20			$	1			$	2,573			$	37
Municipal bonds			558				1				-				-				558				1
Mortgage- backed securities:
U.S. Government agencies and U.S. Government - sponsored enterprises			3,761				42				45				1				3,806				43
Total temporarily impaired securities		$	6,872			$	79			$	65			$	2			$	6,937			$	81


		Less than 12 Months								12 Months or Longer								Total
December 31, 2019 (in thousands)		Fair value				Unrealized losses				Fair value				Unrealized losses				Fair Value				Unrealized losses
Available-for-sale
U.S. Government Agency notes		$	-			$	-			$	195			$	1			$	195			$	1
Municipal bonds			6,273				73				-				-				6,273				73
Mortgage- backed securities:
U.S. Government agencies and U.S. Government - sponsored enterprises			5,781				22				704				2				6,485				24
Collateralized mortgage obligations:
U.S. Government Agencies			1,438				10				-				-				1,438				10
Total temporarily impaired securities		$	13,492			$	105			$	899			$	3			$	14,391			$	108

The table below presents the amortized cost, fair value and tax equivalent yield of securities, by maturity. Debt securities issued by U.S. Government agencies (SBA securities), MBS, and CMOS are disclosed separately in the table below as these securities may prepay prior to the scheduled contractual maturity dates.

December 31, 2020 (in thousands)		Maturity		Amortized cost					Fair value				Yield⁽¹⁾
U.S. Government Agency notes		After 1 year but within 5 years		$	2,497			$	2,545				3.48	%
		Total			2,497				2,545				3.48
Municipal bonds		After 5 years but within 10 years			2,731				2,910				2.59
		After 10 years			23,100				24,707				3.02
		Total			25,831				27,617				2.98
Corporate bonds		After 5 years but within 10 years			8,750				8,916				5.22
Mortgage-backed securities, CMO securities and SBA securities					57,532				59,333				2.00
Securities available-for-sale				$	94,610			$	98,411				2.61	%

(1) Yield is based on amortized cost.

Salisbury evaluates debt securities for OTTI where the fair value of a security is less than its amortized cost basis at the balance sheet date. As part of this process, Salisbury considers whether it has the intent to sell each debt security and whether it is more likely than not that it will be required to sell the security before its anticipated recovery. If either of these conditions is met, Salisbury recognizes an OTTI charge to earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date. For securities that meet neither of these conditions, an analysis is performed to determine if any of these securities are at risk for OTTI.

The following summarizes, by security type, the basis for evaluating if the applicable debt securities were OTTI at December 31, 2020.

U.S. Government Agency notes: The contractual cash flows are guaranteed by the U.S. government. Six securities had unrealized losses at December 31, 2020, which approximated 1.41% of their amortized cost. Changes in fair values are a function of changes in investment spreads and interest rate movements and not changes in credit quality since time of purchase. Management expects to recover the entire amortized cost basis of these securities. Furthermore, Salisbury evaluates these securities for strategic fit and may reduce its position in these securities, although it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be maturity, and does not intend to sell these securities. Management evaluated the impairment status of these debt securities, and concluded that the gross unrealized losses were temporary in nature. Therefore, management does not consider these investments to be other-than temporarily impaired at December 31, 2020.

Municipal bonds: Salisbury performed a detailed analysis of the municipal bond portfolio. One security was in an unrealized loss position at December 31, 2020, which approximated 0.12% of its amortized cost. Management believes the unrealized loss position is attributable to interest rate and spread movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, Salisbury evaluates these securities for strategic fit and may reduce its position in these securities, although it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be maturity, and does not intend to sell these securities. Management evaluated the impairment status of these debt securities, and concluded that the gross unrealized losses were temporary in nature. Therefore, management does not consider these investments to be other-than temporarily impaired at December 31, 2020.

U.S. Government agency and U.S. Government-sponsored mortgage-backed securities and collateralized mortgage obligations: The contractual cash flows are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Five securities had unrealized losses at December 31, 2020, which approximated 1.11% of their amortized cost. Changes in fair values are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, Salisbury evaluates these securities for strategic fit and may reduce its position in these securities, although it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be maturity, and does not intend to sell these securities. Therefore, management does not consider these investments to be other-than-temporarily impaired at December 31, 2020.

The Federal Home Loan Bank of Boston (FHLBB) is a cooperative that provides services, including funding in the form of advances, to its member banking institutions. As a requirement of membership, the Bank must own a minimum amount of FHLBB stock, calculated periodically based primarily on its level of borrowings from the FHLBB. No market exists for shares of the FHLBB and therefore, they are carried at par value. FHLBB stock may be redeemed at par value five years following termination of FHLBB membership, subject to limitations which may be imposed by the FHLBB or its regulator, the Federal Housing Finance Board, to maintain capital adequacy of the FHLBB. While the Bank currently has no intentions to terminate its FHLBB membership, the ability to redeem its investment in FHLBB stock would be subject to the conditions imposed by the FHLBB. Based on the capital adequacy and the liquidity position of the FHLBB, management believes there is no impairment related to the carrying amount of the Bank’s FHLBB stock as of December 31, 2020. Deterioration of the FHLBB’s capital levels may require the Bank to deem its restricted investment in FHLBB stock to be OTTI. If evidence of impairment exists in the future, the FHLBB stock would reflect fair value using either observable or unobservable inputs. The Bank will continue to monitor its investment in FHLBB stock.

See Note 7 to the Consolidated Financial Statements for further information.