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NOTE 2 - SECURITIES

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

NOTE 2 - SECURITIES

NOTE 2 - SECURITIES

The composition of securities is as follows:

(in thousands)			Amortized cost basis (1)				Gross un-realized gains				Gross un-realized losses				Fair value
March 31, 2021
Available-for-sale
U.S. Government Agency notes		$	19,095			$	133			$	86			$	19,142
Municipal bonds			27,500				1,293				74				28,719
Mortgage-backed securities:
U.S. Government agencies and U.S. Government - sponsored enterprises			55,435				786				499				55,722
Collateralized mortgage obligations:
U.S. Government agencies			14,590				321				62				14,849
Corporate bonds			8,750				161				-				8,911
Total securities available-for-sale		$	125,370			$	2,694			$	721			$	127,343
CRA mutual fund														$	904
Non-marketable securities
Federal Home Loan Bank of Boston stock		$	1,713			$	-			$	-			$	1,713

(in thousands)			Amortized cost basis (1)				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

Salisbury did not sell any available-for-sale securities during the three month periods ended March 31, 2021 and March 31, 2020, respectively.

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 date presented:


		Less than 12 Months								12 Months or Longer								Total
March 31, 2021 (in thousands)		Fair value				Unrealized losses				Fair value				Unrealized losses				Fair value				Unrealized losses
Available-for-sale
U.S. Government Agency notes		$	10,993			$	86			$	-			$	-			$	10,993			$	86
Municipal bonds			4,996				74				-				-				4,996				74
Mortgage- backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises			36,534				499				-				-				36,534				499
Collateralized mortgage obligations:
U.S. Government agencies			4,030				62				-				-				4,030				62
Total temporarily impaired securities		$	56,553			$	721			$	-			$	-			$	56,553			$	721


		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

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.

March 31, 2021 (in thousands)		Maturity		Amortized cost					Fair value				Yield⁽¹⁾
U.S. Government Agency notes		After 1 year but within 5 years		$	4,497			$	4,512				2.32	%
		After 5 year but within 10 years			2,995				2,964				1.35
		Total			7,492				7,476				1.93
Municipal bonds		After 5 year but within 10 years			3,038				3,188				2.71
		After 10 years			24,462				25,531				2.94
		Total			27,500				28,719				2.92
Mortgage-backed securities, Collateralized mortgage obligations,
U.S. Government agencies and sponsored enterprises		Not a single maturity			81,628				82,237				1.94
Corporate bonds		After 5 years but within 10 years			8,750				8,911				5.22
Securities available-for-sale				$	125,370			$	127,343				2.39	%

⁽¹⁾Yield is based on amortized cost.

Salisbury evaluates debt securities for other-than-temporary impairment ("OTTI") when 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 March 31, 2021.

U.S. Government Agency notes: The contractual cash flows are guaranteed by the U.S. government. Twelve securities had unrealized losses at March 31, 2021, which approximated 0.78% 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 March 31, 2021

Municipal bonds: Salisbury performed a detailed analysis of the municipal bond portfolio. Eight securities had unrealized losses at March 31, 2021, which approximated 1.47% of their 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 March 31, 2021.

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. Thirty seven securities had unrealized losses at March 31, 2021, which approximated 1.36% 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 March 31, 2021.

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 March 31, 2021. 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.