NOTE 2 - SECURITIES

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

NOTE 2 - SECURITIES

NOTE 2 - SECURITIES

The composition of securities is as follows:

(in thousands)		Amortized cost basis		Gross un-realized gains		Gross un-realized losses		Fair value
June 30, 2022
Available-for-sale
U.S. Treasury	$	19,250	$	—	$	1,578	$	17,672
U.S. Government Agency notes		31,301		128		1,711		29,718
Municipal bonds		55,339		2		7,074		48,267
Mortgage-backed securities:
U.S. Government agencies and U.S. Government - sponsored enterprises		77,339		52		5,924		71,467
Collateralized mortgage obligations:
U.S. Government agencies		24,531		—		1,979		22,552
Corporate bonds		13,750		10		326		13,434
Total securities available-for-sale	$	221,510	$	192	$	18,592	$	203,110
Mutual fund							$	1,672
Non-marketable securities
Federal Home Loan Bank of Boston stock	$	945	$	—	$	—	$	945

(in thousands)		Amortized cost basis		Gross un-realized gains		Gross un-realized losses		Fair value
December 31, 2021
Available-for-sale
U.S. Treasury	$	15,301	$	12	$	182	$	15,131
U.S. Government Agency notes		31,623		237		256		31,604
Municipal bonds		46,469		1,557		204		47,822
Mortgage-backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises		74,703		643		805		74,541
Collateralized mortgage obligations:
U.S. Government agencies		20,948		135		185		20,898
Corporate bonds		12,250		158		8		12,400
Total securities available-for-sale	$	201,294	$	2,742	$	1,640	$	202,396
Mutual fund							$	901
Non-marketable securities
Federal Home Loan Bank of Boston stock	$	1,397	$	—	$	—	$	1,397

Salisbury sold $22.0 million of available-for-sale securities during the six-month period ended June 30, 2022 realizing gains of $458 thousand and losses of $293 thousand resulting in a net gain of $165 thousand and related tax expense of $35 thousand. Salisbury sold $4.0 million of available-for-sale securities during the three-month period ended June 30, 2022 realizing gains of $3 thousand and losses of $48 thousand resulting in a net loss of $45 thousand and related tax benefit of $9 thousand. Salisbury sold $3.3 million of available-for-sale securities during the three and six-month periods ended June 30, 2021 realizing a pre-tax loss of $9 thousand and a related tax benefit of $2 thousand.

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
June 30, 2022 (in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale
U.S. Treasury	$	17,672	$	1,578	$	—	$	—	$	17,672	$	1,578
U.S. Government Agency notes		14,998		1,367		9,267		344		24,265		1,711
Municipal bonds		45,603		6,717		1,518		357		47,121		7,074
Mortgage- backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises		50,249		4,679		14,709		1,245		64,958		5,924
Collateralized mortgage obligations:
U.S. Government agencies		22,552		1,979		—		—		22,552		1,979
Corporate bonds		7,424		326		—		—		7,424		326
Total temporarily impaired securities	$	158,498	$	16,646	$	25,494	$	1,946	$	183,992	$	18,592

	Less than 12 Months				12 Months or Longer				Total
December 31, 2021 (in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale
U.S. Treasury	$	12,155	$	182	$	—	$	—	$	12,155	$	182
U.S. Government Agency notes		22,137		235		2,019		21		24,156		256
Municipal bonds		12,496		204		552		—		13,048		204
Mortgage-backed securities:
U.S. Government agencies and U.S. Government- sponsored enterprises		52,619		740		3,195		65		55,814		805
Collateralized mortgage obligations		11,554		185		—		—		11,554		185
Corporate bonds		1,742		8		—		—		1,742		8
Total temporarily impaired securities	$	112,703	$	1,554	$	5,766	$	86	$	118,469	$	1,640

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.

June 30, 2022 (in thousands)	Maturity	Amortized cost			Fair value	Yield(1)
U.S. Treasury	After 1 year but within 5 years	$	7,859	$	7,444	1.32	%
	After 5 year but within 10 years		11,391		10,228	1.18
	Total		19,250		17,672	1.24
U.S. Government Agency notes	After 1 year but within 5 years		3,990		3,666	0.92
	After 5 year but within 10 years		11,923		10,721	1.34
	Total		15,913		14,387	1.23
Municipal bonds	After 1 year but within 5 years		512		478	1.74
	After 5 year but within 10 years		12,792		11,179	2.38
	After 10 years but within 15 years		12,971		11,282	2.36
	After 15 years		29,064		25,328	2.84
	Total		55,339		48,267	2.61
Mortgage-backed securities and Collateralized mortgage obligations	Securities not due at a single maturity date		117,258		109,350	2.00
	Total		117,258		109,350	2.00
Corporate bonds	After 5 years but within 10 years		13,750		13,434	4.35
	Total		13,750		13,434	4.35
Securities available-for-sale		$	221,510	$	203,110	2.27	%

⁽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 securities were OTTI at June 30, 2022.

U.S. Treasury notes: The contractual cash flows are guaranteed by the U.S. government. Ten securities had unrealized losses at June 30, 2022, which approximated 8.20% 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 June 30, 2022.

U.S. Government Agency notes: The contractual cash flows are guaranteed by the U.S. government. Twenty-three securities had unrealized losses at June 30, 2022, which approximated 6.59% 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 June 30, 2022.

Municipal bonds: Salisbury performed a detailed analysis of the municipal bond portfolio. Sixty-five securities had unrealized losses at June 30, 2022, which approximated 13.05% 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 June 30, 2022.

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. Ninety securities had unrealized losses at June 30, 2022, which approximated 8.28% 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 June 30, 2022.

Corporate bonds: Salisbury regularly monitors and analyzes its corporate bond portfolio for credit quality. Ten securities had unrealized losses at June 30, 2022, which approximated 4.20% 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 June 30, 2022.

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 June 30, 2022. 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.