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2. Investment Securities
 12 Months Ended
Dec. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

Investment securities available for sale at December 31, 2018 and 2017 are as follows:

 

(Dollars in thousands)

 

   December 31, 2018
   Amortized Cost  Gross Unrealized Gains  Gross Unrealized Losses  Estimated Fair Value
Mortgage-backed securities  $52,145    516    558    52,103 
U.S. Government                    
sponsored enterprises   35,356    71    793    34,634 
State and political subdivisions   105,545    2,089    43    107,591 
Trust preferred securities   250    —      —      250 
Total  $193,296    2,676    1,394    194,578 

 

(Dollars in thousands)

 

   December 31, 2017
   Amortized Cost  Gross Unrealized Gains  Gross Unrealized Losses  Estimated Fair Value
Mortgage-backed securities  $53,124    814    329    53,609 
U.S. Government                    
sponsored enterprises   40,504    140    264    40,380 
State and political subdivisions   129,276    4,310    16    133,570 
Corporate bonds   1,500    12    —      1,512 
Trust preferred securities   250    —      —      250 
Total  $224,654    5,276    609    229,321 

 

The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2018 and 2017 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

 

(Dollars in thousands)                                    

 

   December 31, 2018
   Less than 12 Months  12 Months or More  Total
   Fair Value  Unrealized Losses  Fair Value  Unrealized Losses  Fair Value  Unrealized Losses
Mortgage-backed securities  $6,932    56    17,670    502    24,602    558 
U.S. Government                              
sponsored enterprises   1,784    69    25,172    724    26,956    793 
State and political subdivisions   4,815    26    1,578    17    6,393    43 
Total  $13,531    151    44,420    1,243    57,951    1,394 

  

(Dollars in thousands)                                    

 

   December 31, 2017
   Less than 12 Months  12 Months or More  Total
   Fair Value  Unrealized Losses  Fair Value  Unrealized Losses  Fair Value  Unrealized Losses
Mortgage-backed securities  $8,701    75    11,259    254    19,960    329 
U.S. Government                              
        sponsored enterprises   12,661    98    10,067    166    22,728    264 
State and political subdivisions   798    2    1,501    14    2,299    16 
Total  $22,160    175    22,827    434    44,987    609 

 

At December 31, 2018, unrealized losses in the investment securities portfolio relating to debt securities totaled $1.4 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2018 tables above, 11 out of 130 securities issued by state and political subdivisions contained unrealized losses and 31 out of 46 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of acceptable financial condition and results of operations on each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, are government backed.

 

The Company periodically evaluates its investments for any impairment which would be deemed other-than-temporary.   No investment impairments were deemed other-than-temporary in 2018, 2017 or 2016.

 

The amortized cost and estimated fair value of investment securities available for sale at December 31, 2018, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

 

December 31, 2018      
(Dollars in thousands)      
   Amortized Cost  Estimated Fair Value
Due within one year  $21,379    21,426 
Due from one to five years   80,932    82,325 
Due from five to ten years   32,271    32,174 
Due after ten years   6,569    6,550 
Mortgage-backed securities   52,145    52,103 
Total  $193,296    194,578 

 

During 2018, proceeds from sales of securities available for sale were $36.0 million and resulted in gross gains of $15,000. No securities available for sale were sold during the year ended December 31, 2017. During 2016, proceeds from sales of securities available for sale were $1.5 million and resulted in gross gains of $729,000.

 

Securities with a fair value of approximately $93.0 million and $105.6 million at December 31, 2018 and 2017, respectively, were pledged to secure public deposits, Federal Home Loan Bank of Atlanta (“FHLB”) borrowings and for other purposes as required by law.

 

GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The table below presents the balance of securities available for sale, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2018 and 2017.

 

(Dollars in thousands)            
   December 31, 2018
   Fair Value Measurements  Level 1 Valuation  Level 2 Valuation  Level 3 Valuation
Mortgage-backed securities  $52,103    —      52,103    —   
U.S. Government                    
sponsored enterprises  $34,634    —      34,634    —   
State and political subdivisions  $107,591    —      107,591    —   
Trust preferred securities  $250    —      —      250 

  

(Dollars in thousands)            
   December 31, 2017
   Fair Value Measurements  Level 1 Valuation  Level 2 Valuation  Level 3 Valuation
Mortgage-backed securities  $53,609    —      53,609    —   
U.S. Government                    
sponsored enterprises  $40,380    —      40,380    —   
State and political subdivisions  $133,570    —      133,570    —   
Corporate bonds  $1,512    —      1,512    —   
Trust preferred securities  $250    —      —      250 

 

Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

 

The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the year ended December 31, 2018.

 

(Dollars in thousands)   
   Investment Securities Available for Sale
   Level 3 Valuation
Balance, beginning of period  $250 
Change in book value   —   
Change in gain/(loss) realized and unrealized   —   
Purchases/(sales and calls)   —   
Transfers in and/or (out) of Level 3   —   
Balance, end of period  $250 
      
Change in unrealized gain/(loss) for assets still held in Level 3  $—