Note 2 - Investment Securities

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

2.

Investment Securities

Amortized cost and fair value of securities available for sale are as follows:

(Dollars in Thousands)	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government agency securities	$	10,738	$	33	$	(189	)	$	10,582
Mortgage-backed securities and CMO’s		19,525		-		(596	)		18,929
Corporate securities		6,641		37		(239	)		6,439
Municipal securities		9,099		67		(140	)		9,026
	$	46,003	$	137	$	(1,164	)	$	44,976

(Dollars in Thousands)	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government agency securities	$	13,475	$	61	$	(101	)	$	13,435
Mortgage-backed securities and CMO’s		24,344		12		(375	)		23,981
Corporate securities		6,991		118		(42	)		7,067
Municipal securities		10,713		213		(65	)		10,861
	$	55,523	$	404	$	(583	)	$	55,344

The primary purpose of the investment portfolio is to generate income, diversify earning assets, and meet liquidity needs of the Company through readily saleable financial instruments. The portfolio is made up primarily of fixed rate bonds, whose prices move inversely with rates. At the end of any accounting period, the investment portfolio has unrealized gains and losses. The Company monitors the portfolio, which is subject to liquidity needs, market rate changes, and credit risk changes, to see if adjustments are needed. The primary concern in a loss situation is the credit quality of the business or entity behind the instrument. The primary cause of unrealized losses is the increase in market interest rates over the yields available at the time the securities were purchased.

At

December 31, 2018,

the Company does

not

consider any security in an unrealized loss position to be other-than-temporarily impaired.

U.S. Government agency securities

.

The unrealized losses on

twenty-eight

of the Company’s investments in obligations of the U.S. government were caused by increases in market interest rates over the yields available at the time the securities were purchased.  The contractual terms of those investments do

not

permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company does

not

consider those investments to be other-than-temporarily impaired at

December 31, 2018.

Mortgage-backed securities and CMO’s

.

The unrealized losses on

thirty-six

of the Company’s investments in government-sponsored entity mortgage-backed securities were caused by increases in market interest rates over the yields available at the time the securities were purchased.  Because the decline in market value is attributable to changes in interest rates and

not

credit quality, the Company does

not

consider those investments to be other-than-temporarily impaired at

December 31, 2018.

Corporate securities

. The unrealized losses on

five

of the Company’s investments in corporate securities were caused by increases in market interest rates over the yield available at the time the security was purchased. Because the decline in market value is attributable to changes in interest rates and

not

credit quality, the Company does

not

consider this investment to be other-than-temporarily impaired at

December 31, 2018.

Municipal securities

.

The unrealized losses on

eight

of the Company’s investments in obligations of municipal securities were caused by increases in market interest rates over the yields available at the time the securities were purchased. All municipal securities are investment grade. Because the decline in market value is attributable to changes in interest rates and credit spreads, and

not

credit quality, the Company does

not

consider those investments to be other-than-temporarily impaired at

December 31, 2018.

The following tables demonstrate the unrealized loss position of securities available for sale at

December 31, 2018

and

2017.

	December 31, 2018
	Less than 12 months					12 months or more					Total
(Dollars in Thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Government agency securities	$	668	$	(3	)	$	8,129	$	(186	)	$	8,797	$	(189	)
Mortgage-backed securities and CMO’s		90		(1	)		18,782		(595	)		18,872		(596	)
Corporate securities		1,953		(56	)		1,299		(183	)		3,252		(239	)
Municipal securities		435		(1	)		3,466		(139	)		3,901		(140	)
	$	3,146	$	(61	)	$	31,676	$	(1,103	)	$	34,822	$	(1,164	)

	December 31, 2017
	Less than 12 months					12 months or more					Total
(Dollars in Thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Government agency securities	$	6,859	$	(44	)	$	2,995	$	(57	)	$	9,854	$	(101	)
Mortgage-backed securities and CMO’s		15,624		(192	)		7,386		(183	)		23,010		(375	)
Corporate securities		1,438		(42	)		-		-			1,438		(42	)
Municipal securities		453		(3	)		2,332		(62	)		2,785		(65	)
	$	24,374	$	(281	)	$	12,713	$	(302	)	$	37,087	$	(583	)

The amortized cost and estimated fair value of securities at

December 31, 2018,

by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers

may

have the right to prepay obligations with or without call or prepayment penalties.

(Dollars In Thousands)	Amortized Cost		Fair Value
Less than one year	$	456	$	453
Over one through five years		2,312		2,279
Over five through ten years		13,720		13,479
Greater than 10 years		29,515		28,765
	$	46,003	$	44,976

Proceeds from the sales, maturities and calls of securities available for sale in

2018

and

2017

were

$10.1

million and

$20.5

million, respectively. The Company realized

$60

thousand in net gains on sales of

thirteen

available for sale securities in

2018,

compared to

$69

thousand from the sales of

forty-five

securities in the prior year.  The net gain in

2018

included gross gains of

$68

thousand net of gross losses of

$8

thousand. The prior year included gross gains of

$170

thousand and gross losses of

$101

thousand. Total pledged securities had a fair market value of

$3.2

million at

December 31, 2018

and

$4.0

million at

December 31, 2017.

At

December 31, 2018,

securities having a fair market value of

$1.7

million were pledged to secure public deposits, securities pledged to secure Federal Home Loan Bank borrowings totaled

$74

thousand, and

$1.4

million in securities were pledged for other purposes.