Note 3 - Investment Securities

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

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

NOTE 3: Investment Securities

The Company’s investment policy requires that the Company purchase only high-grade investment securities. Most municipal obligations are categorized as “A” or better by a nationally recognized statistical rating organization. These ratings are achieved because the securities are backed by the full faith and credit of the municipality and also supported by

third

-party credit insurance policies.

Mortgage-backed securities (“MBSs”) and collateralized mortgage obligations (“CMOs”) are issued by government sponsored corporations, including Federal Home Loan Mortgage Corporation, Fannie Mae and the Guaranteed National Mortgage Association. Asset-backed securities (“ABSs”) are financial securities collateralized by a pool of assets, such as loans, leases, credit card debt, royalties or receivables. An ABS is similar to an MBS, except that the underlying securities are

not

mortgage-based.

The amortized cost and fair values of securities, together with unrealized gains and losses, were as follows:

	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
Available-for-sale:
U.S. government and agency obligations	$	13,318	$	279	$	-		$	13,597
Municipal obligations		50,699		1,616		(93	)		52,222
Corporate obligations		8,356		40		(8	)		8,388
Mortgage-backed securities		9,460		56		(21	)		9,495
Collateralized mortgage obligations		33,129		297		(92	)		33,334
Asset-backed securities		10,110		-		(271	)		9,839
Total	$	125,072	$	2,288	$	(485	)	$	126,875

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
Available-for-sale:
U.S. government and agency obligations	$	9,333	$	58	$	(44	)	$	9,347
Municipal obligations		69,024		244		(990	)		68,278
Corporate obligations		11,411		8		(300	)		11,119
Mortgage-backed securities		19,635		86		(373	)		19,348
Collateralized mortgage obligations		24,229		6		(360	)		23,875
Asset-backed securities		10,350		6		(158	)		10,198
Total	$	143,982	$	408	$	(2,225	)	$	142,165

Proceeds from sales of available-for-sale securities and the associated gross realized gains and losses were as follows:

	Years Ended
	December 31,
	2019			2018
	(In Thousands)
Proceeds from sale of available-for-sale securities	$	58,027		$	51,319
Gross realized gain on sale of available-for-sale securities	$	576		$	191
Gross realized loss on sale of available-for-sale securities		(507	)		(378	)
Net realized gain (loss) on sale of available-for-sale securities	$	69		$	(187	)

The amortized cost and fair value of securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers

may

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

	December 31, 2019
	Amortized		Fair
	Cost		Value
	(In Thousands)
Due in one year or less	$	9,116	$	9,134
Due from one to five years		10,005		10,085
Due from five to ten years		8,738		9,078
Due after ten years		54,624		55,749
		82,483		84,046
Mortgage-backed securities		9,460		9,495
Collateralized mortgage obligations		33,129		33,334
Total	$	125,072	$	126,875

At

December 31, 2019

and

2018,

securities with a fair value of

$18,897,000

and

$21,408,000,

respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

The Company’s investment securities that have been in a continuous unrealized loss position for less than

12

months and those that have been in a continuous unrealized loss position for

12

or more months were as follows:

	December 31, 2019
	Less than 12 Months					12 Months or Longer
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses
	(In Thousands)
U.S. government and agency obligations	$	-	$	-		$	-	$	-
Municipal obligations		11,142		(93	)		-		-
Corporate obligations		-		-			992		(8	)
Mortgage-backed securities and collateralized mortgage obligations		9,868		(35	)		7,968		(78	)
Asset-backed securities		940		(33	)		8,900		(238	)
Total	$	21,950	$	(161	)	$	17,860	$	(324	)

	December 31, 2018
	Less than 12 months					12 months or Longer
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses
	(In Thousands)
U.S. government and agency obligations	$	-	$	-		$	3,385	$	(44	)
Municipal obligations		17,887		(140	)		32,712		(850	)
Corporate obligations		2,890		(110	)		7,220		(190	)
Mortgage-backed securities and collateralized mortgage obligations		5,575		(98	)		22,559		(635	)
Asset-backed securities		8,200		(158	)		-		-
Total	$	34,552	$	(506	)	$	65,876	$	(1,719	)

Unrealized losses associated with investments are believed to be caused by changing market conditions, primarily spreads related to U.S. treasuries, that are considered to be temporary and the Company does

not

intend to sell the securities, and it is

not

likely to be required to sell these securities prior to maturity. Based on the Company’s evaluation of these securities,

no

other-than-temporary impairment was recorded for the year ended

December 31, 2019,

or

2018.

As of

December 31, 2019

and

December 31, 2018,

there were, respectively,

28

 and

108

securities in unrealized loss positions that were considered to be temporarily impaired and therefore an impairment charge has

not

been recorded.

As of

December 31, 2019,

10

U.S. government and agency securities and municipal obligations had unrealized losses with aggregate depreciation of approximately

0.83%

from the Company’s amortized cost basis of these securities. At

December 31, 2018,

74

U.S. government and agency securities and municipal obligations had unrealized losses with aggregate depreciation of approximately

1.88%

from the Company’s amortized cost basis of these securities. As of

December 31, 2019,

1

 corporate obligation had unrealized losses of approximately

0.80%

from the Company’s amortized cost basis of these securities. At

December 31, 2018,

11

corporate obligations had an unrealized loss with aggregate depreciation of approximately

2.88%

from the Company's amortized cost basis of these securities. As management has the ability to hold debt securities until maturity, or for the foreseeable future,

no

declines are deemed to be other than temporary.

As of

December 31, 2019,

12

 mortgage-backed securities (“MBSs”) and collateralized mortgage obligations (“CMOs”) had unrealized losses with aggregate depreciation of approximately

0.63%

from the Company’s amortized cost basis of these securities. At

December 31, 2018,

19

MBSs and CMOs had unrealized losses with aggregate depreciation of approximately

2.54%

from the Company’s amortized cost basis of these securities. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and

not

due to concerns regarding the underlying credit of the issuers or the underlying collateral. 

As of

December 31, 2019,

5

 asset-backed securities (“ABSs”) had unrealized losses with aggregate depreciation of approximately

2.68%

from the Company’s amortized cost basis of these securities. At

December 31, 2018,

4

ABSs had unrealized losses with aggregate depreciation of approximately

1.89%

from the Company’s amortized cost basis of these securities. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and

not

due to concerns regarding the underlying credit of the issuers or the underlying collateral.