NOTE 2 — Debt Securities

Available-for-Sale Securities

The amortized cost, gross unrealized gains and losses and estimated fair value of securities available-for-sale were as follows at December 31:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2018
Mortgage-backed securities – agency	$	27,384	$	15	$	(724)	$	26,675
Collateralized mortgage obligations (CMO’s) – agency		121,913		32		(2,922)		119,023
Total available-for-sale	$	149,297	$	47	$	(3,646)	$	145,698

December 31, 2017
Mortgage-backed securities – agency	$	20,082	$	12	$	(291)	$	19,803
Collateralized mortgage obligations (CMO’s) – agency		110,590		13		(1,648)		108,955
Total available-for-sale	$	130,672	$	25	$	(1,939)	$	128,758

Mortgage-backed securities included all residential pass-through certificates guaranteed by FHLMC, FNMA, or GNMA and the CMO’s are backed by government agency pass-through certificates. The 2018 and 2017 pass-through certificates are fixed rate instruments. CMO’s, by virtue of the underlying residential collateral or structure, are fixed rate current pay sequentials or planned amortization classes (PAC’s). As actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations, these securities are not considered to have a single maturity date.

When purchasing investment securities, the Company’s overall interest-rate risk profile is considered as well as the adequacy of expected returns relative to risks assumed, including prepayments. In continuously managing the investment securities portfolio, management occasionally sells investment securities in response to, or in anticipation of, changes in interest rates and spreads, actual or anticipated prepayments, liquidity needs and credit risk associated with a particular security.

The proceeds from sales and calls of securities and the associated gains and losses are listed below:


	2018		2017		2016
Proceeds	$	—	$	—	$	4,068
Gross gains		—		—		6
Gross losses		—		—		—

The tax provision related to the gross gains was $2 for 2016.

At December 31, 2018, securities having a fair value of $120,673 were pledged to the FHLB for borrowing capacity totaling $114,963. At December 31, 2017, securities having a fair value of $108,955 were pledged to the FHLB for borrowing capacity totaling $103,351. At December 31, 2018 and 2017, the Company had no outstanding FHLB advances.

At December 31, 2018, securities having a fair value of $25,025 were pledged to the FRB of New York for borrowing capacity totaling $24,177. At December 31, 2017, securities having a fair value of $19,803 were pledged to FRB of New York for borrowing capacity totaling $19,370. At December 31, 2018 and 2017, the Company had no outstanding FRB borrowings.

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, as of December 31:


	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
December 31, 2018
Mortgage-backed securities – agency	$	9,528	$	(99)	$	15,497	$	(625)	$	25,025	$	(724)
CMO’s – agency		19,184		(73)		85,775		(2,849)		104,959		(2,922)
Total temporarily impaired securities	$	28,712	$	(172)	$	101,272	$	(3,474)	$	129,984	$	(3,646)


	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
December 31, 2017
Mortgage-backed securities – agency	$	5,766	$	(26)	$	12,312	$	(265)	$	18,078	$	(291)
CMO’s – agency		75,056		(685)		28,848		(963)		103,904		(1,648)
Total temporarily impaired securities	$	80,822	$	(711)	$	41,160	$	(1,228)	$	121,982	$	(1,939)

Management reviews the investment portfolio on a quarterly basis to determine the cause, magnitude and duration of declines in the fair value of each security. In estimating other-than-temporary impairment (OTTI), management considers many factors including: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether any other than temporary decline exists may involve a high degree of subjectivity and judgment and is based on the information available to management at a point in time. Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

At December 31, 2018, securities in unrealized loss positions were issuances from government sponsored entities. Due to the decline in fair value attributable to changes in interest rates and illiquidity, not credit quality and because the Company does not have the intent to sell the securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider the securities to be other-than-temporarily impaired at December 31, 2018.

No impairment charges were recorded in 2018, 2017 and 2016.