NOTE 2: INVESTMENT SECURITIES

The amortized cost and fair values of investment securities, as of the dates indicated, are summarized as follows:



	September 30, 2019
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,955	$	15	$	-	$	8,970
Government Sponsored Entities (GSE) mortgage-backed securities		314		7		-		321
Corporate bonds		12,190		207		-		12,397
Collateralized mortgage obligations GSE		979		5		(1)		983
State and municipal taxable		362		5		-		367
State and municipal tax-exempt		34,691		157		(2)		34,846
Total	$	57,491	$	396	$	(3)	$	57,884

Available For Sale
US Government agency obligations	$	24,192	$	8	$	(8)	$	24,192
GSE mortgage-backed securities		24,813		32		(187)		24,658
Collateralized mortgage obligations GSE		8,981		22		(144)		8,859
Corporate bonds		6,029		14		(3)		6,040
State and municipal tax-exempt		1,701		5		(1)		1,705
Total	$	65,716	$	81	$	(343)	$	65,454



	December 31, 2018
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,749	$	41	$	-	$	8,790
Government Sponsored Entities (GSE) mortgage-backed securities		389		-		-		389
Corporate bonds		13,851		124		(47)		13,928
Collateralized mortgage obligations GSE		1,159		-		(27)		1,132
State and municipal taxable		362		-		(3)		359
State and municipal tax-exempt		37,516		19		(998)		36,537
Total	$	62,026	$	184	$	(1,075)	$	61,135

Available For Sale
US Government agency obligations	$	48,082	$	-	$	(359)	$	47,723
GSE mortgage-backed securities		27,563		-		(1,005)		26,558
Collateralized mortgage obligations GSE		10,249		-		(441)		9,808
Corporate bonds		10,890		-		(186)		10,704
State and municipal tax-exempt		1,981		-		(131)		1,850
Total	$	98,765	$	-	$	(2,122)	$	96,643

Included in unrealized losses are market losses on securities that have been in a continuous unrealized loss position for twelve months or more and those securities that have been in a continuous unrealized loss position for less than twelve months. The following table details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at September 30, 2019 and December 31, 2018.


	September 30, 2019
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Collateralized mortgage obligations GSE	$	164	$	(1)	$	-	$	-	$	164	$	(1)
State and municipal tax-exempt		603		(2)		-		-		603		(2)
Total	$	767	$	(3)	$	-	$	-	$	767	$	(3)
Available For Sale
US Government agency obligations	$	4,993	$	(8)	$	-	$	-	$	4,993	$	(8)
GSE mortgage-backed securities		20,444		(187)		2,244		(11)		18,200		(176)
Collateralized mortgage obligations GSE		7,040		(144)		409		(7)		6,631		(137)
Corporate bonds		1,001		(3)		-		-		1,001		(3)
State and municipal tax-exempt		783		(1)		783		(1)		-		-
Total	$	34,261	$	(343)	$	3,436	$	(19)	$	30,825	$	(324)


	December 31, 2018
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Corporate bonds	$	4,157	$	(47)	$	1,887	$	(15)	$	2,270	$	(32)
Collateralized mortgage obligations GSE		1,132		(27)		-		-		1,132		(27)
State and municipal taxable		359		(3)		-		-		359		(3)
State and municipal tax-exempt		26,466		(998)		2,045		(31)		24,421		(967)
Total	$	32,114	$	(1,075)	$	3,932	$	(46)	$	28,182	$	(1,029)
Available For Sale
US Government agency obligations	$	37,723	$	(359)	$	-	$	-	$	37,723	$	(359)
GSE mortgage-backed securities		26,558		(1,005)		-		-		26,558		(1,005)
Collateralized mortgage obligations GSE		9,808		(441)		-		-		9,808		(441)
Corporate bonds		10,704		(186)		2,035		(7)		8,669		(179)
State and municipal tax-exempt		1,850		(131)		-		-		1,850		(131)
Total	$	86,643	$	(2,122)	$	2,035	$	(7)	$	84,608	$	(2,115)

As of September 30, 2019, there were fifteen collateralized mortgage obligations GSE, seventeen GSE mortgage-backed securities, two U.S. agency obligations, two tax-exempt municipalities, and one corporate bond which were in an unrealized loss position. DNB does not intend to sell these securities and management of DNB does not expect to be required to sell any of these securities prior to a recovery of their cost basis. Management has reviewed all of these securities and believes that DNB will collect all principal and interest that is due on debt securities on a timely basis. Management does not believe any individual unrealized loss as of September 30, 2019 represents an other-than-temporary impairment (OTTI). DNB reviews its investment portfolio on a quarterly basis, reviewing each investment for OTTI. The OTTI analysis focuses on condition of the issuers as well as duration and severity of impairment in determining OTTI. As of September 30, 2019, the following securities were reviewed:

Collateralized mortgage obligations GSE There are fifteen impaired securities classified as collateralized mortgage obligations GSE, fourteen of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 4.43% of its carrying value. All of these securities were issued and insured by FNMA, FHLMC or GNMA. DNB receives monthly principal and interest payments on all of these securities on a timely basis and none of these agencies have ever defaulted on mortgage-backed principal or interest. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from September 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at September 30, 2019.

GSE mortgage-backed securities There are seventeen impaired securities classified as GSE mortgage-backed securities, fourteen of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 1.44% of its carrying value. These securities were issued and insured by FNMA, FHLMC or GNMA. DNB receives monthly principal and interest payments on these securities on a timely basis and none of these have ever defaulted on mortgage-backed principal or interest. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from September 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at September 30, 2019.

US Government agency obligations There are two impaired securities classified as agencies, both of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 0.22% of its carrying value. All of these securities were issued and insured by FHLB, FNMA or FHLMC. DNB has received timely interest payments on all of these securities and none of these agencies have ever defaulted on their bonds. DNB anticipates a recovery in the market value as the securities approach their maturity dates. Management concluded that these securities were not other-than-temporarily impaired at September 30, 2019.

State and municipal tax-exempt There are two impaired securities in this category, one of which has been impaired for more than 12 months. The largest unrealized loss of a security in this group is 0.28% of its carrying value. Both securities are uninsured school districts, but one has a state school district credit enhancement program. One carries an “Aa3” underlying credit rating, and the other carries an “AA” underlying credit rating. Both are performing and are expected to continue to perform in accordance with their contractual terms and conditions. There have not been disruptions of any payments associated with these municipal securities. These bonds are investment grade and the value decline is related to the changes in interest rates. Management concluded that these securities were not other-than-temporarily impaired at September 30, 2019.

Corporate bonds There is one impaired corporate bond, which has been impaired for more than 12 months. The unrealized loss of this security is 0.33% of its carrying value. The bond is investment grade and the value decline is related to the changes in interest rates that occurred since the time of purchase and subsequent changes in spreads affecting the market prices. The issue carries an "A-" underlying credit support and was evaluated on the basis on its underlying fundamentals; included but not limited to annual financial reports, rating agency reports, capital strength and debt ratios. DNB anticipates a recovery in the market value as the security approaches its maturity date or if interest rates decline from September 30, 2019 levels. Management concluded that this security was not other-than-temporarily impaired at September 30, 2019.

The amortized cost and fair value of investment securities as of September 30, 2019, by final contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid without penalties.


	Held to Maturity				Available for Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,804	$	11,821	$	15,996	$	15,990
Due after one year through five years		13,171		13,210		15,546		15,559
Due after five years through ten years		29,198		29,487		12,527		12,470
Due after ten years		3,318		3,366		21,647		21,435
Total investment securities	$	57,491	$	57,884	$	65,716	$	65,454

The HTM securities called during the nine months ended September 30, 2019 resulted in a gain on call of $68,000. Gains and losses resulting from investment sales, redemptions or calls were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Gross realized gains-AFS	$	56	$	-	$	66	$	-
Gross realized gains-HTM		65		-		68		-
Gross realized losses-AFS		-		-		(9)		-
Net realized gain	$	121	$	-	$	125	$	-

At September 30, 2019 and December 31, 2018, investment securities with a carrying value of approximately $68.0 million and $95.8 million, respectively, were pledged to secure public funds and for other purposes as required by law.