4.	INVESTME NT AND EQUITY SECURITIES

The amortized cost, gross gains and losses and fair values of securities available for sale are as follows:

	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value

Subordinated debt	$	4,000	$	126	$	-		$	4,126
Obligations of states and political subdivisions:
Taxable		500		1		-			501
Tax-exempt		80,436		2,065		(25	)		82,476
Mortgage-backed securities in government-sponsored entities		18,465		274		(109	)		18,630
Total	$	103,401	$	2,466	$	(134	)	$	105,733

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value

U.S. government agency securities	$	7,442	$	90	$	(61	)	$	7,471
Obligations of states and political subdivisions:
Taxable		502		10		-			512
Tax-exempt		72,387		667		(473	)		72,581
Mortgage-backed securities in government-sponsored entities		18,185		88		(515	)		17,758
Total	$	98,516	$	855	$	(1,049	)	$	98,322

January 1, 2018,

the Company reclassified

$625,000

from investment securities available for sale to equity securities in accordance with the adoption of ASU

2016

01.

Equity securities totaled

$710,000

and

$616,000

December 31, 2019

and

2018,

respectively, which incorporates a recognized net gain (loss) on equity investments of

$94,000

and (

$9,000

) for the year ended

December 31, 2019

and

2018,

respectively.

net gains on sold equity securities were realized from sales during these periods.

The amortized cost and fair value of debt securities at

December 31, 2019,

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.

	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value

Due in one year or less	$	148	$	149
Due after one year through five years		1,324		1,345
Due after five years through ten years		16,613		16,908
Due after ten years		85,316		87,331

Total	$	103,401	$	105,733

Investment securities with an approximate carrying value of

$55.6

million and

$63.5

million at

December 31, 2019

and

2018,

respectively, were pledged to secure deposits and other purposes as required by law.

There were

securities sold during the year ended

December 31, 2018.

Proceeds from the sales of investment securities and the gross realized gains and losses for the year ended

December 31, 2019,

are as follows (in thousands):

	2019			2018
Proceeds from sales	$	12,324		$	-
Gross realized gains		227			-
Gross realized losses		(33	)		-

The tax expense related to the net realized gains above was

$41,000,

and

for the year ended

December 31, 2019

and

2018,

respectively.

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

	December 31, 2019
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses

Obligations of states and political subdivisions
Tax-exempt	$	4,324	$	(25	)	$	-	$	-		$	4,324	$	(25	)
Mortgage-backed securities in government-sponsored entities		1,409		(2	)		8,223		(107	)		9,632		(109	)
Total	$	5,733	$	(27	)	$	8,223	$	(107	)	$	13,956	$	(134	)

	December 31, 2018
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses

U.S. government agency securities	$	-	$	-		$	4,105	$	(61	)	$	4,105	$	(61	)
Obligations of states and political subdivisions
Tax-exempt		20,451		(286	)		11,053		(187	)		31,504		(473	)
Mortgage-backed securities in government-sponsored entities		2,068		(9	)		12,257		(506	)		14,325		(515	)
Total	$	22,519	$	(295	)	$	27,415	$	(754	)	$	49,934	$	(1,049	)

There were

securities that were considered temporarily impaired at

December 31, 2019.

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The accounting literature requires the Company to assess whether the unrealized loss is other than temporary. For equity securities where the fair value has been significantly below cost for

one

year, the Company’s policy is to recognize an impairment loss unless sufficient evidence is available that the decline is

not

other than temporary and a recovery period can be predicted.

The Company has asserted that at

December 31, 2019

and

2018,

the declines outlined in the above table represent temporary declines and the Company does

not

intend to sell and does

not

believe it will be required to sell these securities before recovery of their cost basis, which

may

be at maturity. The Company has concluded that any impairment of its investment securities portfolio outlined in the above table is

not

other than temporary and is the result of interest rate changes, sector credit rating changes, or company-specific rating changes that are

not

expected to result in the non-collection of principal and interest during the period.

Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for

96.1%

of the total available-for-sale portfolio as of

December

31,

2019,

and

credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of significant unrealized loss positions within the obligations of state and political subdivisions security portfolio. The Company evaluates credit losses on a quarterly basis. The Company considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

●

The length of time and the extent to which the fair value has been less than the amortized cost basis.

●

Changes in the near term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions.

●

The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities.

●

Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation, and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.