Securities

9 Months Ended

Sep. 30, 2020

3. SECURITIES

The amortized cost of securities and their approximate fair value at September 30, 2020 and December 31, 2019 were as follows:



	September 30, 2020
	(in thousands)

	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value

Available for Sale:
Debt securities:
U.S. government agencies	$	61,631	$	776	$	(128)	$	62,279
States and political subdivisions		7,375		175		(5)		7,545
Total debt securities		69,006		951		(133)		69,824

Mortgage-backed securities:
FNMA		24,305		750		(18)		25,037
FHLMC		4,066		120		-		4,186
GNMA		2,305		46		(1)		2,350
SBA		21,259		977		(34)		22,202
CMO		31,159		1,003		-		32,162
Total mortgage-backed securities		83,094		2,896		(53)		85,937

Total securities designated as available for sale	$	152,100	$	3,847	$	(186)	$	155,761

Held to Maturity:
Debt securities
States and political subdivisions	$	4,996	$	88	$	-	$	5,084
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Total securities designated as held to maturity	$	4,996	$	88	$	-	$	5,084



	December 31, 2019
	(in thousands)

	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value

Available for Sale:
Debt securities:
U.S. government agencies	$	27,951	$	225	$	(21)	$	28,155
States and political subdivisions		3,289		69		(7)		3,351
Total debt securities		31,240		294		(28)		31,506

Mortgage-backed securities:
FNMA		34,395		330		(53)		34,672
FHLMC		15,390		137		(13)		15,514
GNMA		3,421		16		(24)		3,413
SBA		13,752		90		(70)		13,772
CMO		29,019		190		(164)		29,045
Total mortgage-backed securities		95,977		763		(324)		96,416

Total securities designated as available for sale	$	127,217	$	1,057	$	(352)	$	127,922

Held to Maturity:
Debt securities
States and political subdivisions	$	2,386	$	24	$	(18)	$	2,392

Total securities designated as held to maturity	$	2,386	$	24	$	(18)	$	2,392

Available for sale securities with a total fair value of $128 million and $102 million at September 30, 2020 and December 31, 2019, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The scheduled maturities of debt and mortgage-backed securities at September 30, 2020 and December 31, 2019 are summarized below. All maturity amounts are contractual maturities. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call premiums.




	September 30, 2020				December 31, 2019
	Amortized		Estimated		Amortized		Estimated
	cost		fair value		cost		fair value
			(in thousands)

Debt securities available for sale:

Due in one year or less	$	3,790	$	3,802	$	6,005	$	6,014
Due after one year through five years		7,768		7,971		6,481		6,626
Due after five years through ten years		23,959		24,658		18,754		18,866
Due after ten years		33,489		33,393		-		-
		69,006		69,824		31,240		31,506

Mortgage-backed securities
available for sale		83,094		85,937		95,977		96,416

Total	$	152,100	$	155,761	$	127,217	$	127,922

Debt securities held to maturity:

Due in one year or less	$	3,944	$	3,949	$	1,139	$	1,140
Due after one year through five years		564		597		712		732
Due after five years through ten years		45		48		54		54
Due after ten years		443		490		481		466
Total	$	4,996	$	5,084	$	2,386	$	2,392

Contractual maturities of the Company’s mortgage-backed securities generally exceed ten years; however, the effective lives may be significantly shorter due to prepayments of the underlying loans and due to the nature of these securities.

During the three months ended September 30, 2020, the Company received $23.3 million from the sale of investment securities. Gross realized gains from sales of investment securities for the three month and nine month periods ended September 30, 2020 were $0.7 million. There were no significant gross realized gains or losses from sales of investment securities for the three month and nine month periods ended September 30, 2019. Information regarding unrealized losses within the Company’s available for sale securities at September 30, 2020 and December 31, 2019 is summarized below. The securities are primarily U.S. government-guaranteed agency securities or municipal securities.

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	September 30, 2020

		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	27,432	$	(128)	$	-	$	-	$	27,432	$	(128)
States and political subdivisions		-		-		181		(5)		181		(5)
Total debt securities		27,432		(128)		181		(5)		27,613		(133)

Mortgage-backed securities:
FNMA		238		(1)		1,396		(17)		1,634		(18)
FHLMC		90		-		-		-		90		-
GNMA		156		(1)		-		-		156		(1)
SBA		-		-		1,406		(34)		1,406		(34)
CMO		-		-		-		-		-		-
Total mortgage-backed securities		484		(2)		2,802		(51)		3,286		(53)

Held to Maturity:
Debt securities:
States and political subdivisions		-		-		-		-		-		-

Total temporarily impaired
securities	$	27,916	$	(130)	$	2,983	$	(56)	$	30,899	$	(186)


	December 31, 2019

		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. government agencies	$	1,976	$	(18)	$	3,997	$	(3)	$	5,973	$	(21)
States and political subdivisions		-		-		181		(7)		181		(7)
Total debt securities		1,976		(18)		4,178		(10)		6,154		(28)

Mortgage-backed securities:
FNMA		5,355		(38)		3,630		(15)		8,985		(53)
FHLMC		-		-		1,242		(13)		1,242		(13)
GNMA		2,091		(22)		770		(2)		2,861		(24)
SBA		5,171		(70)		-		-		5,171		(70)
CMO		5,706		(36)		8,911		(128)		14,617		(164)
Total mortgage-backed securities		18,323		(166)		14,553		(158)		32,876		(324)

Held to Maturity:
Debt securities:
States and political subdivisions		227		(1)		2,165		(17)		2,392		(18)

Total temporarily impaired
securities	$	20,526	$	(185)	$	20,896	$	(185)	$	41,422	$	(370)

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Management has assessed the securities available for sale in an unrealized loss position at September 30, 2020 and December 31, 2019 and determined the decline in fair value below amortized cost to be temporary. In making this determination, management considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, and the financial condition of the issuer (primarily government or government-sponsored enterprises). In addition, management does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost. Management believes the decline in fair value is primarily related to market interest rate fluctuations and not to the credit deterioration of the individual issuers.

The Company has not recorded any other-than-temporary impairment (“OTTI”) charges during the nine months ended September 30, 2020 and did not record any OTTI charges during 2019. The credit worthiness of the Company’s securities portfolio is largely reliant on the ability of U.S. government sponsored agencies such as Federal Home Loan Bank (“FHLB”), Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”), and municipalities throughout New York State to meet their obligations. In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio. The stable past performance is not a guarantee for similar performance of the Company’s securities portfolio in future periods.