NOTE 5: INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2020

Notes

NOTE 5: INVESTMENT SECURITIES

NOTE 5: INVESTMENT SECURITIES

The amortized cost and fair values of securities classified as available-for-sale were as follows:

		September 30, 2020
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	152,068	$	19,402	$	12	$	171,458
Agency collateralized mortgage obligations		176,077		9,273		259		185,091
States and political subdivisions		65,821		1,959		97		67,683
Small Business Administration securities		20,677		1,031		-		21,708
	$	414,643	$	31,665	$	368	$	445,940

		December 31, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
		(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
Agency mortgage-backed securities	$	156,591	$	8,716	$	265	$	165,042
Agency collateralized mortgage obligations		149,980		2,891		921		151,950
States and political subdivisions		33,757		1,368		-		35,125
Small Business Administration securities		22,132		-		74		22,058
	$	362,460	$	12,975	$	1,260	$	374,175

The amortized cost and fair value of available-for-sale securities at September 30, 2020, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Amortized		Fair
		Cost		Value
		(In Thousands)
One year or less	$	-	$	-
After one through five years		-		-
After five through ten years		10,388		11,064
After ten years		55,433		56,619
Securities not due on a single maturity date		348,822		378,257
	$	414,643	$	445,940

There were no securities classified as held to maturity at September 30, 2020 or December 31, 2019.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2020 and December 31, 2019, was approximately $33.9 million and $116.2 million, respectively, which is approximately 7.6% and 31.1% of the Company’s available-for-sale investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes any declines in fair value for these debt securities are temporary.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2020 and December 31, 2019:

		September 30, 2020
		Less than 12 Months					12 Months or More				Total
		Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses			Value		Losses		Value		Losses
		(In Thousands)
Agency mortgage-backed securities	$	11,140	$	(12	)	$	-	$	-	$	11,140	$	(12)
Agency collateralized mortgage obligations		12,849		(259	)		-		-		12,849		(259)
States and political subdivisions		9,929		(97	)		-		-		9,929		(97)
	$	33,918	$	(368	)	$	-	$	-	$	33,918	$	(368)

		December 31, 2019
		Less than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses		Value		Losses		Value		Losses
		(In Thousands)
Agency mortgage-backed securities	$	-	$	-	$	24,762	$	(265)	$	24,762	$	(265)
Agency collateralized mortgage obligations		69,372		(921)		-		-		69,372		(921)
Small Business Administration securities		22,058		(74)		-		-		22,058		(74)
	$	91,430	$	(995)	$	24,762	$	(265)	$	116,192	$	(1,260)

There were no sales of available-for-sale securities during the three months ended September 30, 2020.  Gross gains of $78,000 resulting from sales of available-for-sale securities were realized during the nine months ended September 30, 2020. There were no sales of available-for-sale securities during the three months ended September 30, 2020.  Gross gains of $226,000 and gross losses of $216,000 resulting from sales of available-for-sale securities were realized during the nine months ended September 30, 2019. Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment.  Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities. The Company does not have, and does not currently expect to have, securities within the scope of the accounting guidance for beneficial interests. For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model.

The Company periodically evaluates each investment security in an unrealized loss position to determine whether an other-than-temporary impairment has occurred.  The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors.  If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary.  The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange.  For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other than temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss.  The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows.  If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

During the three and nine months ended September 30, 2020, no securities were determined to have impairment that had become other-than-temporary.  

Credit Losses Recognized on Investments.  During the three and nine months ended September 30, 2020 and 2019, respectively, there were no debt securities that had experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired.

Amounts Reclassified Out of Accumulated Other Comprehensive Income.  Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three and nine months ended September 30, 2020 and 2019, are shown below.  

	Amounts Reclassified from Accumulated Other
	Comprehensive Income Three Months Ended September 30,		Affected Line Item in the
	2020	2019	Statements of Income
	(In Thousands)
			Net realized gains on sales of
Unrealized gains on available-for-    sale securities	$         -	$          -	available-for-sale securities
			(Total reclassified amount before tax)
Income Taxes	-	-	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$         -	$          -

	Amounts Reclassified from Accumulated Other
	Comprehensive Income Nine Months Ended September 30,		Affected Line Item in the
	2020	2019	Statements of Income
	(In Thousands)
			Net realized gains on sales of
Unrealized gains on available-for-    sale securities	$          78	$        10	available-for-sale securities
			(Total reclassified amount before tax)
Income Taxes	(18)	(2)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$          60	$          8