NOTE 2 – SECURITIES


	March 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(dollars in thousands)	Cost		Gains		Losses		Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs and U.S. Agencies
Residential Mortgage Backed Securities ("MBS")	$	12,343	$	27	$	126	$	12,244
Residential Collateralized Mortgage Obligations ("CMOs")		104,772		754		1,014		104,512
U.S. Agency		11,938		19		313		11,644
Total securities available for sale	$	129,053	$	800	$	1,453	$	128,400

Securities held to maturity (HTM)
Asset-backed securities issued by GSEs and U.S. Agencies
Residential MBS	$	25,191	$	124	$	192	$	25,123
Residential CMOs		52,074		188		842		51,420
U.S. Agency		10,319		31		188		10,162
Asset-backed securities issued by Others:
Residential CMOs		465		—		19		446

Callable GSE Agency Bonds		5,007		—		31		4,976
Certificates of Deposit Fixed		950		—		—		950
U.S. government obligations		1,489		—		1		1,488
Total securities held to maturity	$	95,495	$	343	$	1,273	$	94,565

Equity securities carried at fair value through income
CRA investment fund	$	4,511	$	—	$	—	$	4,511
Non-marketable equity securities
Other equity securities	$	209	$	—	$	—	$	209


	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(dollars in thousands)	Cost		Gains		Losses		Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs and U.S. Agencies
Residential MBS	$	7,641	$	1	$	281	$	7,361
Residential CMOs		102,411		199		1,870		100,740
U.S. Agency		12,472		9		606		11,875
Total securities available for sale	$	122,524	$	209	$	2,757	$	119,976

Securities held to maturity (HTM)
Asset-backed securities issued by GSEs and U.S. Agencies
Residential MBS	$	25,948	$	75	$	756	$	25,267
Residential CMOs		52,375		64		1,360		51,079
U.S. Agency		10,507		7		404		10,110
Asset-backed securities issued by Others:
Residential CMOs		483		—		41		442

Callable GSE Agency Bonds		5,009		—		110		4,899
Certificates of Deposit Fixed		950		—		—		950
U.S. government obligations		999		—		1		998
Total securities held to maturity	$	96,271	$	146	$	2,672	$	93,745

Equity securities carried at fair value through income
CRA investment fund	$	4,428	$	—	$	—	$	4,428
Non-marketable equity securities
Other equity securities	$	209	$	—	$	—	$	209

At March 31, 2019, and December 31, 2018 securities with an amortized cost of $45.5 million and $41.3 million were pledged to secure certain customer deposits. At March 31, 2019, no securities were pledged as collateral for advances from the Federal Home Loan Bank (“FHLB”) of Atlanta, and at December 31, 2018, securities with an amortized cost of $3.3 million were pledged as collateral for advances from the Federal Home Loan Bank (“FHLB”) of Atlanta.

At March 31, 2019, and December 31, 2018, greater than 99% of the asset-backed securities and agency bond portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs and U.S. Agencies had an average life of 4.14 years and 4.37 years and average duration of 3.68 years and 3.86 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs and U.S. Agencies had an average life of 4.54 years and 4.88 years and average duration of 3.99 years and 4.25 years and are guaranteed by their issuer as to credit risk.

Management believes that AFS securities with unrealized losses will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity. Because our intention is not to sell the investments and it is not more likely than not that the Company will be required to sell the investments, management considers the unrealized losses in the AFS portfolio to be temporary.

The Company intends to, and has the ability to, hold the HTM securities with unrealized losses until they mature, at which time the Company will receive full value for the securities. Because our intention is not to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, management considers the unrealized losses in the held-to-maturity portfolio to be temporary.

No charges related to other-than-temporary impairment were made during the three months ended March 31, 2019 and the year ended December 31, 2018.

During the three months ended March 31, 2019 and the year ended December 31, 2018, there were no sales of securities in the ordinary course of operations.

During January 31, 2018, the Company sold virtually all of the acquired securities from the County First acquisition netting proceeds of $34.9 million which served as the fair value of the acquired securities.

ASC 320 “Investments - Debt Securities.” permits the sale of HTM securities for certain changes in circumstances. The Company may dispose of HTM securities using the safe harbor rule that allows for the sale of HTM securities when principal repayments have reduced the balance to less than 15% of original purchased par. ASC 320 10‑25‑15 indicates that a sale of a debt security after a substantial portion of the principal has been collected is equivalent to holding the security to maturity. In addition, the Company may dispose of HTM securities under ASC 320‑10‑25‑6 due to a significant deterioration in the issues’ creditworthiness.

AFS Securities

Gross unrealized losses and estimated fair value by length of time that individual AFS securities have been in a continuous unrealized loss position at March 31, 2019, and December 31, 2018 were as follows:


March 31, 2019	Less Than 12				More Than 12
	Months				Months				Total
			Unrealized				Unrealized				Unrealized
(dollars in thousands)	Fair Value		Loss		Fair Value		Loss		Fair Value		Losses
Asset-backed securities issued by GSEs and U.S. Agencies	$	6,789	$	23	$	55,540	$	1,430	$	62,329	$	1,453
	$	6,789	$	23	$	55,540	$	1,430	$	62,329	$	1,453


December 31, 2018	Less Than 12				More Than 12
	Months				Months				Total
			Unrealized				Unrealized				Unrealized
(dollars in thousands)	Fair Value		Loss		Fair Value		Loss		Fair Value		Losses
Asset-backed securities issued by GSEs and U.S. Agencies	$	30,095	$	163	$	54,846	$	2,594	$	84,941	$	2,757
	$	30,095	$	163	$	54,846	$	2,594	$	84,941	$	2,757

At March 31, 2019, and December 31, 2018, the AFS investment portfolio had an estimated fair value of $128 million and $120.0 million, of which $62.3 million and $84.9 million, respectively, of the securities had some unrealized losses from their amortized cost.

AFS asset-backed securities issued by GSEs are guaranteed by the issuer and AFS U.S. government agency securities and bonds are guaranteed by the full faith and credit of the U.S. government. At March 31, 2019, and December 31, 2018, total unrealized losses were $1.5 million and $2.8 million of the portfolio amortized cost of $129.0 million and $122.5 million, respectively. AFS asset-backed securities issued by GSEs and U.S. Agencies with unrealized losses had an average life of 4.23 years and 4.32 years and an average duration of 3.78 years and 3.83 years. Management believes that the securities will either recover in market value or be paid off as agreed.

HTM Securities

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018 were as follows:


March 31, 2019	Less Than 12				More Than 12
	Months				Months				Total
			Unrealized				Unrealized				Unrealized
(dollars in thousands)	Fair Value		Loss		Fair Value		Loss		Fair Value		Losses
Asset-backed securities issued by GSEs and U.S. Agencies	$	2,732	$	12	$	56,849	$	1,211	$	59,581	$	1,223
Callable GSE Agency Bonds		—		—		4,976		31		4,976		31
Asset-backed securities issued by Others		—		—		446		19		446		19
	$	2,732	$	12	$	62,271	$	1,261	$	65,003	$	1,273


December 31, 2018	Less Than 12				More Than 12
	Months				Months				Total
			Unrealized				Unrealized				Unrealized
(dollars in thousands)	Fair Value		Loss		Fair Value		Loss		Fair Value		Losses
Asset-backed securities issued by GSEs and U.S. Agencies	$	6,955	$	38	$	70,752	$	2,483	$	77,707	$	2,521
Callable GSE Agency Bonds		—		—		4,899		110		4,899		110
Asset-backed securities issued by Others		—		—		441		41		441		41
	$	6,955	$	38	$	76,092	$	2,634	$	83,047	$	2,672

At March 31, 2019, and December 31, 2018, the HTM investment portfolio had an estimated fair value of $94.6 million and $93.7 million of which $65.0 million and $83.0 million of the securities had some unrealized losses from their amortized cost, respectively. Of these securities, $64.6 million and $82.6 million were asset-backed securities issued by GSEs and U.S. Agencies and the remaining $446,000 and $441,000 were asset-backed securities issued by others.

HTM asset-backed securities issued by GSEs and GSE agency bonds are guaranteed by the issuer and HTM U.S. government agency securities and bonds are guaranteed by the full faith and credit of the U.S. government. At March 31, 2019, and December 31, 2018, total unrealized losses on the portfolio were $1.3 million and $2.7 million of the portfolio amortized cost of $94.5 million and $94.8 million, respectively. The securities with unrealized losses had an average life of 3.90 years and 4.88 years and an average duration of 3.49 years and 4.26 years. Management believes that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. The securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. At March 31, 2019, and December 31, 2018, total unrealized losses on the asset-backed securities issued by others were $19,000 and $41,000 of the portfolio amortized cost of $465,000 and $482,000, respectively. HTM asset-backed securities issued by others with unrealized losses had an average life of 3.19 years and 3.01 years and an average duration of 2.65 years and 2.33 years.

Credit Quality of Asset-Backed Securities and Agency Bonds

The tables below present the Standard & Poor’s (“S&P”) or equivalent credit rating from other major rating agencies for AFS and HTM securities at March 31, 2019 and December 31, 2018 by carrying value. The Company considers noninvestment grade securities rated BB+ or lower as classified assets for regulatory and financial reporting. GSE asset-backed securities and GSE agency bonds with S&P AA+ ratings were treated as AAA based on regulatory guidance.


March 31, 2019			December 31, 2018
Credit Rating		Amount	Credit Rating		Amount
(dollars in thousands)
AAA	$	223,430	AAA	$	215,764
BB		465	BB		483
B+		—	B+		—
Total	$	223,895	Total	$	216,247