NOTE 4 – INVESTMENT SECURITIES

Investment securities are accounted for according to their purpose and holding period. Trading securities are those that are bought and held principally for the purpose of selling them in the near term. The Company held no trading securities at June 30, 2020 or December 31, 2019. Available-for-sale investment securities, comprised of debt and mortgage-backed securities, are those that may be sold before maturity due to changes in the Company's interest rate risk profile or funding needs, and are reported at fair value with unrealized gains and losses, net of taxes, reported as a component of other comprehensive income. Held-to-maturity investment securities are those that management has the positive intent and ability to hold to maturity and are reported at amortized cost. The Company held no held-to-maturity securities at June 30, 2020 or December 31, 2019.

Realized gains and losses are recorded in noninterest income and are determined on a trade date basis using the specific identification method. Interest and dividends on investment securities are recognized in interest income on an accrual basis. Premiums and discounts are amortized or accreted into interest income using the interest method over the expected lives of the individual securities.

The following table summarizes the amortized cost and estimated fair value of the Company’s investment securities portfolio at June 30, 2020 and December 31, 2019:


	At June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

Collateralized mortgage obligations	$	27,193	$	354	$	(36)	$	27,511
Agency mortgage-backed securities		31,780		887		(12)		32,655
Municipal securities		12,210		357		(9)		12,558
U.S. Government agency securities		11,816		13		(19)		11,810

Total securities available for sale	$	82,999	$	1,611	$	(76)	$	84,534


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

Collateralized mortgage obligations	$	27,618	$	52	$	(187)	$	27,483
Agency mortgage-backed securities		27,823		149		(135)		27,837
Municipal securities		12,301		191		(17)		12,475
U.S. Government agency securities		3,195		1		(5)		3,191
U.S. Treasury securities		500		—		—		500

Total securities available for sale	$	71,437	$	393	$	(344)	$	71,486

The 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 June 30, 2020 and December 31, 2019 are as follows:


June 30, 2020	Less than 12 months				12 months or more				Total
Securities available for sale:	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
	(dollars in thousands)
Collateralized mortgage obligations	$	3,811	$	(9)	$	1,337	$	(27)	$	5,148	$	(36)
Agency mortgage-backed securities		965		(4)		300		(8)		1,265		(12)
Municipal securities		856		(6)		546		(3)		1,402		(9)
U.S. Government agency securities		4,703		(19)		—		—		4,703		(19)
	$	10,335	$	(38)	$	2,183	$	(38)	$	12,518	$	(76)


December 31, 2019	Less than 12 months				12 months or more				Total
Securities available for sale:	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
	(dollars in thousands)
Collateralized mortgage obligations	$	11,792	$	(65)	$	7,330	$	(122)	$	19,122	$	(187)
Agency mortgage-backed securities		4,577		(20)		10,918		(115)		15,495		(135)
Municipal securities		1,806		(7)		864		(10)		2,670		(17)
U.S. Government agency securities		591		(5)		—		—		591		(5)
	$	18,766	$	(97)	$	19,112	$	(247)	$	37,878	$	(344)

Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary-impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At June 30, 2020, the Company recorded unrealized losses in its portfolio of debt securities totaling $76,000 related to 25 securities, which resulted from decreases in market interest rates, spread volatility, and other factors that management deems to be temporary. Management does not believe the securities are impaired due to reasons of credit quality. Since management believes that it is more likely than not that the Company will not be required to sell these securities prior to maturity or a full recovery of the amortized cost, the Company does not consider these securities to be other-than-temporarily impaired.

At December 31, 2019, the Company recorded unrealized losses in its portfolio of debt securities totaling $344,000 related to 97 securities, which resulted from decreases in market interest rates, spread volatility, and other factors that management deems to be temporary. Management does not believe the securities are impaired due to reasons of credit quality. Since management believes that it is more likely than not that the Company will not be required to sell these securities prior to maturity or a full recovery of the amortized cost, the Company does not consider these securities to be other-than-temporarily impaired.

Shown below are contractual maturities of debt securities at June 30, 2020. Actual maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.


	At June 30, 2020

	Amortized		Fair		Yield
(dollars in thousands)	Cost		Value		(1), (2)
Available for sale securities maturing:
Within one year	$	1,871	$	1,877	1.79	%
Over one to five years		1,593		1,631	2.36	%
Over five to ten years		15,727		15,858	1.45	%
Over ten years		63,808		65,168	1.79	%
Total debt securities	$	82,999	$	84,534

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(1) Yields are stated as book yields which are adjusted for amortization and accretion of purchase premiums and discounts, respectively.

(2) Yields on tax-exempt obligations are computed on a tax-equivalent basis.