NOTE 4. INVESTMENT SECURITIES

The following table provides information on the amortized cost and estimated fair values of investment securities.


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
Available-for-sale securities:
December 31, 2018
U.S. Government agencies	$	34,285	$	2	$	651	$	33,636
Mortgage-backed		124,162		115		3,481		120,796
Total		158,447		117		4,132		154,432

December 31, 2017
U.S. Government agencies	$	45,806	$	23	$	497	$	45,332
Mortgage-backed		152,198		157		1,390		150,965
Equity		666		-		8		658
Total	$	198,670	$	180	$	1,895	$	196,955

The Company adopted ASU 2016-01 effective January 1, 2018 and equity securities with an aggregate fair value of $1.3 million at
December 31, 2018 are presented separately on the balance sheet. A cumulative effect adjustment of $(6) thousand was recorded to retained
earnings from accumulated other comprehensive loss upon adoption. The fair value adjustment recorded through earnings totaled $(5) thousand
for the year ended December 31, 2018.

Held-to-maturity securities:
December 31, 2018
U.S. Government agencies	$	1,642	$	-	$	25	$	1,617
States and political subdivisions		1,401		14		-		1,415
Other Debt Securities (1)		3,000		-		32		2,968
Total	$	6,043	$	14	$	57	$	6,000

December 31, 2017
U.S. Government agencies	$	1,844	$	21	$	-	$	1,865
States and political subdivisions		1,403		47		-		1,450
Other Debt Securities (1)		3,000		76		-		3,076
Total	$	6,247	$	144	$	-	$	6,391

(1)

On December 15, 2016, the Company bought $3.0 million in ten-year subordinated notes from a local regional bank with a fixed rate of 6.5% for the first five years and a floating rate for the remaining five years. After the first five years the note is callable by the issuer. The Company intends to hold to maturity of December 30, 2026 if the notes are not called.

The following table provides information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2018.


	Less than				More than
	12 Months				12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
December 31, 2018
Available-for-sale securities:
U.S. Government agencies	$	1,079	$	10	$	32,362	$	641	$	33,441	$	651
Mortgage-backed		13,981		261		99,904		3,220		113,885		3,481
Total	$	15,060	$	271	$	132,266	$	3,861	$	147,326	$	4,132

Held-to-maturity securities:
U.S. Government agencies		-		-		1,617		25		1,617		25
Other debt securities		2,968		32		-		-		2,968		32
Total	$	2,968	$	32	$	1,617	$	25	$	4,585	$	57


	Less than				More than
	12 Months				12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
December 31, 2017
Available-for-sale securities:
U.S. Government agencies	$	37,550	$	453	$	5,956	$	44	$	43,506	$	497
Mortgage-backed		96,622		700		28,215		690		124,837		1,390
Equity securities		-		-		666		8		666		8
Total	$	134,172	$	1,153	$	34,837	$	742	$	169,009	$	1,895

All of the securities with unrealized losses in the portfolio have modest duration risk, low credit risk, and minimal losses when compared to total amortized cost. The unrealized losses on debt securities that exist are the result of market changes in interest rates since original purchase and are not related to credit concerns. Because the Company 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 bases, which may be at maturity for debt securities, the Company considers the unrealized losses to be temporary. There were eighty-two available-for-sale securities in an unrealized loss position at December 31, 2018, of which 74 were mortgage-backed and 8 were U.S. Government agencies. Two held-to-maturity securities were in an unrealized loss position at December 31, 2018, one mortgage-backed and one other debt security.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at December 31, 2018.


	Available for sale				Held to maturity
	Amortized				Amortized
(Dollars in thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	5,992	$	5,919	$	500	$	505
Due after one year through five years		29,332		28,721		400		406
Due after five years through ten years		62,893		61,292		3,501		3,472
Due after ten years		60,230		58,500		1,642		1,617
Total	$	158,447	$	154,432	$	6,043	$	6,000

The maturity dates for debt securities are determined using contractual maturity dates.

The following table sets forth the amortized cost and estimated fair values of securities which have been pledged as collateral for obligations to federal, state and local government agencies, and other purposes as required or permitted by law, or sold under agreements to repurchase. All pledged securities are in the available-for-sale investment portfolio.


	December 31, 2018				December 31, 2017
	Amortized				Amortized
(Dollars in thousands)	Cost		Fair Value		Cost		Fair Value
Pledged available-for-sale securities	$	99,729	$	97,170	$	131,035	$	129,880

There were no obligations of states or political subdivisions with carrying values, as to any issuer, exceeding 10% of stockholders’ equity at December 31, 2018 or 2017.

Proceeds from sales of investment securities were $0 for the years ended December 31, 2018 and 2017, respectively. Gross gains from sales and calls of investment securities were $0 and $5 thousand for the years ended December 31, 2018 and 2017, respectively. There were no gross losses in 2018 and 2017.