Note 3 - Investment Securities

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Investments in Debt and Equity Instruments, Cash and Cash Equivalents, Unrealized and Realized Gains (Losses) [Text Block]

(

3

)

       INVESTMENT SECURITIES

Investment securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at

December 31, 2018

and

2017

are summarized as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2018:
Securities available for sale:
Agency mortgage-backed securities	$	94,746	$	–	$	3,489	$	91,257
Agency CMO		33,222		152		382		32,992
Other debt securities:
Agency notes and bonds		75,461		59		1,016		74,504
Municipal obligations		63,008		651		571		63,088
Total securities available for sale	$	266,437	$	862	$	5,458	$	261,841
December 31, 2017:
Securities available for sale:
Agency mortgage-backed securities	$	114,902	$	–	$	2,253	$	112,649
Agency CMO		15,660		1		338		15,323
Other debt securities:
Agency notes and bonds		70,013		–		985		69,028
Municipal obligations		73,303		1,274		405		74,172
Total securities available for sale	$	273,878	$	1,275	$	3,981	$	271,172
Securities held to maturity:
Agency mortgage-backed securities	$	1	$	–	$	–	$	1
Total securities held to maturity	$	1	$	–	$	–	$	1

The amortized cost and fair value of debt securities as of

December 31, 2018,

by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO

may

differ from contractual maturities because the mortgages underlying the obligations

may

be prepaid without penalty.

	Securities Available for Sale
	Amortized Cost		Fair Value
(In thousands)
Due in one year or less	$	28,204	$	28,078
Due after one year through five years		58,319		57,485
Due after five years through ten years		34,062		33,890
Due after ten years		17,884		18,139
		138,469		137,592
Mortgage-backed securities and CMO		127,968		124,249
	$	266,437	$	261,841

At

December 31, 2018,

certain securities available for sale with an amortized cost of

$47.2

million and fair value of

$46.4

million were pledged to secure public fund deposits.

At

December 31, 2018

and

2017,

there were

no

holdings of securities of any

one

issuer, other than the U.S. Government and its agencies, with an aggregate book value greater that

10%

of stockholders’ equity.

Information pertaining to investment securities with gross unrealized losses at

December 31, 2018

and

2017,

aggregated by investment category and the length of time that individual investment securities have been in a continuous loss position, follows. At

December 31, 2018

and

2017,

the Company did

not

have any securities held to maturity with an unrealized loss.

(Dollars in thousands)	Number of Investment Positions		Gross Fair  Value		Unrealized Losses
December 31, 2018:
Continuous loss position less than twelve months:
Agency mortgage-backed securities		1	$	1,563	$	13
Agency CMO		4		2,870		1
Agency notes and bonds		1		499		1
Municipal obligations		11		3,552		12
Total less than twelve months		17		8,484		27
Continuous loss position more than twelve months:
Agency mortgage-backed securities		97		89,680		3,476
Agency CMO		24		12,168		381
Agency notes and bonds		22		67,927		1,015
Municipal obligations		49		25,316		559
Total more than twelve months		192		195,091		5,431
Total securities available for sale		209	$	203,575	$	5,458

(Dollars in thousands)	Number of Investment Positions		Gross Fair  Value		Unrealized Losses
December 31, 2017:
Continuous loss position less than twelve months:
Agency mortgage-backed securities		37	$	37,570	$	400
Agency CMO		6		3,036		38
Agency notes and bonds		4		11,119		69
Municipal obligations		20		10,955		83
Total less than twelve months		67		62,680		590
Continuous loss position more than twelve months:
Agency mortgage-backed securities		60		74,960		1,853
Agency CMO		18		11,801		300
Agency notes and bonds		19		57,909		916
Municipal obligations		29		14,667		322
Total more than twelve months		126		159,337		3,391
Total securities available for sale		193	$	222,017	$	3,981

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (

1

) the length of time and the extent to which the fair value has been less than cost, (

2

) the financial condition and near-term prospects of the issuer, and (

3

) 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

December 31, 2018,

the municipal obligations and U.S. government agency debt securities, including agency mortgage-backed securities, agency CMOs, and agency notes and bonds, in a loss position had depreciated approximately

2.6%

from the amortized cost basis. All of the U.S. government agency securities and municipal securities are issued by U.S. government agencies, government-sponsored enterprises, or municipal governments, and are secured by

first

mortgage loans or municipal project revenues. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the U.S. government agency debt securities and municipal securities in an unrealized loss position until maturity,

no

declines are deemed to be other-than-temporary.

While management does

not

anticipate any credit-related impairment losses at

December 31, 2018,

additional deterioration in market and economic conditions

may

have an adverse impact on the credit quality in the future.

During the year ended

December 31, 2018,

the Company realized gross gains of

$218,000

and gross losses of

$313,000

on sales of available for sale securities. During the year ended

December 31, 2017,

the Company realized gross gains of

$61,000

and gross losses of

$7,000

on the sale of available for sale securities. During the year ended

December 31, 2016,

the Company realized gross gains of

$176,000

and gross losses of

$0

on the sale of available for sale securities.

Equity Securities

In

September 2018,

the Company acquired

90,000

shares of common stock in another bank holding company, representing approximately

5%

of the outstanding common stock of the entity, for a total investment of

$1.9

million. During the year ended

December 31, 2018,

the Company recognized an unrealized loss of

$207,000

on this equity investment. At

December 31, 2018,

the equity investment had a fair value of

$1.7

million and is included in other assets on the consolidated balance sheet.

During the year ended

December 31, 2016,

the Company sold its investment in another financial institution for

$856,000

resulting in a gain of

$145,000.