NOTE 2 – Investment Securities

The amortized costs and fair value of investment securities are as follows:


	September 30, 2018
		Amortized	Gross Unrealized		Fair
(dollars in thousands)		Cost	Gains	Losses	Value
Available for sale
US government agencies	$	8,981	2	349	8,634
SBA securities		3,635	-	163	3,472
State and political subdivisions		8,460	39	127	8,372
Asset-backed securities		6,583	13	10	6,586
Mortgage-backed securities
FHLMC		8,012	-	361	7,651
FNMA		30,100	1	933	29,168
GNMA		3,168	1	166	3,003
Total mortgage-backed securities		41,280	2	1,460	39,822
Total investment securities available for sale	$	68,939	56	2,109	66,886

	December 31, 2017
		Amortized	Gross Unrealized		Fair
		Cost	Gains	Losses	Value
Available for sale
US government agencies	$	8,749	1	97	8,653
SBA securities		4,087	-	24	4,063
State and political subdivisions		11,242	179	25	11,396
Mortgage-backed securities
FHLMC		9,102	-	149	8,953
FNMA		29,383	3	386	29,000
GNMA		5,618	2	82	5,538
Total mortgage-backed securities		44,103	5	617	43,491
Total investment securities available for sale	$	68,181	185	763	67,603

During the first nine months of 2018, there were $5.8 million of investment securities either sold or called, resulting in a loss on sale of $1,000. During the first nine months of 2017, there were $915,000 of investment securities either sold or called, subsequently resulting in a gain on sale of $2,000.

Contractual maturities and yields on the Company’s investment securities at September 30, 2018 and December 31, 2017 are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2018
	Less than one year			One to five years		Five to ten years		Over ten years		Total
(dollars in thousands)	Amount		Yield	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield
Available for sale
US government agencies	$	-	-	2,625	2.12%	6,009	2.75%	-	-	8,634	2.56%
SBA securities		-	-	-	-	-	-	3,472	2.67%	3,472	2.67%
State and political subdivisions		-	-	816	2.60%	4,186	3.09%	3,370	2.83%	8,372	2.94%
Asset-backed securities		-	-	-	-	-	-	6,586	2.91%	6,586	2.91%
Mortgage-backed securities		-	-	3,925	1.83%	9,119	1.80%	26,778	2.48%	39,822	2.26%
Total	$	-	-	7,366	2.02%	19,314	2.37%	40,206	2.59%	66,886	2.47%

	December 31, 2017
	Less than one year			One to five years		Five to ten years		Over ten years		Total
	Amount		Yield	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield
Available for sale
US government agencies	$	995	1.15%	1,503	2.04%	6,155	2.40%	-	-	8,653	2.20%
SBA securities		-	-	-	-	-	-	4,063	2.45%	4,063	2.45%
State and political subdivisions		-	-	1,163	1.96%	7,162	2.84%	3,071	2.76%	11,396	2.73%
Mortgage-backed securities		432	0.99%	-	-	11,328	1.84%	31,731	2.06%	43,491	1.99%
Total	$	1,427	1.10%	2,666	1.59%	24,645	2.27%	38,865	2.15%	67,603	2.17%

The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities at September 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


	September 30, 2018
		Less than 12 months						12 months or longer						Total
		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(dollars in thousands)	#	value		losses		#	value		losses		#	value		losses
Available for sale
US government agencies	3	$	3,368	$	86	6	$	4,764	$	263	9	$	8,132	$	349
SBA securities	-		-		-	2		3,472		163	2		3,472		163
State and political subdivisions	4		3,491		48	5		1,935		79	9		5,426		127
Asset-backed securities	2		3,474		10	-		-		-	2		3,474		10
Mortgage-backed securities
FHLMC	-		-		-	10		7,651		361	10		7,651		361
FNMA	4		5,476		60	23		23,656		873	27		29,132		933
GNMA	1		1,206		70	2		1,776		96	3		2,982		166
Total	14	$	17,015	$	274	48	$	43,254	$	1,835	62	$	60,269	$	2,109

	December 31, 2017
		Less than 12 months					12 months or longer							Total
		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	#	value		losses		#	value		losses		#	value		losses
Available for sale
US government agencies	5	$	4,184	$	22	4	$	3,968	$	75	9	$	8,152	$	97
SBA securities	1		2,936		13	1		1,127		11	2		4,063		24
State and political subdivisions	3		1,214		9	2		792		16	5		2,006		25
Mortgage-backed securities
FHLMC	3		2,897		26	7		6,056		123	10		8,953		149
FNMA	11		14,345		135	13		14,597		251	24		28,942		386
GNMA	2		2,270		40	1		971		42	3		3,241		82
Total	25	$	27,846	$	245	28	$	27,511	$	518 53		$	55,357	$	763

At September 30, 2018, the Company had 14 individual investments with a fair market value of $17.0 million that were in an unrealized loss position for less than 12 months and 48 individual investments with a fair market value of $43.3 million that were in an unrealized loss position for 12 months or longer. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality. The individual securities are each investment grade securities. The Company considers the length of time and extent to which the fair value of available-for-sale debt securities have been less than cost to conclude that such securities are not other-than-temporarily impaired. The Company also considers other factors such as the financial condition of the issuer, including credit ratings and specific events affecting the operations of the issuer, volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions.

As the Company has no intent to sell securities with unrealized losses and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of amortized cost, the Company has concluded that these securities are not impaired on an other-than-temporary basis.

Other investments are comprised of the following and are recorded at cost which approximates fair value.


(dollars in thousands)	September 30, 2018		December 31, 2017
Federal Home Loan Bank stock	$	4,373	3,754
Investment in Trust Preferred securities		403	403
Other investments		153	305
Total other investments	$	4,929	4,462

The Company has evaluated the Federal Home Loan Bank (“FHLB”) stock for impairment and determined that the investment in the FHLB stock is not other than temporarily impaired as of September 30, 2018 and ultimate recoverability of the par value of this investment is probable. All of the FHLB stock is used to collateralize advances with the FHLB.

At September 30, 2018, there were no securities pledged as collateral for borrowings or client deposits. At December 31, 2017, $7.7 million of securities were pledged as collateral for repurchase agreements from brokers.