Note 3 – Investment Securities

The amortized cost and fair value of securities are as follows:


	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
		(Dollars in thousands)
SECURITIES AVAILABLE FOR SALE:
Debt Securities
U.S. government agencies	$	2,011	$	134	$	-	$	2,145
Municipal bonds		34,985		835		(1)		35,819
Mortgage-backed securities:
Collateralized mortgage obligations-private label		23		-		-		23
Collateralized mortgage obligations-government sponsored entities		27,081		393		(133)		27,341
Government National Mortgage Association		162		14		-		176
Federal National Mortgage Association		1,944		69		-		2,013
Federal Home Loan Mortgage Corporation		3,211		156		-		3,367
Asset-backed securities-private label		-		215		-		215
Asset-backed securities-government sponsored entities		33		2		-		35
Total Debt Securities	$	69,450	$	1,818	$	(134)	$	71,134
Equity Securities		22		45		-		67
Total Securities Available for Sale	$	69,472	$	1,863	$	(134)	$	71,201


	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
		(Dollars in thousands)
SECURITIES AVAILABLE FOR SALE:
Debt Securities
U.S. government agencies	$	2,012	$	-	$	(51)	$	1,961
Municipal bonds		44,546		521		(125)		44,942
Mortgage-backed securities:
Collateralized mortgage obligations-private label		27		-		-		27
Collateralized mortgage obligations-government sponsored entities		32,987		152		(686)		32,453
Government National Mortgage Association		191		8		-		199
Federal National Mortgage Association		2,367		41		(23)		2,385
Federal Home Loan Mortgage Corporation		3,833		64		(9)		3,888
Asset-backed securities-private label		-		270		-		270
Asset-backed securities-government sponsored entities		43		1		-		44
Total Debt Securities	$	86,006	$	1,057	$	(894)	$	86,169
Equity Securities		22		2		-		24
Total Securities Available for Sale	$	86,028	$	1,059	$	(894)	$	86,193

Debt Securities

All of our collateralized mortgage obligations are backed by one- to four-family residential mortgages.

At December 31, 2019, thirty-three municipal bonds with a cost of $10.9 million and fair value of $11.2 million were pledged under a collateral agreement with the Federal Reserve Bank (“FRB”) of New York for liquidity borrowing. At December 31, 2018, thirty-two municipal bonds with a cost of $11.0 million and fair value of $11.2 million were pledged with the FRB. In addition, at December 31, 2019, sixteen municipal bonds with a cost of $3.6 million and fair value of $3.7 million were pledged as collateral for customer deposits in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At December 31, 2018, twenty-two municipal bonds with a cost and fair value of $5.6 million were pledged as collateral for customer deposits in excess of FDIC insurance limits.

The following table sets forth the Company’s investment in securities available for sale with gross unrealized losses of less than twelve months and gross unrealized losses of twelve months or more and associated fair values as of the dates indicated:


	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
December 31, 2019
Municipal bonds	$	399		(1)	$	-	$	-	$	399	$	(1)
Mortgage-backed securities		423		(3)		10,676		(130)		11,099		(133)
	$	822	$	(4)	$	10,676	$	(130)	$	11,498	$	(134)


December 31, 2018
U.S. government agencies	$	-	$	-	$	1,961	$	(51)	$	1,961	$	(51)
Municipal bonds		1,531		(5)		4,299		(120)		5,830		(125)
Mortgage-backed securities		736		(5)		23,065		(713)		23,801		(718)
	$	2,267	$	(10)	$	29,325	$	(884)	$	31,592	$	(894)

The Company reviews all investment securities on an ongoing basis for the presence of OTTI with formal reviews performed quarterly.

At December 31, 2019, the Company’s investment portfolio included two securities in the “unrealized losses less than twelve months” category and 25 securities in the “unrealized losses twelve months or more” category. Management has the intent and ability to hold these securities until maturity. Management believes the temporary impairments were due to declines in fair value resulting from changes in interest rates and/or increased credit liquidity spreads since the securities were purchased. The unrealized losses on debt securities shown in the previous tables were recorded as a component of other comprehensive income (loss), net of tax expense (benefit) on the Company’s consolidated statements of stockholders’ equity.

The following table presents a summary of the credit-related OTTI charges recognized as components of income:


	For The Years Ended December 31,
	2019		2018
	(Dollars in thousands)
Beginning balance	$	347	$	435
Additions:
Credit loss not previously recognized		-		-
Reductions:
Losses realized during the period on OTTI previously recognized		-		-
Receipt of cash flows on previously recorded OTTI		(53)		(88)
Ending balance	$	294	$	347

A deterioration in credit quality and/or other factors that may limit the liquidity of a security in our portfolio might adversely affect the fair values of the Company’s investment portfolio and may increase the potential that certain unrealized losses will be designated as “other-than-temporary” and that the Company may incur additional write-downs in future periods.

During the years ended December 31, 2019 and 2018, the Company did not sell any available for sale debt securities. During the year ended December 31, 2017, the Company sold eighteen municipal bonds for total proceeds of $6.5 million resulting in realized gains of $244,000.

Equity Securities

At December 31, 2019 and 2018, equity securities consisted of 22,368 shares of Federal Home Loan Mortgage Corporation (“FHLMC”) common stock. During the years ended December 31, 2019 and 2018, the Company recognized an unrealized gain of $43,000 and $2,000, respectively, on the equity securities, which was recorded in non-interest income in the consolidated statements of income. There were no sales of equity securities during the years ended December 31, 2019, 2018 or 2017.

Scheduled contractual maturities of available for sale debt securities are as follows:


	Amortized		Fair
	Cost		Value
	(Dollars in thousands)
December 31, 2019:
Less than one year	$	480	$	481
After one year through five years		7,223		7,306
After five years through ten years		13,836		14,048
After ten years		15,457		16,129
Mortgage-backed securities		32,421		32,920
Asset-backed securities		33		250
	$	69,450	$	71,134