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Investment Securities
 9 Months Ended
Sep. 30, 2018
Investments [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
8.
Investment Securities
The cost basis and fair values of investment securities are summarized as follows (in thousands):
Investment securities available for sale (AFS):
 
 
 
September 30, 2018
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
Value
US Agency
 
 
$
6,731
 
 
 
$
—
 
 
 
$
(308
)
 
 
$
6,423
 
US Agency mortgage- backed securities
 
 
 
87,075
 
 
 
 
232
 
 
 
 
(2,308
)
 
 
 
84,999
 
Municipal
 
 
 
11,240
 
 
 
 
15
 
 
 
 
(489
)
 
 
 
10,766
 
Corporate bonds
 
 
 
37,380
 
 
 
 
92
 
 
 
 
(907
)
 
 
 
36,565
 
Total
 
 
$
142,426
 
 
 
$
339
 
 
 
$
(4,012
)
 
 
$
138,753
 
 
Investment securities held to maturity (HTM):
 
 
 
September 30, 2018
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
Value
US Agency mortgage- backed securities
 
 
$
8,294
 
 
 
$
65
 
 
 
$
(256
)
 
 
$
8,103
 
Municipal
 
 
 
24,341
 
 
 
 
25
 
 
 
 
(956
)
 
 
 
23,410
 
Corporate bonds and other securities
 
 
 
6,038
 
 
 
 
10
 
 
 
 
(216
)
 
 
 
5,832
 
Total
 
 
$
38,673
 
 
 
$
100
 
 
 
$
(1,428
)
 
 
$
37,345
 
Investment securities available for sale (AFS):
 
 
 
December 31, 2017
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
Value
US Agency
 
 
$
6,612
 
 
 
$
—
 
 
 
$
(40
)
 
 
$
6,572
 
US Agency mortgage- backed securities
 
 
 
79,854
 
 
 
 
611
 
 
 
 
(719
)
 
 
 
79,746
 
Municipal
 
 
 
7,198
 
 
 
 
27
 
 
 
 
(189
)
 
 
 
7,036
 
Corporate bonds
 
 
 
35,886
 
 
 
 
322
 
 
 
 
(424
)
 
 
 
35,784
 
Total
 
 
$
129,550
 
 
 
$
960
 
 
 
$
(1,372
)
 
 
$
129,138
 
Investment securities held to maturity (HTM):
 
 
 
December 31, 2017
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
Value
US Agency mortgage- backed securities
 
 
$
9,740
 
 
 
$
149
 
 
 
$
(45
)
 
 
$
9,844
 
Municipal
 
 
 
22,970
 
 
 
 
203
 
 
 
 
(238
)
 
 
 
22,935
 
Corporate bonds and other securities
 
 
 
6,042
 
 
 
 
38
 
 
 
 
(48
)
 
 
 
6,032
 
Total
 
 
$
38,752
 
 
 
$
390
 
 
 
$
(331
)
 
 
$
38,811
 
 
Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investor’s Service or Standard & Poor’s rating of  “A.” At September 30, 2018, 57.0% of the portfolio was rated “AAA” as compared to 57.8% at December 31, 2017. Approximately 9.7% of the portfolio was either rated below “A” or unrated at September 30, 2018 and December 31, 2017.
The Company sold no AFS securities during the third quarter of 2018. Total proceeds from the sale of AFS securities for the first nine months of 2018 were $4.5 million resulting in $15,000 of gross investment security gains and $163,000 of gross investment security losses. The Company sold $937,000 AFS securities in the third quarter of 2017 resulting in $56,000 of gross investment security gains and sold $8.1 million AFS securities in the first nine months of 2017 resulting in $115,000 of gross investment security gains.
The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $110,038,000 at September 30, 2018 and $117,181,000 at December 31, 2017.
The following tables present information concerning investments with unrealized losses as of September 30, 2018 and December 31, 2017 (in thousands):
Total investment securities:
 
 
 
September 30, 2018
 
 
 
Less than 12 months
 
 
12 months or longer
 
 
Total
 
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
US Agency
 
 
$
2,734
 
 
 
$
(109
)
 
 
$
3,689
 
 
 
$
(199
)
 
 
$
6,423
 
 
 
$
(308
)
US Agency mortgage-backed securities
 
 
 
49,544
 
 
 
 
(1,211
)
 
 
 
29,471
 
 
 
 
(1,353
)
 
 
 
79,015
 
 
 
 
(2,564
)
Municipal
 
 
 
19,978
 
 
 
 
(619
)
 
 
 
11,847
 
 
 
 
(826
)
 
 
 
31,825
 
 
 
 
(1,445
)
Corporate bonds and other securities
 
 
 
21,320
 
 
 
 
(547
)
 
 
 
12,979
 
 
 
 
(576
)
 
 
 
34,299
 
 
 
 
(1,123
)
Total
 
 
$
93,576
 
 
 
$
(2,486
)
 
 
$
57,986
 
 
 
$
(2,954
)
 
 
$
151,562
 
 
 
$
(5,440
)
Total investment securities:
 
 
 
 
December 31, 2017
 
 
 
Less than 12 months
 
 
12 months or longer
 
 
Total
 
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
US Agency
 
 
$
5,923
 
 
 
$
(39
)
 
 
$
399
 
 
 
$
(1
)
 
 
$
6,322
 
 
 
$
(40
)
US Agency mortgage-backed securities
 
 
 
36,783
 
 
 
 
(253
)
 
 
 
22,625
 
 
 
 
(511
)
 
 
 
59,408
 
 
 
 
(764
)
Municipal
 
 
 
8,657
 
 
 
 
(109
)
 
 
 
7,727
 
 
 
 
(318
)
 
 
 
16,384
 
 
 
 
(427
)
Corporate bonds and other securities
 
 
 
7,123
 
 
 
 
(71
)
 
 
 
13,655
 
 
 
 
(401
)
 
 
 
20,778
 
 
 
 
(472
)
Total
 
 
$
58,486
 
 
 
$
(472
)
 
 
$
44,406
 
 
 
$
(1,231
)
 
 
$
102,892
 
 
 
$
(1,703
)
 
The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are 233 positions that are considered temporarily impaired at September 30, 2018. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.
Contractual maturities of securities at September 30, 2018 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The weighted average duration of the total investment securities portfolio at September 30, 2018 is 48.2 months and is higher than the duration at December 31, 2017 which was 44.3 months. The duration remains within our internal established guideline range of 24 to 60 months which we believe is appropriate to maintain proper levels of liquidity, interest rate risk, market valuation sensitivity and profitability.
Total investment securities:
 
 
 
September 30, 2018
 
 
 
Available for sale
 
 
Held to maturity
 
 
 
Cost
Basis
 
 
Fair
Value
 
 
Cost
Basis
 
 
Fair
Value
Within 1 year
 
 
$
48
 
 
 
$
49
 
 
 
$
1,000
 
 
 
$
973
 
After 1 year but within 5 years
 
 
 
20,140
 
 
 
 
19,890
 
 
 
 
3,658
 
 
 
 
3,471
 
After 5 years but within 10 years
 
 
 
47,068
 
 
 
 
45,673
 
 
 
 
18,017
 
 
 
 
17,362
 
After 10 years but within15 years
 
 
 
29,952
 
 
 
 
29,194
 
 
 
 
11,605
 
 
 
 
11,292
 
Over 15 years
 
 
 
45,218
 
 
 
 
43,947
 
 
 
 
4,393
 
 
 
 
4,247
 
Total
 
 
$
142,426
 
 
 
$
138,753
 
 
 
$
38,673
 
 
 
$
37,345