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NOTE 5: INVESTMENT SECURITIES

3 Months Ended

Sep. 30, 2018

NOTE 5: INVESTMENT SECURITIES

NOTE 5: INVESTMENT SECURITIES

	September 30, 2018
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Mortgage-backed securities	$ 124,777		$ 639		$ 3,891		$ 121,525		2.44%
Collateralized mortgage obligations	17,481		—		97		17,384		3.03
States and political subdivisions	51,047		1,314		19		52,342		4.81
	$ 193,305		$ 1,953		$ 4,007		$ 191,251		3.12%

	December 31, 2017
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
	(In Thousands)

AVAILABLE-FOR-SALE SECURITIES:
Mortgage-backed securities	$ 123,300		$ 871		$ 1,638		$ 122,533		2.19%
States and political subdivisions	53,930		2,716		—		56,646		4.72
	$ 177,230		$ 3,587		$ 1,638		$ 179,179		2.96%

HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$ 130		$ 1		$ —		$ 131		6.14%

The amortized cost and fair value of available-for-sale securities at September 30, 2018, by contractual maturity, are shown below. 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.

	Amortized		Fair
	Cost		Value
	(In Thousands)

One year or less	$ —		$ —
After one through five years	841		905
After five through ten years	9,556		9,687
After ten years	40,650		41,750
Securities not due on a single maturity date	142,258		138,909

	$ 193,305		$ 191,251

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2018 and December 31, 2017, was approximately $117.5 million and $89.7 million, respectively, which is approximately 61.4% and 50.0% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2018 and December 31, 2017:

		September 30, 2018
		Less than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses		Value		Losses		Value		Losses
		(In Thousands)

Mortgage-backed securities		$ 24,226		$ (557)		$ 72,518		$ (3,334)		$ 96,744		$ (3,891)
Collateralized mortgage obligations		17,384		(97)		—		—		17,384		(97)
State and political
subdivisions		3,341		(19)		—		—		3,341		(19)
		$ 44,951		$ (673)		$ 72,518		$ (3,334)		$ 117,469		$ (4,007)

		December 31, 2017
		Less than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Losses		Value		Losses		Value		Losses
		(In Thousands)

Mortgage-backed securities		$ 33,862		$ (384)		$ 55,845		$ (1,254)		$ 89,707		$ (1,638)
State and political
subdivisions		—		—		—		—		—		—
		$ 33,862		$ (384)		$ 55,845		$ (1,254)		$ 89,707		$ (1,638)

Gross gains of $2,000 and $2,000 and gross losses of $0 and $0 resulting from sales of available-for-sale securities were realized during the three and nine months ended September 30, 2018. There were no sales of available-for-sale securities during the three and nine months ended September 30, 2017. Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment. Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities. For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model. For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model. The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets.

The Company routinely conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred. The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors. If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary. The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange. For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other than temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows. If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

During the three and nine months ended September 30, 2018 and 2017, respectively, no securities were determined to have impairment that had become other-than-temporary.

Credit Losses Recognized on Investments. During the three and nine months ended September 30, 2018 and 2017, respectively, there were no debt securities that experienced fair value deterioration due to credit losses, or due to other market factors, that are not otherwise other-than-temporarily impaired.

Amounts Reclassified Out of Accumulated Other Comprehensive Income. During the three and nine months ended September 30, 2018 and 2017, there were no amounts reclassified from accumulated other comprehensive income other than the $272,000 stranded tax amount related to unrealized gains and losses on available for sale securities noted above in Note 3, which was reclassified from accumulated other comprehensive income to retained earnings as of January 1, 2018 due to the adoption of ASU 2018-02.