INVESTMENTS

12 Months Ended

Dec. 31, 2018

INVESTMENTS

3. INVESTMENTS

3. INVESTMENTS

The amortized cost, gross unrealized holding gains and losses, and estimated fair value of the investment securities by major security type at December 31, 2018 and 2017 are as follows:

(in $000)	2018
			Gross		Gross
	Amortized		Unrealized		unrealized			Fair
	Cost		Gains		losses			Value
U.S. Government agency securities	$	2,349	$	-	$	(72	)	$	2,277
Government Sponsored Enterprises residential mortgage-backed securities		2,349		9		(54	)		2,304
	$	4,698	$	9	$	(126	)	$	4,581

	2017
			Gross		Gross
	Amortized		Unrealized		unrealized			Fair
	Cost		Gains		losses			Value
U.S. Government agency securities	$	2,349	$	-	$	(76	)	$	2,273
Government Sponsored Enterprises residential mortgage-backed securities		2,737		21		(18	)		2,740
Investments in money market funds		132		-		-			132
	$	5,218	$	21	$	(94	)	$	5,145

Upon the adoption of ASU 2016-01, the balance of money market funds was reclassified into cash and cash equivalents on the Consolidated Balance Sheet.

In 2018 and 2017, no securities were called. There were no sales of securities in 2018 and 2017.

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at

December 31, 2018 (in thousands):

	Number		Less than 12 months					12 months or longer					Total
Description of	Of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Securities		Value		Losses			Value		Losses			Value		Losses
U.S. Government
agency securities		7	$	-	$	-		$	2,277	$	(72	)	$	2,277	$	(72	)
Mortgage backed
Securities		14		718		(10	)		1,299		(44	)		2,017		(54	)
Total temporarily
impaired investment
Securities		21	$	718	$	(10	)	$	3,576	$	(116	)	$	4,294	$	(126	)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2017 (in thousands):

	Number		Less than 12 months					12 months or longer					Total
Description of	Of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Securities		value		Losses			Value		Losses			value		Losses
U.S. Government
agency securities		7	$	245	$	(5	)	$	2,028	$	(71	)	$	2,273	$	(76	)
Mortgage backed
Securities		8		1,124		(7	)		377		(11	)		1,501		(18	)
Total temporarily
impaired investment
Securities		15	$	1,369	$	(12	)	$	2,405	$	(82	)	$	3,774	$	(94	)

U.S. Government and Agency Securities. Unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by market rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2018 and 2017.

Residential Government Sponsored Enterprise Mortgage-Backed Securities. Unrealized losses on the Company’s investment in government sponsored enterprise mortgage-backed securities were caused by market rate changes. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2018 and 2017.

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. On a quarterly basis, we review all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include:

(1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value.

Maturities of investment securities at December 31, 2018 were as follows. Expected maturities may differ from contractual maturities because the underlying mortgages supporting mortgage backed securities may be prepaid without any penalties. Consequently, mortgage-backed securities are not presented by maturity category.

(In 000’s)	Amortized		Fair
	Cost		Value
Due in one year	$	-	$	-
Due after one year through five years		2,349		2,277
Due after five years through ten years		-		-
Government-sponsored enterprises residential mortgage-backed securities		2,349		2,304
	$	4,698	$	4,581

As of December 31, 2018 and 2017, investment securities with a carrying value of $3,668,000 and $4,297,000, respectively, were pledged as collateral to secure public deposits and contingent borrowing at the Federal Reserve Discount Window