Securities

9 Months Ended

Sep. 30, 2019

Investments Debt And Equity Securities [Abstract]

NOTE 3 SECURITIES

Mortgage-backed securities, as shown in the following tables, are all government sponsored enterprises. The amortized cost and fair value of securities, with gross unrealized gains and losses at September 30, 2019 and December 31, 2018, follows:

	(In Thousands)
	September 30, 2019
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	14,029	$	10	$	(30	)	$	14,009
U.S. Government agencies		79,130		948		(35	)		80,043
Mortgage-backed securities		57,180		446		(165	)		57,461
State and local governments		38,265		697		(10	)		38,952
Total available-for-sale securities	$	188,604	$	2,101	$	(240	)	$	190,465

	(In Thousands)
	December 31, 2018
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	23,078	$	6	$	(254	)	$	22,830
U.S. Government agencies		71,235		2		(1,910	)		69,327
Mortgage-backed securities		37,342		62		(1,142	)		36,262
State and local governments		40,608		225		(805	)		40,028
Total available-for-sale securities	$	172,263	$	295	$	(4,111	)	$	168,447

Investment securities will at times depreciate to an unrealized loss position. The Company utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as an other than temporary impairment.

The fair value of the security has significantly declined from book value.

A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

Dividends have been reduced or eliminated or scheduled interest payments have not been made.

The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Company currently does not hold any securities with other than temporary impairment.

Information pertaining to securities with gross unrealized losses at September 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	(In Thousands)
	September 30, 2019
	Less Than Twelve Months					Twelve Months & Over					Total
	Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
U.S. Treasury	$	-		$	-	$	(30	)	$	12,015	$	(30	)	$	12,015
U.S. Government agencies		-			-		(35	)		13,720		(35	)		13,720
Mortgage-backed securities		(48	)		8,099		(117	)		16,811		(165	)		24,910
State and local governments		(9	)		2,425		(1	)		1,100		(10	)		3,525
Total available-for-sale securities	$	(57	)	$	10,524	$	(183	)	$	43,646	$	(240	)	$	54,170

	(In Thousands)
	December 31, 2018
	Less Than Twelve Months					Twelve Months & Over					Total
	Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
U.S. Treasury	$	-		$	-	$	(254	)	$	20,861	$	(254	)	$	20,861
U.S. Government agencies		-			-		(1,910	)		64,727		(1,910	)		64,727
Mortgage-backed securities		(4	)		697		(1,138	)		30,347		(1,142	)		31,044
State and local governments		(22	)		3,254		(783	)		29,413		(805	)		32,667
Total available-for-sale securities	$	(26	)	$	3,951	$	(4,085	)	$	145,348	$	(4,111	)	$	149,299

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. Additionally, the decline in value is primarily due to changes in interest rates since the securities were purchased. The fair value is expected to recover as the bonds approach the maturity date.

Below are the gross realized gains and losses for the three and nine months ended September 30, 2019 and September 30, 2018.

	Three Months					Nine Months
	(In Thousands)					(In Thousands)
	2019		2018			2019			2018
Gross realized gains	$	-	$	51		$	16		$	51
Gross realized losses		-		(41	)		(42	)		(41	)
Net realized losses	$	-	$	10		$	(26	)	$	10
Tax expense related to net realized losses	$	-	$	2		$	(5	)	$	2

The net realized losses on sales and related tax expense is a reclassification out of accumulated other comprehensive income (loss). The net realized loss is included in net loss on sale of available-for-sale securities and the related tax expense is included in income taxes in the condensed consolidated statements of income and comprehensive income.

The amortized cost and fair value of debt securities at September 30, 2019, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized
	Cost		Fair Value
One year or less	$	30,708	$	30,702
After one year through five years		52,474		52,597
After five years through ten years		46,971		48,433
After ten years		1,271		1,272
Total	$	131,424	$	133,004
Mortgage-backed securities		57,180		57,461
Total	$	188,604	$	190,465

Investments with a carrying value of $89.2 million and $81.8 million at September 30, 2019 and December 31, 2018, respectively, were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Indianapolis stock as of September 30, 2019. As of December 31, 2018, other securities only includes Federal Home Loan Bank of Cincinnati stock.