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INVESTMENT SECURITIES | 12 Months Ended
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Dec. 31, 2018
INVESTMENT SECURITIES [Abstract] |
INVESTMENT SECURITIES | 4. INVESTMENT SECURITIES The amortized cost, gross unrealized gains and losses, and fair value of investment securities at December 31, 2018 and 2017 were as follows (in thousands):
|  |  |  |  | Gross |  |  | Gross |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
December 31, 2018 |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Agency securities |  | $ | 106,516 |  |  | $ | 509 |  |  | $ | (640 | ) |  | $ | 106,385 |
U.S. Treasuries |  |  | 33,813 |  |  |  | - |  |  |  | (455 | ) |  |  | 33,358 |
Obligations of state and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  | 52,074 |  |  |  | 150 |  |  |  | (177 | ) |  |  | 52,047 |
Corporate obligations |  |  | 3,000 |  |  |  | 34 |  |  |  | - |  |  |  | 3,034 |
Mortgage-backed securities in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
government sponsored entities |  |  | 46,839 |  |  |  | 59 |  |  |  | (712 | ) |  |  | 46,186 |
Total available-for-sale securities |  | $ | 242,242 |  |  | $ | 752 |  |  | $ | (1,984 | ) |  | $ | 241,010 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
2017 |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Agency securities |  | $ | 99,454 |  |  | $ | 26 |  |  | $ | (593 | ) |  | $ | 98,887 |
U.S. Treasuries |  |  | 28,782 |  |  |  | - |  |  |  | (178 | ) |  |  | 28,604 |
Obligations of state and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  | 78,409 |  |  |  | 820 |  |  |  | (139 | ) |  |  | 79,090 |
Corporate obligations |  |  | 3,000 |  |  |  | 83 |  |  |  | - |  |  |  | 3,083 |
Mortgage-backed securities in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
government sponsored entities |  |  | 45,385 |  |  |  | 19 |  |  |  | (377 | ) |  |  | 45,027 |
Equity securities in financial institutions |  |  | 92 |  |  |  | - |  |  |  | (1 | ) |  |  | 91 |
Total available-for-sale securities |  | $ | 255,122 |  |  | $ | 948 |  |  | $ | (1,288 | ) |  | $ | 254,782 |
The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual securities have been in a continuous unrealized loss position, at December 31, 2018 and 2017 (in thousands). As of December 31, 2018, the Company owned 110 securities each of whose fair value was less than its cost basis.
|  | Less than Twelve Months |  |  | Twelve Months or Greater |  |  | Total |
|  |  |  |  | Gross |  |  |  |  |  | Gross |  |  |  |  |  | Gross |
|  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
2018 |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
U.S. agency securities |  | $ | 5,981 |  |  | $ | (5 | ) |  | $ | 52,673 |  |  | $ | (635 | ) |  | $ | 58,654 |  |  | $ | (640 | )
U.S. Treasuries |  |  | 4,948 |  |  |  | (31 | ) |  |  | 28,410 |  |  |  | (424 | ) |  |  | 33,358 |  |  |  | (455 | )
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  | 8,979 |  |  |  | (22 | ) |  |  | 12,441 |  |  |  | (155 | ) |  |  | 21,420 |  |  |  | (177 | )
Mortgage-backed securities in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
government sponsored entities |  |  | 5,272 |  |  |  | (18 | ) |  |  | 32,570 |  |  |  | (694 | ) |  |  | 37,842 |  |  |  | (712 | )
Total securities |  | $ | 25,180 |  |  | $ | (76 | ) |  | $ | 126,094 |  |  | $ | (1,908 | ) |  | $ | 151,274 |  |  | $ | (1,984 | )
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. agency securities |  | $ | 74,952 |  |  | $ | (421 | ) |  | $ | 16,928 |  |  | $ | (172 | ) |  | $ | 91,880 |  |  | $ | (593 | )
U.S. Treasuries |  |  | 28,604 |  |  |  | (178 | ) |  |  | - |  |  |  | - |  |  |  | 28,604 |  |  |  | (178 | )
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  | 14,885 |  |  |  | (85 | ) |  |  | 5,958 |  |  |  | (54 | ) |  |  | 20,843 |  |  |  | (139 | )
Mortgage-backed securities in |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
government sponsored entities |  |  | 27,154 |  |  |  | (190 | ) |  |  | 13,822 |  |  |  | (187 | ) |  |  | 40,976 |  |  |  | (377 | )
Equity securities in financial institutions |  |  | 91 |  |  |  | (1 | ) |  |  | - |  |  |  | - |  |  |  | 91 |  |  |  | (1 | )
Total securities |  | $ | 145,686 |  |  | $ | (875 | ) |  | $ | 36,708 |  |  | $ | (413 | ) |  | $ | 182,394 |  |  | $ | (1,288 | )
As of December 31, 2018, the Company’s investment securities portfolio contained unrealized losses on agency securities issued or backed by the full faith and credit of the United States government or are generally viewed as having the implied guarantee of the U.S. government, U.S Treasury securities, obligations of states and political subdivisions and mortgage backed securities in government sponsored entities. For fixed maturity available for sale investments management considers whether the present value of cash flows expected to be collected are less than the security’s amortized cost basis (the difference defined as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and the Company’s intent to sell the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated recovery in market value, to determine whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, if the Company does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security, before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. As of December 31, 2018 and 2017, the Company had concluded that any impairment of its investment securities portfolio outlined in the above table is not other than temporary and is the result of interest rate changes, sector credit rating changes, or company-specific rating changes that are not expected to result in the non-collection of principal and interest during the period. Proceeds from sales of securities available-for-sale during 2018, 2017 and 2016 were $27,149,000, $58,177,000, and $22,372,000, respectively. The gross gains realized during 2018 consisted of $160,000 from the sale of fourteen municipal securities. The gross losses realized during 2018 consisted of $179,000 from the sale of seven agency securities. The gross gains realized during 2017 consisted of $23,000, $20,000, $13,000 and $1,149,000 from the sales of ten agency securities, one mortgage backed security, thirteen interest bearing time deposits with other banks and five equity security positions. The gross losses realized during 2017 consisted of $170,000 from the sale of fourteen agency securities. The gross gains realized during 2016 consisted of $72,000, $27,000, $80,000 and $133,000 from the sales of four agency securities, two US treasury notes, four municipal securities and portions of three equity security positions, respectively. The gross losses realized during 2016 consisted of $22,000 and $35,000 from the sales of four agency securities and six corporate securities. Gross gains and gross losses were realized as follows on available for sale securities (in thousands):
|  | 2018 |  |  | 2017 |  |  | 2016 |
Gross gains |  | $ | 160 |  |  | $ | 1,205 |  |  | $ | 312 |
Gross losses |  |  | (179 | ) |  |  | (170 | ) |  |  | (57 | )
Net (losses) gains |  | $ | (19 | ) |  | $ | 1,035 |  |  | $ | 255 |
The Company’s portfolio of equity securities experienced no net gain or loss during the year. Investment securities with an approximate carrying value of $221,191,000 and $243,382,000 at December 31, 2018 and 2017, respectively, were pledged to secure public funds and certain other deposits as provided by law and certain borrowing arrangements of the Company. 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. The amortized cost and fair value of debt securities at December 31, 2018, by contractual maturity are shown below (in thousands). Municipal securities that have been refunded and will therefore pay-off on the call date are reflected in the table below utilizing the call date as the date of repayment as payment is guaranteed on that day:
|  | Amortized |  |  |  |
|  | Cost |  |  | Fair Value |
Available-for-sale securities: |  |  |  |  |  |
Due in one year or less |  | $ | 23,212 |  |  | $ | 23,138 |
Due after one year through five years |  |  | 111,439 |  |  |  | 110,666 |
Due after five years through ten years |  |  | 55,904 |  |  |  | 55,838 |
Due after ten years |  |  | 51,687 |  |  |  | 51,368 |
Total |  | $ | 242,242 |  |  | $ | 241,010 |

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