XML 26 R15.htm IDEA: XBRL DOCUMENT

Note 7 - Investment and Equity Securities

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 7 – INVESTMENT AND EQUITY SECURITIES

The amortized cost and fair values of investment securities available for sale are as follows:

		September 30, 2020
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollar amounts in thousands)		Cost				Gains				Losses				Value

Subordinated debt		$	16,100			$	498			$	-			$	16,598
Obligations of states and political subdivisions:
Taxable			500				2				-				502
Tax-exempt			76,718				4,083				-				80,801
Mortgage-backed securities in government-sponsored entities			14,489				579				(1	)			15,067
Total		$	107,807			$	5,162			$	(1	)		$	112,968

		December 31, 2019
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(Dollar amounts in thousands)		Cost				Gains				Losses				Value

Subordinated debt		$	4,000			$	126			$	-			$	4,126
Obligations of states and political subdivisions:
Taxable			500				1				-				501
Tax-exempt			80,436				2,065				(25	)			82,476
Mortgage-backed securities in government-sponsored entities			18,465				274				(109	)			18,630
Total		$	103,401			$	2,466			$	(134	)		$	105,733

The Company recognized a net (loss) on equity investments of ($28,000) and ($157,000), respectively, for the three and nine months ended September 30, 2020. The Company recognized a net (loss) gain on equity investments of ($32,000) and $12,000, respectively, for the three and nine months ended September 30, 2019. No net gains or losses on sold equity securities were realized during these periods.

The amortized cost and fair value of debt securities at September 30, 2020, 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.

		Amortized				Fair
(Dollar amounts in thousands)		Cost				Value

Due in one year or less		$	3			$	3
Due after one year through five years			2,240				2,282
Due after five years through ten years			27,348				28,114
Due after ten years			78,216				82,569
Total		$	107,807			$	112,968

Proceeds from the sales of investment securities and the gross realized gains and losses are as follows:

(Dollar amounts in thousands)		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2020				2019				2020				2019
Proceeds from sales		$	-			$	518			$	-			$	12,325
Gross realized gains			-				4				-				227
Gross realized losses			-				-				-				(33	)

Investment securities with an approximate carrying value of $76.8 million and $55.6 million at September 30, 2020 and December 31, 2019, respectively, were pledged to secure deposits and for other purposes as required by law.

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.

		September 30, 2020
		Less than Twelve Months								Twelve Months or Greater								Total
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollar amounts in thousands)		Value				Losses				Value				Losses				Value				Losses

Mortgage-backed securities in government-sponsored entities		$	1,141			$	(1	)		$	-			$	-			$	1,141			$	(1	)
Total		$	1,141			$	(1	)		$	-			$	-			$	1,141			$	(1	)

		December 31, 2019
		Less than Twelve Months								Twelve Months or Greater								Total
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollar amounts in thousands)		Value				Losses				Value				Losses				Value				Losses

Obligations of states and political subdivisions:
Tax-exempt		$	4,324			$	(25	)		$	-			$	-			$	4,324			$	(25	)
Mortgage-backed securities in government-sponsored entities			1,409				(2	)			8,223				(107	)			9,632				(109	)
Total		$	5,733			$	(27	)		$	8,223			$	(107	)		$	13,956			$	(134	)

There were 2 securities considered temporarily impaired at September 30, 2020.

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The Company assesses whether the unrealized loss is other than temporary.

OTTI losses are recognized in earnings when the Company has the intent to sell the debt security or it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if the Company does not expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.

An unrealized loss is generally deemed to be other than temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss of an OTTI is recorded as a component of investment securities gains (losses) in the accompanying Consolidated Statement of Income, while the remaining portion of the impairment loss is recognized in other comprehensive income, provided the Company does not intend to sell the underlying debt security and it is “more likely than not” that the Company will not have to sell the debt security prior to recovery.

Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for 85% of the total available-for-sale portfolio as of September 30, 2020 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of prolonged unrealized loss positions within the obligations of the state and political subdivisions security portfolio. The Company considers the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

	•	The length of time and the extent to which the fair value has been less than the amortized cost basis;
	•	Changes in the near-term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions;
	•	The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and
	•	Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

For the nine months ended September 30, 2020 and 2019, there were no available-for-sale debt securities with an unrealized loss that suffered OTTI. Management does not believe any individual unrealized loss as of September 30, 2020 or December 31, 2019 represented an other-than-temporary impairment. The unrealized losses on debt securities are primarily the result of interest rate changes. These conditions will not prohibit the Company from receiving its contractual principal and interest payments on these debt securities. The fair value of these debt securities is expected to recover as payments are received on these securities and they approach maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.