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2. Investment Securities

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investment securities available for sale at December 31, 2020 and 2019 are as follows:

(Dollars in thousands)

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	143,095		2,812		593		145,314
U.S. Government
sponsored enterprises		7,384		331		208		7,507
State and political subdivisions		87,757		4,758		87		92,428
Total	$	238,236		7,901		888		245,249

(Dollars in thousands)

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	77,812		1,371		227		78,956
U.S. Government
sponsored enterprises		28,265		443		311		28,397
State and political subdivisions		84,686		3,657		200		88,143
Trust preferred securities		250		-		-		250
Total	$	191,013		5,471		738		195,746

The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2020 and 2019 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

(Dollars in thousands)

	December 31, 2020
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	80,827		565		4,762		28		85,589		593
U.S. Government
sponsored enterprises		-		-		4,193		208		4,193		208
State and political subdivisions		7,126		87		-		-		7,126		87
Total	$	87,953		652		8,955		236		96,908		888

(Dollars in thousands)

	December 31, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	28,395		177		6,351		50		34,746		227
U.S. Government
sponsored enterprises		2,899		10		6,151		301		9,050		311
State and political subdivisions		7,367		200		-		-		7,367		200
Total	$	38,661		387		12,502		351		51,163		738

At December 31, 2020, unrealized losses in the investment securities portfolio relating to debt securities totaled $888,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2020 tables above, six out of 86 securities issued by state and political subdivisions contained unrealized losses and 29 out of 68 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of acceptable financial condition and results of operations on each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, are government backed.

The Company periodically evaluates its investments for any impairment which would be deemed other-than-temporary. No investment impairments were deemed other-than-temporary in 2020, 2019 or 2018.

The amortized cost and estimated fair value of investment securities available for sale at December 31, 2020, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

December 31, 2020
(Dollars in thousands)
	Amortized Cost		Estimated Fair Value
Due within one year	$	10,576		10,705
Due from one to five years		15,236		15,997
Due from five to ten years		62,014		65,826
Due after ten years		7,315		7,407
Mortgage-backed securities		143,095		145,314
Total	$	238,236		245,249

During 2020, proceeds from sales of securities available for sale were $56.3 million and resulted in net gains of $2.6 million. During 2019, proceeds from sales of securities available for sale were $20.7 million and resulted in net gains of $226,000. During 2018, proceeds from sales of securities available for sale were $36.0 million and resulted in gross gains of $15,000.

Securities with a fair value of approximately $77.3 million and $66.0 million at December 31, 2020 and 2019, respectively, were pledged to secure public deposits, FHLB borrowings and for other purposes as required by law.

GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The table below presents the balance of securities available for sale, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2020 and 2019.

(Dollars in thousands)

	December 31, 2020
	Fair Value Measurements		Level 1 Valuation		Level 2 Valuation		Level 3 Valuation
Mortgage-backed securities	$	145,314		-		145,314		-
U.S. Government
sponsored enterprises	$	7,507		-		7,507		-
State and political subdivisions	$	92,428		-		92,428		-

(Dollars in thousands)

	December 31, 2019
	Fair Value Measurements		Level 1 Valuation		Level 2 Valuation		Level 3 Valuation
Mortgage-backed securities	$	78,956		-		78,956		-
U.S. Government
sponsored enterprises	$	28,397		-		28,397		-
State and political subdivisions	$	88,143		-		88,143		-
Trust preferred securities	$	250		-		-		250

Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the year ended December 31, 2020.

(Dollars in thousands)

	Investment Securities Available for Sale
	Level 3 Valuation
Balance, beginning of period	$	250
Change in book value		-
Change in gain/(loss) realized and unrealized		-
Purchases/(sales and calls)		(250	)
Transfers in and/or (out) of Level 3		-
Balance, end of period	$	-

Change in unrealized gain/(loss) for assets still held in Level 3	$	-