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Investment Securities

12 Months Ended

Dec. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Investment Securities

(3) Investment Securities

A summary of investment securities available-for-sale is as follows:

		As of December 31, 2018
						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
(Dollars in thousands)		cost				gains				losses				fair value

U. S. treasury securities		$	1,999			$	-			$	(28	)		$	1,971
U. S. federal agency obligations			10,370				32				(41	)			10,361
Municipal obligations, tax exempt			161,529				353				(2,770	)			159,112
Municipal obligations, taxable			53,178				180				(323	)			53,035
Agency mortgage-backed securities			158,765				264				(2,953	)			156,076
Certificates of deposit			7,790				-				-				7,790
Total		$	393,631			$	829			$	(6,115	)		$	388,345

		As of December 31, 2017
						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
		cost				gains				losses				fair value

U. S. treasury securities		$	1,999			$	-			$	(9	)		$	1,990
U. S. federal agency obligations			16,572				5				(85	)			16,492
Municipal obligations, tax exempt			183,846				1,972				(1,080	)			184,738
Municipal obligations, taxable			57,783				409				(216	)			57,976
Agency mortgage-backed securities			119,096				92				(1,633	)			117,555
Certificates of deposit			9,224				-				-				9,224
Common stocks			-				8				-				8
Total		$	388,520			$	2,486			$	(3,023	)		$	387,983

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of December 31, 2018 and 2017. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

						As of December 31, 2018
						Less than 12 months								12 months or longer								Total
		No. of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in thousands)		securities				value				losses				value				losses				value				losses
U.S. federal treasury securities			1			$	-			$	-			$	1,971			$	(28	)		$	1,971			$	(28	)
U.S. federal agency obligations			6				145				(1	)			7,970				(40	)			8,115				(41	)
Municipal obligations, tax exempt			296				35,898				(367	)			85,921				(2,403	)			121,819				(2,770	)
Municipal obligations, taxable			86				8,293				(22	)			28,984				(301	)			37,277				(323	)
Agency mortgage-backed securities			101				30,030				(146	)			96,155				(2,807	)			126,185				(2,953	)
Total			490			$	74,366			$	(536	)		$	221,001			$	(5,579	)		$	295,367			$	(6,115	)

						As of December 31, 2017
						Less than 12 months								12 months or longer								Total
		No. of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		securities				value				losses				value				losses				value				losses
U.S. federal treasury securities			1			$	1,990			$	(9	)		$	-			$	-			$	1,990			$	(9	)
U.S. federal agency obligations			14				7,989				(24	)			8,272				(61	)			16,261				(85	)
Municipal obligations, tax exempt			178				37,299				(273	)			31,930				(807	)			69,229				(1,080	)
Municipal obligations, taxable			73				18,792				(96	)			9,744				(120	)			28,536				(216	)
Agency mortgage-backed securities			79				68,630				(620	)			39,844				(1,013	)			108,474				(1,633	)
Total			345			$	134,700			$	(1,022	)		$	89,790			$	(2,001	)		$	224,490			$	(3,023	)

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the security and its belief that it was more likely than not that the Company will not be required to sell the security before recovery of its cost basis, the Company believed that the U.S. treasury security identified in the tables above was temporarily impaired as of December 31, 2018 and 2017.

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and the FHLB. The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the U.S. federal agency obligations identified in the tables above were temporarily impaired.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. As of December 31, 2018, the Company did not intend to sell and it is more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association. The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the tables above were temporarily impaired.

The table below includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

The amortized cost and fair value of investment securities at December 31, 2018 are as follows:

		Amortized				Estimated
(Dollars in thousands)		cost				fair value
Due in less than one year		$	34,943			$	34,847
Due after one year but within five years			177,050				174,149
Due after five years but within ten years			103,823				102,522
Due after ten years			77,815				76,827
Total		$	393,631			$	388,345

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

		Years ended December 31,
(Dollars in thousands)		2018				2017				2016
Sales proceeds		$	21,126			$	13,810			$	14,326

Realized gains		$	84			$	522			$	573
Realized losses			(64	)			(24	)			(15	)
Net realized gains		$	20			$	498			$	558

Securities with carrying values of $249.7 million and $232.5 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at December 31, 2018 and 2017, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

Effective January 1, 2018, the Company changed the classification of its common stock investments from available-for-sale with changes in fair value excluded from earnings and reported as a separate component of stockholders’ equity, net of taxes to be carried at fair value with changes in fair value included in net earnings. The Company received $7,000 of proceeds from the sale of its remaining common stock investments during the year ended December 31, 2018.