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Investments

9 Months Ended

Sep. 30, 2019

2.	Investments

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

(Dollars in thousands)	As of September 30, 2019
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value

U. S. treasury securities	$	2,298	$	16	$	-		$	2,314
U. S. federal agency obligations		4,015		98		-			4,113
Municipal obligations, tax exempt		149,193		3,565		(80	)		152,678
Municipal obligations, taxable		47,479		1,620		(2	)		49,097
Agency mortgage-backed securities		156,134		1,944		(306	)		157,772
Certificates of deposit		3,343		-		-			3,343
Total	$	362,462	$	7,243	$	(388	)	$	369,317

(Dollars in thousands)	As of December 31, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	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

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 September 30, 2019 and December 31, 2018. 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.

(Dollars in thousands)			As of September 30, 2019
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
Municipal obligations, tax exempt		35	$	8,105	$	(27	)	$	5,625	$	(53	)	$	13,730	$	(80	)
Municipal obligations, taxable		7		-		-			1,551		(2	)		1,551		(2	)
Agency mortgage-backed securities		38		23,890		(55	)		19,377		(251	)		43,267		(306	)
Total		80	$	31,995	$	(82	)	$	26,553	$	(306	)	$	58,548	$	(388	)

(Dollars in thousands)			As of December 31, 2018
			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. 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	)

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. The Company did not intend to sell and it was 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 their costs. 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 as of September 30, 2019 and December 31, 2018.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association 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 as of September 30, 2019 and December 31, 2018.

The table below sets forth amortized cost and fair value of investment securities at September 30, 2019. The table 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.

(Dollars in thousands)	Amortized		Estimated
	cost		fair value
Due in less than one year	$	16,778	$	16,796
Due after one year but within five years		186,606		188,671
Due after five years but within ten years		86,494		88,618
Due after ten years		72,584		75,232
Total	$	362,462	$	369,317

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

	Three months ended					Nine months ended
(Dollars in thousands)	September 30,					September 30,
	2019		2018			2019			2018

Sales proceeds	$	-	$	19,591		$	9,491		$	21,125

Realized gains	$	-	$	49		$	2		$	84
Realized losses		-		(64	)		(148	)		(64	)
Net realized losses	$	-	$	(15	)	$	(146	)	$	20

Securities with carrying values of $248.0 million and $249.7 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at September 30, 2019 and December 31, 2018, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.