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Available-for-Sale Securities

12 Months Ended

Dec. 31, 2019

Note 3: Available-for-Sale Securities

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of available-for-sale securities are as follows:

	Amortized		Gross Unrealized		Gross Unrealized
($ in thousands)	Cost		Gains		Losses			Fair Value
December 31, 2019:
U.S. Treasury and Government agencies	$	12,023	$	181	$	(2	)	$	12,202
Mortgage-backed securities		77,892		492		(202	)		78,182
State and political subdivisions		10,199		366		(1	)		10,564

Totals	$	100,114	$	1,039	$	(205	)	$	100,948

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
December 31, 2018:
U.S. Treasury and Government agencies	$	18,597	$	187	$	(114	)	$	18,670
Mortgage-backed securities		61,868		114		(1,039	)		60,943
State and political subdivisions		11,203		180		(27	)		11,356

Totals	$	91,668	$	481	$	(1,180	)	$	90,969

The amortized cost and fair value of securities available-for-sale at December 31, 2019, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
($ in thousands)	Cost		Value

Within one year	$	3,566	$	3,571
Due after one year through five years		7,209		7,340
Due after five years through ten years		5,783		5,954
Due after ten years		5,664		5,901
		22,222		22,766
Mortgage-backed securities		77,892		78,182

Totals	$	100,114	$	100,948

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $34.8 million at December 31, 2019, and $30.7 million at December 31, 2018. Securities delivered for repurchase agreements (not included above) were $19.5 million at December 31, 2019 and $17.9 million at December 31, 2018.

Gross gains of $0.2 million was a reclassification from accumulated other comprehensive income and is included in the net gain on sales of securities for 2019. Gross gains of $0.07 million was a reclassification from accumulated other comprehensive income and is included in the net gain on sales of securities for 2018. The related tax expense for net security gains for 2019 was $0.04 million and for 2018 was $0.01 million and was a reclassification from accumulated other comprehensive income and is included in the income tax expense line in the income statement.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2019 and 2018, was $38.8 million and $59.0 million, respectively, which was approximately 38 percent and 65 percent, respectively, of the Company’s available-for-sale investment portfolio.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

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.

The following tables present securities with unrealized losses at December 31, 2019 and 2018:

	Less than 12 Months					12 Months or Longer					Total
($ in thousands) December 31, 2019	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

U.S. Treasury and Government agencies	$	872	$	(1	)	$	2,598	$	(1	)	$	3,470	$	(2	)
Mortgage-backed securities		30,692		(157	)		4,264		(45	)		34,956		(202	)
State and political subdivisions		339		(1	)		-		-			339		(1	)

Totals	$	31,903	$	(159	)	$	6,862	$	(46	)	$	38,765	$	(205	)

	Less than 12 Months					12 Months or Longer					Total
December 31, 2018	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

U.S. Treasury and Government agencies	$	1,417	$	(8	)	$	7,870	$	(106	)	$	9,287	$	(114	)
Mortgage-backed securities		10,613		(54	)		37,495		(985	)		48,108		(1,039	)
State and political subdivisions		417		(6	)		1,159		(21	)		1,576		(27	)

Totals	$	12,447	$	(68	)	$	46,524	$	(1,112	)	$	58,971	$	(1,180	)

The unrealized loss on the securities portfolio decreased by $0.98 million as of December 31, 2019, from the prior year. Management reviews these securities on a quarterly basis and has determined that no impairment exists. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation. When the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.