Investment Securities

3 Months Ended

Mar. 31, 2019

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

8. Investment Securities

The cost basis and fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale (AFS):

	March 31, 2019
			Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value
US Agency	$	7,606	$	3	$	(65	)	$	7,544
US Agency mortgage-backed securities		94,806		983		(537	)		95,252
Municipal		13,298		228		(110	)		13,416
Corporate bonds		38,334		127		(648	)		37,813
Total	$	154,044	$	1,341	$	(1,360	)	$	154,025

Investment securities held to maturity (HTM):

	March 31, 2019
			Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value
US Agency mortgage-backed securities	$	9,764	$	137	$	(53	)	$	9,848
Municipal		24,729		341		(151	)		24,919
Corporate bonds and other securities		6,035		6		(78	)		5,963
Total	$	40,528	$	484	$	(282	)	$	40,730

Investment securities available for sale (AFS):

	December 31, 2018
			Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value
US Agency	$	7,685	$	4	$	(160	)	$	7,529
US Agency mortgage-backed securities		90,169		516		(1,158	)		89,527
Municipal		13,301		114		(234	)		13,181
Corporate bonds		37,359		131		(996	)		36,494
Total	$	148,514	$	765	$	(2,548	)	$	146,731

Investment securities held to maturity (HTM):

	December 31, 2018
			Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value
US Agency mortgage-backed securities	$	9,983	$	78	$	(132	)	$	9,929
Municipal		24,740		131		(404	)		24,467
Corporate bonds and other securities		6,037		13		(122	)		5,928
Total	$	40,760	$	222	$	(658	)	$	40,324

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investor’s Service or Standard & Poor’s rating of “A.” At March 31, 2019, 58.5% of the portfolio was rated “AAA” as compared to 57.5% at December 31, 2018. Approximately 8.4% of the portfolio was either rated below “A” or unrated at March 31, 2019 as compared to 10.0% at December 31, 2018.

The Company sold no AFS securities during the first quarter of 2019. The Company sold $4.5 million AFS securities in the first quarter of 2018 resulting in $148,000 of gross investment security losses.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $118,370,000 at March 31, 2019 and $115,536,000 at December 31, 2018.

The following tables present information concerning investments with unrealized losses as of March 31, 2019 and December 31, 2018 (in thousands):

Total investment securities:

	March 31, 2019
	Less than 12 months					12 months or longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
US Agency	$	—	$	—		$	5,891	$	(65	)	$	5,891	$	(65	)
US Agency mortgage-backed securities		—		—			40,841		(590	)		40,841		(590	)
Municipal		—		—			13,384		(261	)		13,384		(261	)
Corporate bonds and other securities		12,344		(213	)		19,229		(513	)		31,573		(726	)
Total	$	12,344	$	(213	)	$	79,345	$	(1,429	)	$	91,689	$	(1,642	)

Total investment securities:

	December 31, 2018
	Less than 12 months					12 months or longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
US Agency	$	244	$	(6	)	$	5,631	$	(154	)	$	5,875	$	(160	)
US Agency mortgage-backed securities		17,718		(177	)		39,983		(1,113	)		57,701		(1,290	)
Municipal		6,601		(71	)		15,880		(567	)		22,481		(638	)
Corporate bonds and other securities		15,221		(440	)		17,038		(678	)		32,259		(1,118	)
Total	$	39,784	$	(694	)	$	78,532	$	(2,512	)	$	118,316	$	(3,206	)

The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are 129 positions that are considered temporarily impaired at March 31, 2019. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.

Contractual maturities of securities at March 31, 2019 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The weighted average duration of the total investment securities portfolio at March 31, 2019 is 41.7 months and is lower than the duration at December 31, 2018 which was 44.1 months. The duration remains within our internal established guideline range of 24 to 60 months which we believe is appropriate to maintain proper levels of liquidity, interest rate risk, market valuation sensitivity and profitability.

Total investment securities:

	March 31, 2019
	Available for sale				Held to maturity
	Cost Basis		Fair Value		Cost Basis		Fair Value
Within 1 year	$	1,006	$	1,005	$	1,000	$	953
After 1 year but within 5 years		22,552		22,456		5,192		5,168
After 5 years but within 10 years		44,406		44,189		19,023		19,149
After 10 years but within 15 years		29,382		29,521		9,816		9,971
Over 15 years		56,698		56,854		5,497		5,489
Total	$	154,044	$	154,025	$	40,528	$	40,730