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Investment Securities
 6 Months Ended
Jun. 30, 2019
Investments [Abstract]  
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):
 
 
 
June 30, 2019
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
US Agency
 
$
7,489
 
 
$
54
 
 
$
—
 
 
$
7,543
 
US Agency mortgage-backed securities
 
 
90,523
 
 
 
1,602
 
 
 
(167
)
 
 
91,958
 
Municipal
 
 
13,994
 
 
 
499
 
 
 
(22
)
 
 
14,471
 
Corporate bonds
 
 
37,312
 
 
 
258
 
 
 
(454
)
 
 
37,116
 
Total
 
$
149,318
 
 
$
2,413
 
 
$
(643
)
 
$
151,088
 
 
 
 
 
 
 
 
 
 
Investment securities held to maturity (HTM):
 
 
 
June 30, 2019
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
US Agency mortgage-backed securities
 
$
9,501
 
 
$
197
 
 
$
(18
)
 
$
9,680
 
Municipal
 
 
24,216
 
 
 
881
 
 
 
(44
)
 
 
25,053
 
Corporate bonds and other securities
 
 
6,035
 
 
 
49
 
 
 
(42
)
 
 
6,042
 
Total
 
$
39,752
 
 
$
1,127
 
 
$
(104
)
 
$
40,775
 
 
 
 
 
 
 
 
 
 
Investment securities available for sale (AFS):
 
 
 
December 31, 2018
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
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
 
 
 
Cost
Basis
 
 
Gross
Unrealized
Gains
 
 
Gross
Unrealized
Losses
 
 
Fair
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 June 30, 2019 and December 31, 2018, 57.5% of the portfolio was rated “AAA”. Approximately 8.7% of the portfolio was either rated below “A” or unrated at June 30, 2019 as compared to 10.0% at December 31, 2018.
 
The Company sold $
530
,000 AFS securities in the second quarter and first six months of 2019 resulting in $30,000 of gross investment security gains. The Company sold
no
AFS securities during the second quarter of 2018. Total proceeds from the sale of AFS securities for the first six months of 2018 were $4.5 million resulting in $15,000 of gross investment security gains and $163,000 of gross investment security losses.
 
The carrying value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $121,682,000 at June 30, 2019 and $115,536,000 at December 31, 2018.
 
The following tables present information concerning investments with unrealized losses as of June 30, 2019 and December 31, 2018 (in thousands):
 
Total investment securities:
 
 
 
June 30, 2019
 
 
 
Less than 12 months
 
 
12 months or longer
 
 
Total
 
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
 
US Agency
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
US Agency mortgage-backed securities
 
 
—
 
 
 
—
 
 
 
21,440
 
 
 
(185
)
 
 
21,440
 
 
 
(185
)
Municipal
 
 
—
 
 
 
—
 
 
 
2,468
 
 
 
(66
)
 
 
2,468
 
 
 
(66
)
Corporate bonds and other securities
 
 
4,922
 
 
 
(77
)
 
 
18,182
 
 
 
(419
)
 
 
23,104
 
 
 
(496
)
Total
 
$
4,922
 
 
$
(77
)
 
$
42,090
 
 
$
(670
)
 
$
47,012
 
 
$
(747
)
 
 
 
 
 
 
 
 
 
 
Total investment securities:
 
 
 
December 31, 2018
 
 
 
Less than 12 months
 
 
12 months or longer
 
 
Total
 
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
Losses
 
 
Fair
Value
 
 
Unrealized
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 65 positions that are considered temporarily impaired at June 30, 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 June 30, 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 June 30, 2019 is 37.2 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:
 
 
 
June 30, 2019
 
 
 
Available for sale
 
 
Held to maturity
 
 
 
Cost
Basis
 
 
Fair
Value
 
 
Cost
Basis
 
 
Fair
Value
 
Within 1 year
 
$
2,500
 
 
$
2,502
 
 
$
1,000
 
 
$
995
 
After 1 year but within 5 years
 
 
20,264
 
 
 
20,319
 
 
 
5,178
 
 
 
5,196
 
After 5 years but within 10 years
 
 
44,101
 
 
 
44,554
 
 
 
20,018
 
 
 
20,696
 
After 10 years but within 15 years
 
 
28,373
 
 
 
28,849
 
 
 
8,201
 
 
 
8,477
 
Over 15 years
 
 
54,080
 
 
 
54,864
 
 
 
5,355
 
 
 
5,411
 
Total
 
$
149,318
 
 
$
151,088
 
 
$
39,752
 
 
$
40,775
 
 
 
 
 
 
 
As of June 30, 2019, the Company reported $328,000 of equity securities within Other assets on the Consolidated Balance Sheets. These equity securities are held within a nonqualified deferred compensation plan in which a select group of executives of the Company can participate. An eligible executive can defer a certain percentage of their current salary to be placed into the plan and held within a rabbi trust. The assets of the rabbi trust are invested in various publicly listed mutual funds. The gain or loss on the equity securities (both realized and unrealized) will be reported within Other income on the Consolidated Statements of Operations. Additionally, the Company has recognized a deferred compensation liability, which is equal to the balance of the equity securities and is reported within Other liabilities on the Consolidated Balance Sheets.