held-to-maturity decreased to $3,703,000 on September 30, 2018 from $5,713,000 on December 31, 2017. This decrease resulted from the call of a security with a
par value of $2,000,000 during the quarter. Securities available-for-sale, which are carried on the balance sheet at fair market value, decreased to $52,333,000 on
September 30, 2018, from $55,312,000 on December 31, 2017. The decrease resulted from the normal amortization of and principal payments on mortgage-backed securities in the
available-for-sale portfolio along with a decrease in fair value related to an increase in interest rates. During the nine months ended September 30, 2018 the Bank
received $1,666,000 in proceeds from calls, maturities, and paydowns of securities available-for-sale and $0 in proceeds from the sale of securities available-for-sale. The Bank purchased $998,000 in securities available-for sale during the same period.
Financials investment in Federal Home Loan Bank of Atlanta (FHLBA) stock totaled $564,000 at September 30, 2018 and $607,000 at
December 31, 2017, a decrease of $43,000. This decrease is attributable to the FHLBAs redemption of stock as a result of the repayment of a $10,000,000 advance earlier this year. FHLBA stock is generally viewed as a long-term investment
and because there is no market for the stock other than other Federal Home Loan Banks or member institutions, FHLBA stock is viewed as a restricted security. Therefore, when evaluating FHLBA stock for impairment, its value is based on the ultimate
recoverability of the par value rather than by recognizing temporary declines in value.
Liquidity and Capital
At September 30, 2018, Financial, on a consolidated basis, had liquid assets of $102,797,000 in the form of cash, interest-bearing and
noninterest-bearing deposits with banks, and available-for-sale investments. Of this amount, approximately $16,611,000 (representing current book value) of the available-for-sale securities are pledged as collateral with $8,169,000 pledged as security for public deposits, and $8,442,000 pledged as security on a line of credit the
Bank may draw on from time to time to meet liquidity needs. This line of credit currently has a zero balance. Management believes that liquid assets were adequate at Septmeber 30, 2018. Management anticipates that additional liquidity will be
provided by the growth in deposit accounts and loan repayments at the Bank. In addition, if additional liquidity is needed, the Bank has the ability to purchase federal funds on the open market, borrow from the FHLBA using loans or investments
within the Banks portfolio as collateral, and to borrow from the Federal Reserve Banks discount window.
Management is not
aware of any trends, events or uncertainties that are reasonably likely to have a material negative impact on Financials short-term or long-term liquidity. Based in part on recent loan growth, the Bank is monitoring liquidity to ensure it is
able to fund future loans.
On January 25, 2017, Financial closed a private placement of unregistered debt securities (the 2017
Offering) pursuant to which Financial issued $5,000,000 in principal of notes (the 2017 Notes). The 2017 Notes bear interest at the rate of 4% per year with interest payable quarterly in arrears. The 2017 Notes are to mature on
January 24, 2022, but are subject to prepayment in whole or in part on or after January 24, 2018 at Financials sole discretion on 30 days written notice to the holders. Of the proceeds, $3,000,000 was injected into the Bank as equity
capital in March 2017. The Company left the remaining $2,000,000 at the holding company level for debt service on the 2017 Notes and other general corporate purposes.
At September 30, 2018, the Bank had a leverage ratio of approximately 9.20%, a Tier 1 risk-based capital ratio and a CET1 ratio of
approximately 11.36% and a total risk-based capital ratio of approximately 12.22%. As of September 30, 2018 and December 31, 2017 the Banks regulatory capital