SECURITIES

Amortized cost and fair value at December 31, 2018 and 2017, were as follows:



In thousands	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
December 31, 2018
U.S. Government and agencies	$	120,420	$	142	$	2,149	$	118,413
Mortgage-backed securities, residential	33,960		194		343		33,811
State and municipal	9,482		60		36		9,506
	$	163,862	$	396	$	2,528	$	161,730
December 31, 2017
U.S. Government and agencies	$	105,899	$	2	$	1,818	$	104,083
Mortgage-backed securities, residential	34,473		461		101		34,833
State and municipal	13,227		109		42		13,294
Corporate bonds	5,000		57		—		5,057
	$	158,599	$	629	$	1,961	$	157,267
SECURITIES HELD TO MATURITY
December 31, 2018
U.S. Government and agencies	$	7,000	$	—	$	69	$	6,931
Mortgage-backed securities, residential	20,266		4		290		19,980
	$	27,266	$	4	$	359	$	26,911
December 31, 2017
U.S. Government and agencies	$	19,000	$	2	$	99	$	18,903
Mortgage-backed securities, residential	25,829		55		238		25,646
	$	44,829	$	57	$	337	$	44,549

The Corporation adopted ASU 2016-01, Financial Instruments—Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities effective January 1, 2018. The required fair value disclosures are as follows:



In thousands	Fair Value at January 1, 2018		Unrealized Gains		Unrealized Losses		Fair Value at December 31, 2018
DECEMBER 31, 2018
CRA Mutual Fund	$	1,044	$	—	$	32	$	1,012
Stock in other banks	749		247		169		827
	$	1,793	$	247	$	201	$	1,839

Amortized cost and fair value disclosures of equity securities prior to ASU 2016-01 implementation are as follows:



In thousands	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
DECEMBER 31, 2017
CRA Mutual Fund	$	1,044	$	—	$	9	$	1,035
Stock in other banks	647		102		—		749
	$	1,691	$	102	$	9	$	1,784

The following table shows the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2018 and 2017:



	Less than 12 Months				12 Months or More				Total
In thousands	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
SECURITIES AVAILABLE FOR SALE
December 31, 2018
U.S. Government and agencies	$	1,997	$	5	$	87,216	$	2,144	$	89,213	$	2,149
Mortgage-backed securities, residential	9,410		134		8,586		209		17,996		343
State and municipal	—		—		2,696		36		2,696		36
	$	11,407	$	139	$	98,498	$	2,389	$	109,905	$	2,528
December 31, 2017
U.S. Government and agencies	$	42,775	$	445	$	58,279	$	1,373	$	101,054	$	1,818
Mortgage-backed securities, residential	7,228		56		2,845		45		10,073		101
State and municipal	1,042		8		1,950		34		2,992		42
CRA Mutual Fund	—		—		1,035		9		1,035		9
	$	51,045	$	509	$	64,109	$	1,461	$	115,154	$	1,970
SECURITIES HELD TO MATURITY
December 31, 2018
U.S. Government and agencies	$	2,975	$	25	$	3,956	$	44	$	6,931	$	69
Mortgage-backed securities, residential	5,408		59		12,636		231		18,044		290
	$	8,383	$	84	$	16,592	$	275	$	24,975	$	359
December 31, 2017
U.S. Government and agencies	$	4,985	$	15	$	10,916	$	84	$	15,901	$	99
Mortgage-backed security, residential	4,946		29		11,070		209		16,016		238
	$	9,931	$	44	$	21,986	$	293	$	31,917	$	337

All mortgage-backed security investments are government sponsored enterprise (GSE) pass-through instruments issued by the Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA) or Federal Home Loan Mortgage Corporation (FHLMC), which guarantee the timely payment of principal on these investments.

At December 31, 2018, fifty-one available for sale U.S. Government and agency securities had unrealized losses that individually did not exceed 5% of amortized cost. Fifty of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At December 31, 2018, twenty-eight available for sale residential mortgage-backed securities had unrealized losses that individually did not exceed 4% of amortized cost. Twelve of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At December 31, 2018, ten available for sale state and municipal securities had unrealized losses that individually did not exceed 3% of amortized cost. All of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At December 31, 2018, five held to maturity U.S. Government and agency securities had unrealized losses that individually did not exceed 2% of amortized cost. Three of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At December 31, 2018, thirty held to maturity residential mortgage-backed securities had unrealized losses that individually did not exceed 3% of amortized cost. Twenty of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

In analyzing the issuer’s financial condition, management considers industry analysts’ reports, financial performance, and projected target prices of investment analysts within a one-year time frame. Based on the above information, management has determined that none of these investments are other-than-temporarily impaired.

The fair values of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the security’s relationship to other benchmark quoted prices. The Corporation uses independent service providers to provide matrix pricing.

Management routinely sells securities from its available for sale portfolio in an effort to manage and allocate the portfolio. At December 31, 2018, management had not identified any securities with an unrealized loss that it intends to sell or will be required to sell. In estimating other-than-temporary impairment losses on debt securities, management considers (1) whether management intends to sell the security, or (2) if it is more likely than not that management will be required to sell the security before recovery, or (3) if management does not expect to recover the entire amortized cost basis. In assessing potential other-than-temporary impairment for equity securities, consideration is given to management’s intention and ability to hold the securities until recovery of unrealized losses.

Amortized cost and fair value at December 31, 2018, by contractual maturity, where applicable, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties.



	Available for Sale				Held to Maturity
In thousands	Amortized Cost		Fair Value		Amortized Cost		Fair Value
1 year or less	$	8,483	$	8,439	$	3,000	$	2,970
Over 1 year through 5 years	121,220		119,284		4,000		3,961
Over 5 years through 10 years	199		196		—		—
Over 10 years	—		—		—		—
Mortgage-backed securities, residential	33,960		33,811		20,266		19,980
	$	163,862	$	161,730	$	27,266	$	26,911

The Corporation realized gross gains of $288,000 during 2018 and $0 during 2017, and gross losses of $203,000 during 2018 and $0 during 2017 on sales of securities available for sale.

At December 31, 2018 and 2017, securities with a carrying value of $165,792,000 and $157,601,000, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.