Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of March 31, 2019 and December 31, 2018 are as follows:



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	9,634	$	24	$	(40)	$	9,618
Municipal securities		63,820		845		(108)		64,557
Trust preferred securities		4,080		—		(180)		3,900
Agency mortgage-backed securities		42,818		135		(364)		42,589
Private-label mortgage-backed securities		448		30		—		478
Asset-backed securities		6,791		—		(52)		6,739
	$	127,591	$	1,034	$	(744)	$	127,881



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2018	cost		gains		losses		value
U.S. Government and Agency securities	$	9,120	$	21	$	(65)	$	9,076
Municipal securities		67,811		320		(484)		67,647
Trust preferred securities		4,074		—		(316)		3,758
Agency mortgage-backed securities		45,241		65		(648)		44,658
Private-label mortgage-backed securities		457		31		—		488
Asset-backed securities		5,869		—		(24)		5,845
	$	132,572	$	437	$	(1,537)	$	131,472

At March 31, 2019 and December 31, 2018, the fair value of AFS securities pledged to secure public funds and trust deposits totaled $76.7 million and $84.6 million, respectively.

The amortized cost and estimated fair value of debt securities at March 31, 2019, by contractual maturity are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities.



(Dollars in thousands)	Amortized cost		Fair value
Due in one year or less	$	21,030	$	21,084
Due after one year through five years		25,764		25,839
Due after five years through ten years		35,173		35,467
Due after ten years		2,358		2,424
		84,325		84,814
Mortgage-backed securities		43,266		43,067
	$	127,591	$	127,881

The composition of the net realized gains on AFS securities for the three months ended are as follows:


	For the Three Months Ended
	March 31,
(Dollars in thousands)	2019		2018
Gross gains realized	$	33	$	—
Gross losses realized		(9)		—
Net gains realized	$	24	$	—

Impairment:

The AFS securities portfolio contained 125 securities with $57.7 million of temporarily impaired fair value and $744 thousand in unrealized losses at March 31, 2019. The total unrealized loss position has decreased $793 thousand since year-end 2018.

For securities with an unrealized loss, Management applies a systematic methodology in order to perform an assessment of the potential for other-than-temporary impairment. In the case of debt securities, investments considered for other-than-temporary impairment: (1) had a specified maturity or repricing date; (2) were generally expected to be redeemed at par, and (3) were expected to achieve a recovery in market value within a reasonable period of time. In addition, the Bank considers whether it intends to sell these securities or whether it will be forced to sell these securities before the earlier of amortized cost recovery or maturity. The impairment identified on debt securities and subject to assessment at March 31, 2019, was deemed to be temporary and required no further adjustments to the financial statements, unless otherwise noted.

The following table reflects temporary impairment in the AFS portfolio, aggregated by investment category, length of time that individual securities have been in a continuous unrealized loss position and the number of securities in each category as of March 31, 2019 and December 31, 2018:



	March 31, 2019
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count

U.S. Government and Agency securities	$	—	$	—	—	$	4,777	$	(40)	14	$	4,777	$	(40)	14
Municipal securities		238		—	1		12,377		(108)	21		12,615		(108)	22
Trust preferred securities		1,166		(33)	2		2,734		(147)	3		3,900		(180)	5
Agency mortgage-backed securities		895		(1)	4		28,746		(363)	71		29,641		(364)	75
Asset-backed securities		6,721		(51)	7		18		(1)	2		6,739		(52)	9
Total temporarily impaired securities	$	9,020	$	(85)	14	$	48,652	$	(659)	111	$	57,672	$	(744)	125



	December 31, 2018
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses		Count	Value		Losses		Count	Value		Losses		Count

U.S. Government and Agency securities	$	2,071	$	(6)	2	$	5,175	$	(59)	14	$	7,246	$	(65)	16
Municipal securities		5,832		(12)	10		25,091		(472)	42		30,923		(484)	52
Trust preferred securities		2,008		(159)	3		1,750		(157)	2		3,758		(316)	5
Agency mortgage-backed securities		7,687		(46)	16		30,511		(602)	74		38,198		(648)	90
Asset-backed securities		5,826		(22)	6		19		(2)	2		5,845		(24)	8
Total temporarily impaired securities	$	23,424	$	(245)	37	$	62,546	$	(1,292)	134	$	85,970	$	(1,537)	171

The following table represents the cumulative credit losses on AFS securities recognized in earnings for:



	Three Months Ended
(Dollars in thousands)	March 31,
	2019		2018
Balance of cumulative credit-related OTTI at January 1	$	272	$	595
Additions for credit-related OTTI not previously recognized		—		—
Additional increases for credit-related OTTI previously recognized when there is
no intent to sell and no requirement to sell before recovery of amortized cost basis		—		—
Decreases for previously recognized credit-related OTTI because there was an intent to sell		—		—
Reduction for increases in cash flows expected to be collected		—		—
Balance of credit-related OTTI at March 31	$	272	$	595

Equity securities at Fair Value

The Corporation owns one equity investment. At March 31, 2019 and December 31, 2018, this investment was reported at fair value of $377 thousand and $374 thousand, respectively, with changes in value reported through income.

Restricted Stock at Cost

The Bank held $452 thousand of restricted stock at March 31, 2019. Except for $30 thousand, this investment represents stock in FHLB Pittsburgh. The Bank is required to hold this stock to be a member of FHLB and it is carried at cost of $100 per share. The level of FHLB stock held is determined by FHLB and is comprised of a minimum membership amount plus a variable activity amount. FHLB stock is evaluated for impairment primarily based on an assessment of the ultimate recoverability of its cost. As a government sponsored entity, FHLB has the ability to raise funding through the U.S. Treasury that can be used to support its operations. There is not a public market for FHLB stock and the benefits of FHLB membership (e.g., liquidity and low cost funding) add value to the stock beyond purely financial measures. Management intends to remain a member of the FHLB and believes that it will be able to fully recover the cost basis of this investment.