Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of September 30, 2019 and December 31, 2018 are as follows:



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
September 30, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	9,697	$	49	$	(19)	$	9,727
Municipal securities		73,092		1,857		(258)		74,691
Trust preferred securities		4,091		—		(178)		3,913
Agency mortgage-backed securities		50,372		608		(104)		50,876
Private-label mortgage-backed securities		420		36		—		456
Asset-backed securities		7,789		—		(124)		7,665
	$	145,461	$	2,550	$	(683)	$	147,328



(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 September 30, 2019 and December 31, 2018, the fair value of AFS securities pledged to secure public funds and trust deposits totaled $115.5 million and $84.6 million, respectively.

The amortized cost and estimated fair value of debt securities at September 30, 2019, by contractual maturity are shown below. Actual maturities may differ from contractual maturities because of prepayment or call options embedded in the securities. Securities not due at a single maturity date are presented separately.



(Dollars in thousands)	Amortized cost		Fair value
Due in one year or less	$	17,427	$	17,514
Due after one year through five years		18,193		18,349
Due after five years through ten years		43,931		44,923
Due after ten years		15,118		15,210
		94,669		95,996
Mortgage-backed securities		50,792		51,332
	$	145,461	$	147,328

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


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Proceeds	$	1,826	$	304	$	18,781	$	4,115

Gross gains realized		4		5		285		67
Gross losses realized		(1)		—		(29)		(11)
Net gains (losses) realized	$	3	$	5	$	256	$	56

Tax (provision) benefit on net gains (losses) realized	$	(1)	$	(1)	$	(54)	$	(12)

Impairment:

The AFS securities portfolio contained 95 securities with $48.9 million of temporarily impaired fair value and $683 thousand in unrealized losses at September 30, 2019. The total unrealized loss position has decreased $854 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 September 30, 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 September 30, 2019 and December 31, 2018:



	September 30, 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	$	2,263	$	(10)	7	$	1,516	$	(9)	8	$	3,779	$	(19)	15
Municipal securities		13,737		(226)	15		3,166		(32)	5		16,903		(258)	20
Trust preferred securities		—		—	—		3,913		(178)	5		3,913		(178)	5
Agency mortgage-backed securities		8,073		(47)	14		8,568		(57)	31		16,641		(104)	45
Asset-backed securities		4,759		(73)	5		2,906		(51)	5		7,665		(124)	10
Total temporarily impaired securities	$	28,832	$	(356)	41	$	20,069	$	(327)	54	$	48,901	$	(683)	95



	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:



	Nine Months Ended
(Dollars in thousands)	September 30,
	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 September 30	$	272	$	595

Equity securities at Fair Value

The Corporation owns one equity investment. At September 30, 2019 and December 31, 2018, this investment was reported at fair value of $384 thousand and $374 thousand, respectively, with changes in value reported through income.

Restricted Stock at Cost

The Bank held $465 thousand of restricted stock at September 30, 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.