Investments

3 Months Ended

Mar. 31, 2020

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of March 31, 2020 and December 31, 2019 are as follows:



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
March 31, 2020	cost		gains		losses		value
U.S. Government and Agency securities	$	13,602	$	57	$	(34)	$	13,625
Municipal securities		94,560		2,892		(242)		97,210
Trust preferred securities		4,102		—		(556)		3,546
Agency mortgage-backed securities		68,970		1,638		(461)		70,147
Private-label mortgage-backed securities		316		11		(4)		323
Asset-backed securities		24,197		28		(1,036)		23,189
	$	205,747	$	4,626	$	(2,333)	$	208,040



(Dollars in thousands)			Gross		Gross
	Amortized		unrealized		unrealized		Fair
December 31, 2019	cost		gains		losses		value
U.S. Government and Agency securities	$	8,418	$	30	$	(20)	$	8,428
Municipal securities		90,865		1,418		(997)		91,286
Trust preferred securities		4,097		—		(130)		3,967
Agency mortgage-backed securities		58,503		435		(234)		58,704
Private-label mortgage-backed securities		398		31		—		429
Asset-backed securities		24,918		6		(305)		24,619
	$	187,199	$	1,920	$	(1,686)	$	187,433

At March 31, 2020 and December 31, 2019, the fair value of AFS securities pledged to secure public funds and trust deposits totaled $98.0 million and $107.1 million, respectively.

The amortized cost and estimated fair value of debt securities at March 31, 2020, 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	$	12,900	$	12,978
Due after one year through five years		31,461		31,369
Due after five years through ten years		76,697		77,637
Due after ten years		15,403		15,586
		136,461		137,570
Mortgage-backed securities		69,286		70,470
	$	205,747	$	208,040

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)	2020		2019
Proceeds	$	165	$	3,876

Gross gains realized		—		33
Gross losses realized		(10)		(9)
Net gains (losses) realized	$	(10)	$	24

Tax benefit (provision) on net (losses) gains realized	$	2	$	(5)

Impairment:

The AFS securities portfolio contained 105 securities with $76.5 million of temporarily impaired fair value and $2.3 million in unrealized losses at March 31, 2020. The total unrealized loss position has increased $647 thousand since year-end 2019.

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, 2020, 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, 2020 and December 31, 2019:



	March 31, 2020
	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	$	6,681	$	(27)	8	$	1,284	$	(7)	7	$	7,965	$	(34)	15
Municipal securities		19,666		(235)	21		796		(7)	1		20,462		(242)	22
Trust preferred securities		840		(119)	1		2,706		(437)	4		3,546		(556)	5
Agency mortgage-backed securities		22,506		(459)	35		312		(2)	1		22,818		(461)	36
Private-label mortgage-backed securities		123		(4)	1		—		—	—		123		(4)	1
Asset-backed securities		15,252		(554)	16		6,300		(482)	10		21,552		(1,036)	26
Total temporarily impaired ‎ securities	$	65,068	$	(1,398)	82	$	11,398	$	(935)	23	$	76,466	$	(2,333)	105



	December 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	$	2,559	$	(12)	6	$	1,335	$	(8)	7	$	3,894	$	(20)	13
Municipal securities		38,874		(966)	40		2,655		(31)	4		41,529		(997)	44
Trust preferred securities		—		—	—		3,967		(130)	5		3,967		(130)	5
Agency mortgage-backed securities		21,185		(185)	32		6,555		(49)	22		27,740		(234)	54
Asset-backed securities		17,644		(128)	19		5,669		(177)	9		23,313		(305)	28
Total temporarily impaired ‎ securities	$	80,262	$	(1,291)	97	$	20,181	$	(395)	47	$	100,443	$	(1,686)	144

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



	Three Months Ended
(Dollars in thousands)	March 31,
	2020		2019
Balance of cumulative credit-related OTTI at January 1	$	272	$	272
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	$	272

Equity Securities at Fair Value

The Corporation owns one equity investment. At March 31, 2020 and December 31, 2019, this investment was reported at fair value of $313 thousand and $440 thousand, respectively, with changes in value reported through income.