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Investments
 9 Months Ended
Sep. 30, 2018
Investments [Abstract]  
Investments

Note 4. Investments

Available for Sale (AFS) Securities

The amortized cost and estimated fair value of AFS securities as of September 30, 2018 and December 31, 2017 are as follows:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair

September 30, 2018

 

cost

 

gains

 

losses

 

value

U.S. Government and Agency securities

 

$

 9,405 

 

$

 15 

 

$

 (144)

 

$

 9,276 

Municipal securities

 

 

 63,221 

 

 

 176 

 

 

 (994)

 

 

 62,403 

Trust preferred securities

 

 

 4,069 

 

 

 —

 

 

 (122)

 

 

 3,947 

Agency mortgage-backed securities

 

 

 46,394 

 

 

 39 

 

 

 (1,063)

 

 

 45,370 

Private-label mortgage-backed securities

 

 

 474 

 

 

 43 

 

 

 —

 

 

 517 

Asset-backed securities

 

 

 3,917 

 

 

 —

 

 

 (27)

 

 

 3,890 



 

$

 127,480 

 

$

 273 

 

$

 (2,350)

 

$

 125,403 









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

Gross

 

Gross

 

 

 



 

Amortized

 

unrealized

 

unrealized

 

Fair

December 31, 2017

 

cost

 

gains

 

losses

 

value

Equity securities

 

$

 164 

 

$

 201 

 

$

 —

 

$

 365 

U.S. Government and Agency securities

 

 

 11,451 

 

 

 64 

 

 

 (43)

 

 

 11,472 

Municipal securities

 

 

 57,374 

 

 

 650 

 

 

 (252)

 

 

 57,772 

Trust preferred securities

 

 

 6,000 

 

 

 —

 

 

 (183)

 

 

 5,817 

Agency mortgage-backed securities

 

 

 51,307 

 

 

 197 

 

 

 (567)

 

 

 50,937 

Private-label mortgage-backed securities

 

 

 858 

 

 

 88 

 

 

 —

 

 

 946 

Asset-backed securities

 

 

 28 

 

 

 —

 

 

 (1)

 

 

 27 



 

$

 127,182 

 

$

 1,200 

 

$

 (1,046)

 

$

 127,336 



At September 30, 2018 and December 31, 2017, the fair value of AFS securities pledged to secure public funds and trust deposits totaled $86.9 million and  $84.1 million, respectively.

The amortized cost and estimated fair value of debt securities at September 30, 2018, 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

 

$

 14,466 

 

$

 14,508 

Due after one year through five years

 

 

 33,277 

 

 

 33,081 

Due after five years through ten years

 

 

 31,927 

 

 

 31,026 

Due after ten years

 

 

 942 

 

 

 901 



 

 

 80,612 

 

 

 79,516 

Mortgage-backed securities

 

 

 46,868 

 

 

 45,887 



 

$

 127,480 

 

$

 125,403 



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)

 

2018

 

2017

 

2018

 

2017

Gross gains realized

 

$

 5 

 

$

 1 

 

$

 67 

 

$

 3 

Gross losses realized

 

 

 —

 

 

 —

 

 

 (11)

 

 

 —

Net gains realized

 

$

 5 

 

$

 1 

 

$

 56 

 

$

 3 



Impairment:

The AFS investment portfolio contained 192 securities with $100 million of temporarily impaired fair value and $2.4 million in unrealized losses at September 30, 2018. The total unrealized loss position has increased $1.3 million since year-end 2017. 

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, 2018, 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, 2018 and December 31, 2017:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



September 30, 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

$

 4,011 

 

$

 (54)

 

 5 

 

$

 4,381 

 

$

 (90)

 

 12 

 

$

 8,392 

 

$

 (144)

 

 17 

Municipal securities

 

 28,938 

 

 

 (520)

 

 47 

 

 

 13,014 

 

 

 (474)

 

 23 

 

 

 41,952 

 

 

 (994)

 

 70 

Trust preferred securities

 

 2,102 

 

 

 (62)

 

 3 

 

 

 1,845 

 

 

 (60)

 

 2 

 

 

 3,947 

 

 

 (122)

 

 5 

Agency mortgage-backed securities

 

 18,326 

 

 

 (311)

 

 40 

 

 

 22,996 

 

 

 (752)

 

 53 

 

 

 41,322 

 

 

 (1,063)

 

 93 

Asset-backed securities

 

 3,886 

 

 

 (26)

 

 6 

 

 

 4 

 

 

 (1)

 

 1 

 

 

 3,890 

 

 

 (27)

 

 7 

Total temporarily impaired
  securities

$

 57,263 

 

$

 (973)

 

 101 

 

$

 42,240 

 

$

 (1,377)

 

 91 

 

$

 99,503 

 

$

 (2,350)

 

 192 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



December 31, 2017



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

$

 2,315 

 

$

 (11)

 

 5 

 

$

 3,528 

 

$

 (32)

 

 10 

 

$

 5,843 

 

$

 (43)

 

 15 

Municipal securities

 

 13,767 

 

 

 (89)

 

 22 

 

 

 7,507 

 

 

 (163)

 

 14 

 

 

 21,274 

 

 

 (252)

 

 36 

Trust preferred securities

 

 1,216 

 

 

 (12)

 

 2 

 

 

 4,601 

 

 

 (171)

 

 5 

 

 

 5,817 

 

 

 (183)

 

 7 

Agency mortgage-backed securities

 

 16,287 

 

 

 (129)

 

 29 

 

 

 20,563 

 

 

 (438)

 

 39 

 

 

 36,850 

 

 

 (567)

 

 68 

Asset-backed securities

 

 —

 

 

 —

 

 —

 

 

 4 

 

 

 (1)

 

 1 

 

 

 4 

 

 

 (1)

 

 1 

Total temporarily impaired
  securities

$

 33,585 

 

$

 (241)

 

 58 

 

$

 36,203 

 

$

 (805)

 

 69 

 

$

 69,788 

 

$

 (1,046)

 

 127 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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







 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended

(Dollars in thousands)

 

September 30,



 

2018

 

2017

Balance of cumulative credit-related OTTI at January 1

 

$

 595 

 

$

 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

 

 

 (323)

 

 

 —

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, 2018, this investment was reported at fair value ($383 thousand) with changes in value reported through income.  At December 31, 2017, this investment was reported at fair value with changes in value recorded through other comprehensive income and was included in the Available for Sale Securities table of this note.

Restricted Stock at Cost

The Bank held $452 thousand of restricted stock at September 30, 2018.  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.