Note 2-Securities

A summary of securities available-for-sale at March 31, 2019 and December 31, 2018 is provided below. The securities available-for-sale portfolio is generally comprised of high quality debt instruments, principally obligations of the United States government or agencies thereof and investments in the obligations of states and municipalities. The majority of municipal bonds in the portfolio are general obligation bonds, which can draw upon multiple sources of revenue, including taxes, for payment. Only a few bonds are revenue bonds, which are dependent upon a single revenue stream for payment, but they are for critical services such as water and sewer. In many cases, municipal debt issues are insured or, in the case of school districts of selected states, backed by specific loss reserves. At March 31, 2019, while 85 percent of the fair value of the municipal bond portfolio was concentrated in the Commonwealth of Pennsylvania, the portfolio was intentionally distributed to limit exposure with the largest issuer at $2.3 million.



		Amortized		Gross Unrealized				Fair
(dollars in thousands)		Cost		Gains		Losses		Value
March 31, 2019
Debt securities:
U.S. Treasury notes	$	19,788	$	39	$	(543)	$	19,284
U.S. agency		16,000		0		(621)		15,379
U.S. agency mortgage-backed, residential		81,345		421		(499)		81,267
State and municipal		33,082		181		(25)		33,238
Total debt securities	$	150,215	$	641	$	(1,688)	$	149,168
December 31, 2018
Debt securities:
U.S. Treasury notes	$	19,780	$	29	$	(806)	$	19,003
U.S. agency		16,000		0		(937)		15,063
U.S. agency mortgage-backed, residential		75,446		102		(993)		74,555
State and municipal		41,184		85		(297)		40,972
Total debt securities	$	152,410	$	216	$	(3,033)	$	149,593

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 if call options on select debt issues are exercised in the future. Mortgage-backed securities are included in the maturity categories based on average expected life.



		Available-for-sale
		Amortized		Fair
(dollars in thousands)		Cost		Value
Due in one year or less	$	3,439	$	3,443
Due after one year through five years		89,460		88,997
Due after five years through ten years		46,896		46,221
Due after ten years		10,420		10,507
Total debt securities	$	150,215	$	149,168

Gross realized gains and losses on sales of securities available-for-sale are shown below. Realized gains and losses are computed on the basis of specific identification of the adjusted cost of each security and are shown net as a separate line item in the income statement.



		Three months ended
		March 31,
(dollars in thousands)		2019		2018
Realized gains	$	3	$	0
Realized losses		(7)		0
Net losses	$	(4)	$	0

Investment securities having a carrying value of $123,369,000 and $123,088,000 on March 31, 2019 and December 31, 2018, respectively, were pledged to secure public and trust deposits, repurchase agreements and other short-term borrowings.

The table below shows gross unrealized losses and fair value, aggregated by investment category and length of time, for securities that have been in a continuous unrealized loss position, at March 31, 2019 and December 31, 2018.



	Less than 12 months					12 months or more					Total
	Number of	Fair		Unrealized		Number of	Fair		Unrealized		Number of	Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
March 31, 2019
Debt securities:
U.S. Treasury notes	0	$	0	$	0	3	$	14,250	$	(543)	3	$	14,250	$	(543)
U.S. agency	0		0		0	4		15,379		(621)	4		15,379		(621)
U.S. agency mortgage-backed, residential	6		6,237		(91)	29		37,665		(408)	35		43,902		(499)
State and municipal	2		1,036		(2)	14		7,266		(23)	16		8,302		(25)
Total temporarily impaired debt
securities, available-for-sale	8	$	7,273	$	(93)	50	$	74,560	$	(1,595)	58	$	81,833	$	(1,688)
December 31, 2018
Debt securities:
U.S. Treasury notes	0	$	0	$	0	3	$	13,980	$	(806)	3	$	13,980	$	(806)
U.S. agency	0		0		0	4		15,063		(937)	4		15,063		(937)
U.S. agency mortgage-backed, residential	8		4,878		(14)	39		51,137		(979)	47		56,015		(993)
State and municipal	15		6,707		(11)	36		20,287		(286)	51		26,994		(297)
Total temporarily impaired debt
securities, available-for-sale	23	$	11,585	$	(25)	82	$	100,467	$	(3,008)	105	$	112,052	$	(3,033)

Securities available-for-sale are analyzed quarterly for possible other-than-temporary impairment. The analysis considers, among other factors: 1) whether the Corporation has the intent to sell its securities prior to market recovery or maturity; 2) whether it is more likely than not that the Corporation will be required to sell its securities prior to market recovery or maturity; 3) default rates/history by security type; 4) third-party securities ratings; 5) third-party guarantees; 6) subordination; 7) payment delinquencies; 8) nature of the issuer; and 9) current financial news.

The Corporation believes that unrealized losses at March 31, 2019 were primarily the result of changes in market interest rates and that the Corporation has the ability to hold these investments for a time necessary to recover the amortized cost. Through March 31, 2019 the Corporation has collected all interest and principal on its investment securities as scheduled. The Corporation believes that collection of the contractual principal and interest is probable and, therefore, all impairment is considered to be temporary.