Securities

6 Months Ended

Jun. 30, 2020

Securities

Securities

NOTE 3: Securities

The Corporation’s debt securities, all of which are classified as available for sale, are summarized as follows:

	June 30, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
U.S. government agencies and corporations	$	37,068	$	153	$	(16)	$	37,205
Mortgage-backed securities		102,749		3,500		—		106,249
Obligations of states and political subdivisions		101,361		2,321		(3)		103,679
	$	241,178	$	5,974	$	(19)	$	247,133

	December 31, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
U.S. government agencies and corporations	$	21,454	$	3	$	(17)	$	21,440
Mortgage-backed securities		85,649		979		(43)		86,585
Obligations of states and political subdivisions		80,656		1,111		(59)		81,708
	$	187,759	$	2,093	$	(119)	$	189,733

The amortized cost and estimated fair value of securities at June 30, 2020, by the earlier of contractual maturity or expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

	June 30, 2020
	Amortized
(Dollars in thousands)	Cost		Fair Value
Due in one year or less	$	63,267	$	63,568
Due after one year through five years		139,191		143,546
Due after five years through ten years		36,488		37,698
Due after ten years		2,232		2,321
	$	241,178	$	247,133

The following table presents the gross realized gains and losses on and the proceeds from the sales, maturities and calls of securities. During the six months ended June 30, 2020, $5.99 million in proceeds were related to sales of assets acquired in the acquisition of Peoples. There were no sales of securities during the three and six months ended June 30, 2019.

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
Realized gains from sales, maturities and calls of securities:
Gross realized gains	$	3	$	1	$	7	$	5
Gross realized losses		—		—		—		—
Net realized gains	$	3	$	1	$	7	$	5
Proceeds from sales, maturities, calls and paydowns of securities	$	31,717	$	17,982	$	70,780	$	33,639

The Corporation pledges securities primarily to secure public deposits and repurchase agreements. Securities with an aggregate amortized cost of $118.55 million and an aggregate fair value of $122.58 million were pledged at June 30, 2020. Securities with an aggregate amortized cost of $126.22 million and an aggregate fair value of $127.47 million were pledged at December 31, 2019.

Securities in an unrealized loss position at June 30, 2020, by duration of the period of the unrealized loss, are shown below.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. government agencies and corporations	$	14,320	$	16	$	—	$	—	$	14,320	$	16
Mortgage-backed securities		—		—		—		—		—		—
Obligations of states and political subdivisions		1,412		3		—		—		1,412		3
Total temporarily impaired securities	$	15,732	$	19	$	—	$	—	$	15,732	$	19

There were 11 debt securities totaling $15.73 million of aggregate fair value considered temporarily impaired at June 30, 2020. The primary cause of the temporary impairments in the Corporation’s investments in debt securities was fluctuations in interest rates. The Corporation’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. government-sponsored enterprises.  Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.  At June 30, 2020, all of the Corporation’s obligations of states and political subdivisions that were in a net unrealized loss position were rated “A” or better by Standard & Poor's or Moody's Investors Service. The Corporation considers these to meet regulatory credit quality standards, meaning that the securities have low risk of default by the obligor and the full and timely repayment of principal and interest is expected over the expected life of the investment. Because the Corporation intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Corporation will not be required to sell these investments before a recovery of unrealized losses, the Corporation does not consider these investments to be other-than-temporarily impaired at June 30, 2020 and no other-than-temporary impairment loss has been recognized in net income. 

Securities in an unrealized loss position at December 31, 2019, by duration of the period of the unrealized loss, are shown below.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. government agencies and corporations	$	6,256	$	11	$	4,094	$	6	$	10,350	$	17
Mortgage-backed securities		4,099		7		10,166		36		14,265		43
Obligations of states and political subdivisions		9,187		53		1,368		6		10,555		59
Total temporarily impaired securities	$	19,542	$	71	$	15,628	$	48	$	35,170	$	119

The Corporation’s investment in restricted stock totaled $3.21 million at June 30, 2020 and consisted of Federal Home Loan Bank (FHLB) stock.  Restricted stock is generally viewed as a long-term investment, which is carried at cost because there is no market for the stock other than the FHLBs. Therefore, when evaluating restricted stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing any temporary decline in value. The Corporation did not consider its investment in restricted stock to be other-than-temporarily impaired at June 30, 2020 and no impairment has been recognized.