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Securities
 6 Months Ended
Jun. 30, 2018
Marketable Securities [Abstract]  
Securities
Securities

This table provides the major components of AFS, HTM and Equity securities at amortized cost and estimated fair value at June 30, 2018 and December 31, 2017:
 
 
June 30, 2018
 
December 31, 2017
(In thousands)
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities
 
$
5,761

 
$
—

 
$
(163
)
 
$
5,598

 
$
5,765

 
$
—

 
$
(74
)
 
$
5,691

State and political subdivisions
 
5,001

 
1

 
(180
)
 
4,822

 
5,227

 
21

 
(56
)
 
5,192

Residential mortgage-backed securities
 
29,715

 
79

 
(941
)
 
28,853

 
32,111

 
153

 
(386
)
 
31,878

Corporate and other securities
 
9,656

 
19

 
(241
)
 
9,434

 
9,660

 
9

 
(143
)
 
9,526

Total securities available for sale
 
$
50,133

 
$
99

 
$
(1,525
)
 
$
48,707

 
$
52,763

 
$
183

 
$
(659
)
 
$
52,287

Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities
 
$
2,789

 
$
—

 
$
(112
)
 
$
2,677

 
$
3,026

 
$
—

 
$
(93
)
 
$
2,933

State and political subdivisions
 
1,113

 
109

 
—

 
1,222

 
1,113

 
144

 
—

 
1,257

Residential mortgage-backed securities
 
3,727

 
19

 
(68
)
 
3,678

 
3,958

 
59

 
(18
)
 
3,999

Commercial mortgage-backed securities
 
3,628

 
—

 
(188
)
 
3,440

 
3,685

 
—

 
(142
)
 
3,543

Corporate and other securities
 
4,520

 
77

 
—

 
4,597

 
4,525

 
89

 
—

 
4,614

Total securities held to maturity
 
$
15,777

 
$
205

 
$
(368
)
 
$
15,614

 
$
16,307

 
$
292

 
$
(253
)
 
$
16,346

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity securities
 
$
1,262

 
$
30

 
$
(94
)
 
$
1,198

 
$
1,262

 
$
15

 
$
(71
)
 
$
1,206



This table provides the remaining contractual maturities and yields of securities within the investment portfolios.  The carrying value of securities at June 30, 2018 is distributed by contractual maturity.  Mortgage-backed securities and other securities, which may have principal prepayment provisions, are distributed based on contractual maturity.  Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.
 
 
Within one year
 
After one through five years
 
After five through ten years
 
After ten years
 
Total carrying value
(In thousands, except percentages)
 
Amount
 
Yield
 
Amount
 
Yield
 
Amount
 
Yield
 
Amount
 
Yield
 
Amount
 
Yield
Available for sale at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities  
 
$
—

 
—
%
 
$
3,653

 
1.61
%
 
$
1,945

 
2.17
%
 
$
—

 
—
%
 
$
5,598

 
1.80
%
State and political subdivisions    
 
796

 
3.89

 
359

 
2.41

 
1,695

 
2.41

 
1,972

 
2.69

 
4,822

 
2.77

Residential mortgage-backed securities    
 
237

 
3.11

 
11,565

 
2.75

 
15,383

 
2.81

 
1,668

 
2.68

 
28,853

 
2.78

Corporate and other securities
 
—

 
—

 
5,637

 
4.20

 
3,797

 
3.93

 
—

 
—

 
9,434

 
4.09

Total securities available for sale
 
$
1,033

 
3.71
%
 
$
21,214

 
2.93
%
 
$
22,820

 
2.91
%
 
$
3,640

 
2.69
%
 
$
48,707

 
2.92
%
Held to maturity at cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities  
 
$
—

 
—
%
 
$
—

 
—
%
 
$
2,789

 
1.98
%
 
$
—

 
—
%
 
$
2,789

 
1.98
%
State and political subdivisions    
 
162

 
1.48

 
494

 
5.07

 
—

 
—

 
457

 
5.84

 
1,113

 
4.86

Residential mortgage-backed securities    
 
1

 
4.23

 
1,156

 
3.09

 
800

 
3.09

 
1,770

 
3.77

 
3,727

 
3.41

Commercial mortgage-backed securities    
 
—

 
—

 
—

 
—

 
1,624

 
2.48

 
2,004

 
2.98

 
3,628

 
2.76

Corporate and other securities
 
—

 
—

 
4,520

 
5.73

 
—

 
—

 
—

 
—

 
4,520

 
5.73

Total securities held to maturity
 
$
163

 
1.50
%
 
$
6,170

 
5.18
%
 
$
5,213

 
2.31
%
 
$
4,231

 
3.62
%
 
$
15,777

 
3.77
%
Equity securities at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity securities
 
$
—

 
—
%
 
$
—

 
—
%
 
$
—

 
—
%
 
$
1,198

 
2.04
%
 
$
1,198

 
2.04
%


The fair value of securities with unrealized losses by length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2018 and December 31, 2017 are as follows:
 
 
June 30, 2018
 
 
 
 
Less than 12 months
 
12 months and greater
 
Total
(In thousands, except number in a loss position)
 
Total number in a loss position
 
Estimated fair value
 
Unrealized loss
 
Estimated fair value
 
Unrealized loss
 
Estimated fair value
 
Unrealized loss
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities
 
5

 
$
1,720

 
$
(32
)
 
$
3,878

 
$
(131
)
 
$
5,598

 
$
(163
)
State and political subdivisions
 
6

 
2,513

 
(72
)
 
1,513

 
(108
)
 
4,026

 
(180
)
Residential mortgage-backed securities
 
28

 
13,576

 
(345
)
 
13,339

 
(596
)
 
26,915

 
(941
)
Corporate and other securities
 
5

 
3,129

 
(40
)
 
3,786

 
(201
)
 
6,915

 
(241
)
Total temporarily impaired securities
 
44

 
$
20,938

 
$
(489
)
 
$
22,516

 
$
(1,036
)
 
$
43,454

 
$
(1,525
)
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities
 
2

 
$
—

 
$
—

 
$
2,677

 
$
(112
)
 
$
2,677

 
$
(112
)
Residential mortgage-backed securities
 
8

 
2,550

 
(26
)
 
873

 
(42
)
 
$
3,423

 
(68
)
Commercial mortgage-backed securities
 
2

 
—

 
—

 
3,439

 
(188
)
 
3,439

 
(188
)
Total temporarily impaired securities
 
12

 
$
2,550

 
$
(26
)
 
$
6,989

 
$
(342
)
 
$
9,539

 
$
(368
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
 
2

 
$
—

 
$
—

 
$
906

 
$
(94
)
 
$
906

 
$
(94
)

 
 
December 31, 2017
 
 
 
 
Less than 12 months
 
12 months and greater
 
Total
(In thousands, except number in a loss position)
 
Total number in a loss position
 
Estimated fair value
 
Unrealized loss
 
Estimated fair value
 
Unrealized loss
 
Estimated fair value
 
Unrealized loss
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities
 
5

 
$
3,732

 
$
(40
)
 
$
1,958

 
$
(34
)
 
$
5,690

 
$
(74
)
State and political subdivisions
 
2

 
476

 
(6
)
 
1,792

 
(50
)
 
2,268

 
(56
)
Residential mortgage-backed securities
 
22

 
20,646

 
(218
)
 
4,028

 
(168
)
 
24,674

 
(386
)
Corporate and other securities
 
7

 
4,563

 
(30
)
 
2,803

 
(184
)
 
7,366

 
(214
)
Total temporarily impaired securities
 
36

 
$
29,417

 
$
(294
)
 
$
10,581

 
$
(436
)
 
$
39,998

 
$
(730
)
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government sponsored entities
 
2

 
$
—

 
$
—

 
$
2,933

 
$
(93
)
 
$
2,933

 
$
(93
)
Residential mortgage-backed securities
 
2

 
—

 
—

 
979

 
(18
)
 
979

 
(18
)
Commercial mortgage-backed securities
 
2

 
—

 
—

 
3,543

 
(142
)
 
3,543

 
(142
)
Total temporarily impaired securities
 
6

 
$
—

 
$
—

 
$
7,455

 
$
(253
)
 
$
7,455

 
$
(253
)


Unrealized Losses

The unrealized losses in each of the categories presented in the tables above are discussed in the paragraphs that follow:

U.S. government sponsored entities and state and political subdivision securities: The unrealized losses on investments in these types of securities were caused by the increase in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than temporarily impaired as of June 30, 2018.  There was no impairment on these securities at December 31, 2017.

Residential and commercial mortgage-backed securities:  The unrealized losses on investments in mortgage-backed securities were caused by increases in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The majority of contractual cash flows of these securities are guaranteed by the FNMA, GNMA, and the FHLMC.  It is expected that the securities would not be settled at a price significantly less than the par value of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of June 30, 2018 or December 31, 2017.

Corporate and other securities: Included in this category are corporate debt securities, Community Reinvestment Act (“CRA”) investments, asset-backed securities, and trust preferred securities.  The unrealized losses on corporate debt securities were due to widening credit spreads or the increase in interest rates at the long end of the Treasury curve and the unrealized losses on CRA investments were caused by decreases in the market value of underlying bonds and rate changes.  The Company evaluated the prospects of the issuers and forecasted a recovery period; and as a result determined it did not consider these investments to be other-than-temporarily impaired as of June 30, 2018 or December 31, 2017.  The contractual terms do not allow the securities to be settled at a price less than the par value.  Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these securities to be other-than-temporarily impaired as of June 30, 2018 or December 31, 2017.

Equity Securities: Included in this category are Community Reinvestment Act ("CRA") investments and the Company's current other equity holdings. Equity securities are defined to include (a) preferred, common and other ownership interests in entities including partnerships, joint ventures and limited liability companies and (b) rights to acquire or dispose of ownership interest in entities at fixed or determinable prices. As a result of the adoption of ASU 2016-01 in January 2018, these securities were transfered from available for sale and reclassified into equity securities on the balance sheet. These securities are measured at fair value with unrealized holding gains and losses reflected in net income. The unrealized losses on these securities were caused by decreases in the market value of the shares.

Realized Gains and Losses

Gross realized gains on securities for the three and six months ended June 30, 2018 and 2017 are detailed in the table below:

 
For the three months ended
June 30,
 
For the six months ended
June 30,
(In thousands)
 
2018
 
2017
 
2018
 
2017
Available for sale:
 
 
 
 
 
 
 
 
Realized gains
 
$
—

 
$
74

 
$
—

 
$
74

Realized losses
 
—

 
(58
)
 
—

 
(58
)
Total securities available for sale
 
—

 
16

 
—

 
16

Held to maturity:
 
 
 
 
 
 
 
 
Realized gains
 
—

 
—

 
—

 
—

Realized losses
 
—

 
—

 
—

 
—

Total securities held to maturity
 
—

 
—

 
—

 
—

Net gains on sales of securities
 
$
—

 
$
16

 
$
—

 
$
16



The net realized gains are included in noninterest income in the Consolidated Statements of Income as net security gains.  There were no gross realized gains for the three and six months ended June 30, 2018. There was a gross realized gain of $16 thousand for the three and six months ended June 30, 2017.

•
For the three and six months ended June 30, 2017, the net gains are attributed to the sale of three residential mortgage-backed securities with a total book value of $1.2 million and resulting gains of $71 thousand, and the call of two asset-backed securities with a total book value of $3.5 million and resulting gains of $3 thousand, partially offset by the sale of two residential mortgage-backed securities with a book value of $1.6 million which resulted in a loss of $58 thousand.

The Company follows ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities," which aims to simplify accounting for financial instruments and to converge the guidance between U.S. GAAP and IFRS. ASU 2016-01 also includes guidance on how entities account for equity investments, present and disclose financial instruments, and measure the valuation allowance on deferred tax assets related to available-for-sale debt securities. The guidance in ASU 2016-01 requires an entity to disaggregate the net gains and losses on the equity investments recognized in the income statement during a reporting period into realized and unrealized gains and losses. As a result, equity securities are no longer carried at fair value through other comprehensive income (OCI) or by applying the cost method to those equity securities that do not have readily determinable values. Equity securities are generally required to be measured at fair value with unrealized holding gains and losses reflected in net income. The Company adopted this standard as of January 1, 2018. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2018:
(In thousands)
 
Three months ended
June 30, 2018
 
Six months ended
June 30, 2018
Net gains (losses) recognized during the period on equity securities
 
7

 
(9
)
Less: Net gains (losses) recognized during the period on equity securities sold during the period
 
—

 
—

Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date
 
7

 
(9
)


Pledged Securities

Securities with a carrying value of $3.8 million and $20.8 million for June 30, 2018 and December 31, 2017, respectively, were pledged to secure Government deposits, secure other borrowings and for other purposes required or permitted by law.