SECURITIES

Available for Sale

The amortized cost and approximate fair value of securities available for sale as of March 31, 2017 and December 31, 2016 are summarized as follows:

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(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2017
U.S. government agencies	$	22,304	$	34	$	(94	)	$	22,244
State and political subdivisions	40,681		282		(524		)	40,439
Mortgage-backed securities -
U.S. government-sponsored enterprises	35,485		146		(550		)	35,081
Corporate Debt	2,000		33		—			2,033
	$	100,470	$	495	$	(1,168	)	$	99,797



December 31, 2016
U.S. government agencies	$	13,115	$	29	$	(57	)	$	13,087
State and political subdivisions	41,255		203		(770		)	40,688
Mortgage-backed securities -
U.S. government-sponsored enterprises	33,483		126		(755		)	32,854
Corporate Debt	2,000		—		(18		)	1,982
	$	89,853	$	358	$	(1,600	)	$	88,611

Securities with a carrying value of approximately $47.1 million and $34.3 million at March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for borrowings at the Federal Reserve Bank as required or permitted by applicable laws and regulations.

The amortized cost and fair value of securities available for sale at March 31, 2017 are shown below by contractual maturity. Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments which pay principal on a periodic basis are not included in the maturity categories.

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(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due after one year through five years	199		200
Due after five years through ten years	4,255		4,276
Due after ten years	38,227		37,996
Total bonds and obligations	42,681		42,472
U.S. government agencies	22,304		22,244
Mortgage-backed securities:
U.S. government-sponsored enterprises	35,485		35,081
Total available for sale securities	$	100,470	$	99,797

Gross gains on sales of securities available for sale were $146 thousand and $167 thousand for the three months ended March 31, 2017 and 2016, respectively. Gross realized losses on sales of securities available for sale were $39 thousand and less than $1 thousand for the three months ended March 31, 2017 and 2016, respectively.

Temporarily Impaired Securities

The following table shows gross unrealized losses and fair value of securities with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by category and length of time that individual available for sale securities have been in a continuous unrealized loss position at March 31, 2017 and December 31, 2016.

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	Less Than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
March 31, 2017
U.S. government agencies	$	11,199	$	(53	)	$	2,067	$	(41	)	$	13,266	$	(94	)
State and political subdivisions	14,930		(524		)	—		—			14,930		(524		)
Mortgage-backed securities -
U.S. government-sponsored enterprises	24,538		(549		)	540		(1		)	25,078		(550		)
Corporate Debt	—		—			—		—			—		—
Total temporarily impaired securities	$	50,667	$	(1,126	)	$	2,607	$	(42	)	$	53,274	$	(1,168	)



December 31, 2016
U.S. government agencies	$	4,952	$	(15	)	$	2,126	$	(42	)	$	7,078	$	(57	)
State and political subdivisions	23,989		(770		)	—		—			23,989		(770		)
Mortgage-backed securities -
U.S. government-sponsored enterprises	23,299		(752		)	639		(3		)	23,938		(755		)
Corporate Debt	1,982		(18		)	—		—			1,982		(18		)
Total temporarily impaired securities	$	54,222	$	(1,555	)	$	2,765	$	(45	)	$	56,987	$	(1,600	)

For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred. As of March 31, 2017, we reviewed our available for sale securities portfolio for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security. The intent and likelihood of sale of debt and equity securities are evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position.

U.S. Government Agencies

At March 31, 2017 and December 31, 2016, the declines in fair value and the unrealized losses for our U.S. government agencies securities were primarily due to changes in spreads and market conditions and not credit quality. At March 31, 2017, there were eight securities with a fair value of $13.3 million that had an unrealized loss that amounted to $94 thousand. As of March 31, 2017, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of the U.S. government agency securities at March 31, 2017 were deemed to be other-than-temporarily impaired (“OTTI”).

At December 31, 2016, there were five securities with a fair value of $7.1 million that had an unrealized loss that amounted to $57 thousand.

State and Political Subdivisions

At March 31, 2017 and December 31, 2016, the decline in fair value and the unrealized losses for our state and political subdivisions securities were caused by changes in interest rates and spreads and were not the result of credit quality. At March 31, 2017, there were seventeen securities with a fair value of $14.9 million that had an unrealized loss that amounted to $524 thousand. These securities typically have maturity dates greater than 10 years and the fair values are more sensitive to changes in market interest rates.

At December 31, 2016, there were thirty-one securities with a fair value of $24.0 million that had an unrealized loss that amounted to $770 thousand.

Mortgage-Backed Securities

At March 31, 2017 and December 31, 2016, the decline in fair value and the unrealized losses for our mortgage-backed securities guaranteed by U.S. government-sponsored enterprises were primarily due to changes in spreads and market conditions and not credit quality. At March 31, 2017, there were seventeen securities with a fair value of $25.1 million that had an unrealized loss that amounted to $550 thousand. As of March 31, 2017, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of our mortgage-backed securities at March 31, 2017 were deemed to be OTTI.

At December 31, 2016, there were sixteen securities with a fair value of $23.9 million that had an unrealized loss that amounted to $755 thousand.

Corporate Debt

At March 31, 2017, the decline in fair value and unrealized losses for our corporate debt was caused by changes in interest rates and spreads and were not the result of credit quality. At March 31, 2017, there were no securities that had an unrealized loss. These securities typically have maturity dates greater than five years and the fair values are more sensitive to changes in market interest rates. As of March 31, 2017, we did not intend to sell and it was more-likely-than-no that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore, none of our corporate debt as March 31, 2017, were deemed to be other-than-temporarily-impaired.

At December 31, 2016, there was one security with a fair value of $2.0 million that had an unrealized loss that amounted to $18 thousand.

Held to Maturity Securities

The amortized cost and approximate fair value of securities held to maturity as of March 31, 2017 and December 31, 2016 are summarized as follows:

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(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2017
State and political subdivisions	$	8,630	$	158	$	—		$	8,788
December 31, 2016
State and political subdivisions	$	11,618	$	123	$	(2	)	$	11,739

The amortized cost and carrying value of securities held to maturity at March 31, 2017 are shown below by contractual maturity. Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	5,783	$	5,783
Due after one year through five years	—		—
Due after five years through ten years	1,808		1,871
Due after ten years	1,039		1,134
Total held to maturity securities	$	8,630	$	8,788

Temporarily Impaired Securities

For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred. As of March 31, 2017, we did not have any held to maturity investments with unrealized losses. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security. The intent and likelihood of sale of debt securities is evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. For each security whose fair value is less than their amortized cost basis, a review is conducted to determine if an other-than-temporary impairment has occurred.

At December 31, 2016, there were two securities with a fair value of $789 thousand that had an unrealized loss of $2 thousand.



	Less Than 12 Months					12 Months or More				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
December 31, 2016
State and political subdivisions	$	789	$	(2	)	$	—	$	—	$	789	$	(2	)
Total temporarily impaired securities	$	789	$	(2	)	$	—	$	—	$	789	$	(2	)