SECURITIES

Available for Sale

The amortized cost and approximate fair value of securities available for sale as of June 30, 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
June 30, 2017
U.S. government agencies	$	16,960	$	60	$	(27	)	$	16,993
State and political subdivisions	42,300		1,040		(267		)	43,073
Mortgage-backed securities -
U.S. government-sponsored enterprises	36,306		146		(484		)	35,968
Corporate Debt	2,000		33		—			2,033
	$	97,566	$	1,279	$	(778	)	$	98,067



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 $44.5 million and $34.3 million at June 30, 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 June 30, 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	5,419		5,481
Due after ten years	38,682		39,425
Total bonds and obligations	44,300		45,106
U.S. government agencies	16,960		16,993
Mortgage-backed securities:
U.S. government-sponsored enterprises	36,306		35,968
Total available for sale securities	$	97,566	$	98,067

Gross gains on sales of securities available for sale were $19 thousand and gross realized losses were $49 thousand for the three months ended June 30, 2017. Gross realized gains on sales of securities available for sale were $97 thousand and there were no gross realized losses for the three months ended June 30, 2016.

Gross gains on sales of securities available for sale were $165 thousand and $264 thousand and gross losses were $88 and less than $1 thousand for the six months ended June 30, 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 June 30, 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
June 30, 2017
U.S. government agencies	$	5,166	$	(27	)	$	—	$	—		$	5,166	$	(27	)
State and political subdivisions	11,915		(267		)	—		—			11,915		(267		)
Mortgage-backed securities -
U.S. government-sponsored enterprises	15,875		(363		)	9,426		(121		)	25,301		(484		)
Total temporarily impaired securities	$	32,956	$	(657	)	$	9,426	$	(121	)	$	42,382	$	(778	)



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 June 30, 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 June 30, 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 June 30, 2017, there were three securities with a fair value of $5.2 million that had an unrealized loss that amounted to $27 thousand. As of June 30, 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 June 30, 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 June 30, 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 June 30, 2017, there were twelve securities with a fair value of $11.9 million that had an unrealized loss that amounted to $267 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 June 30, 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 June 30, 2017, there were sixteen securities with a fair value of $25.3 million that had an unrealized loss that amounted to $484 thousand. As of June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 June 30, 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
June 30, 2017
State and political subdivisions	$	8,654	$	174	$	—		$	8,828
December 31, 2016
State and political subdivisions	$	11,618	$	123	$	(2	)	$	11,739

During the three months and the six months ended June 30, 2016, the Company sold a security out of its held to maturity portfolio due to continued credit deterioration. The gross realized gain on the sale of the security was $8 thousand for the three months and six months ended June 30, 2016.

The amortized cost and carrying value of securities held to maturity at June 30, 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	$	5,813	$	5,813
Due after one year through five years	—		—
Due after five years through ten years	1,804		1,881
Due after ten years	1,037		1,134
Total held to maturity securities	$	8,654	$	8,828

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 June 30, 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	)