Securities

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Securities

Note 3 - Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	24,920	$	1	$	(146	)	$	24,775
U.S. Government agencies		84,266		3		(1,795	)		82,474
Mortgage-backed securities		49,155		185		(879	)		48,461
State and local governments		63,173		634		(990	)		62,817
Total available-for-sale securities	$	221,514	$	823	$	(3,810	)	$	218,527

	(In Thousands)
	2015
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	38,778	$	36	$	(309	)	$	38,505
U.S. Government agencies		99,000		55		(835	)		98,220
Mortgage-backed securities		26,157		283		(116	)		26,324
State and local governments		70,858		1,290		(82	)		72,066
Total available-for-sale securities	$	234,793	$	1,664	$	(1,342	)	$	235,115

Investment securities will at times depreciate to an unrealized loss position. The Bank utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as an other than temporary impairment.

1. The fair value of the security has significantly declined from book value.

2. A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

3. Dividends have been reduced or eliminated or scheduled interest payments have not been made.

4. The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

5. Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Bank currently does not hold any securities with other than temporary impairment.

Information pertaining to securities with gross unrealized losses at December 31, 2016 and 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2016
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(146	)	$	15,745	$	—		$	—
U.S. Government agencies		(1,795	)		77,471		—			—
Mortgage-backed securities		(879	)		36,474		—			—
State and local governments		(983	)		37,540		(7	)		526
Total available-for-sales securities	$	(3,803	)	$	167,230	$	(7	)	$	526
	2015
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(142	)	$	23,241	$	(167	)	$	10,195
U.S. Government agencies		(635	)		68,957		(200	)		9,793
Mortgage-backed securities		(60	)		6,331		(56	)		3,580
State and local governments		(54	)		7,920		(28	)		1,725
Total available-for-sales securities	$	(891	)	$	106,449	$	(451	)	$	25,293

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

Sales of $85.7, $47.0, and $57.9 million for 2016, 2015, and 2014 respectively, generated gross realized gains and losses for the years ended December 31, as presented below:

	(In Thousands)
	2016			2015		2014
Gross realized gains	$	598		$	451	$	638
Gross realized losses		(10	)		—		(144	)
Net realized gains	$	588		$	451	$	494
Tax expense related to net realized gains	$	200		$	153	$	168

The net realized gain on sales and related tax expense is a reclassification out of accumulated other comprehensive income. The net realized gain is included in net gain on sale of securities available-for-sale and the related tax expense is included in income tax expense in the consolidated statements of income and comprehensive income.

The amortized cost and fair value of debt securities at December 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized
	Cost		Fair Value
One year or less	$	19,158	$	19,231
After one year through five years		81,888		81,590
After five years through ten years		67,483		65,583
After ten years		3,830		3,662
Total	$	172,359	$	170,066
Mortgage-backed securities		49,155		48,461
Total	$	221,514	$	218,527

Investments with a carrying value and fair value of $129.4 million at December 31, 2016 and $189.3 million at December 31, 2015 were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of December 31, 2016 and 2015.