NOTE 2—SECURITIES

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at June 30, 2016 and 2015 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:

Available-for-sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2016
Obligations of U.S. government-sponsored entities and agencies	$	9,682	$	362	$	—		$	10,044
Obligations of state and political subdivisions		53,952		2,010		(8	)		55,954
U.S. Government-sponsored mortgage-backed securities - residential		58,702		920		(26	)		59,596
U.S. Government-sponsored mortgage-backed securities - commercial		1,485		41		—			1,526
U.S. Government-sponsored collateralized mortgage obligations - residential		5,774		49		(3	)		5,820
Pooled trust preferred security		153		276		—			429
Total available-for-sale securities	$	129,748	$	3,658	$	(37	)	$	133,369

Held-to-maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
June 30, 2016
Obligations of state and political subdivisions	$	3,494	$	125	$	—	$	3,619
Total held-to-maturity securities	$	3,494	$	125	$	—	$	3,619

Available-for-sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2015
Obligations of U.S. government-sponsored entities and agencies	$	16,411	$	178	$	(31	)	$	16,558
Obligations of state and political subdivisions		48,557		811		(405	)		48,963
U.S. Government-sponsored mortgage-backed securities - residential		64,441		699		(226	)		64,914
U.S. Government-sponsored mortgage-backed securities - commercial		1,485		1		—			1,486
U.S. Government-sponsored collateralized mortgage obligations - residential		4,703		14		(34	)		4,683
Pooled trust preferred security		184		356		—			540
Total available-for-sale securities	$	135,781	$	2,059	$	(696	)	$	137,144

Held-to-maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
June 30, 2015
Obligations of state and political subdivisions	$	3,655	$	67	$	—	$	3,722
Total held-to-maturity securities	$	3,655	$	67	$	—	$	3,722

Proceeds from sales and calls of available-for-sale securities during fiscal year 2016 and fiscal year 2015 were as follows:

	2016		201 5
Proceeds from sales	$	10,596	$	16,124
Gross realized gains		202		283
Gross realized losses		—		123

The income tax provision applicable to realized gains amounted to $69 in fiscal year 2016 and $96 in fiscal year 2015. There was no tax benefit recognized from gross realized losses in 2016 and the income tax benefit applicable to the net realized losses was $42 for June 30, 2015.

The amortized cost and fair values of debt securities at June 30, 2016 by expected 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. Securities not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the pooled trust preferred security are shown separately.

Available-for-sale	Amortized Cost		Fair Value
Due in one year or less	$	5,906	$	6,040
Due after one year through five years		14,602		15,194
Due after five years through ten years		25,276		26,256
Due after ten years		17,850		18,508
Total		63,634		65,998
U.S. Government-sponsored mortgage-backed and related securities		65,961		66,942
Pooled trust preferred security		153		429
Total	$	129,748	$	133,369

Held-to-maturity	Amortized Cost		Fair Value
Due after five years through ten years	$	2,820	$	2,914
Due after ten years		674		705
Total	$	3,494	$	3,619

Securities with a carrying value of approximately $55,140 and $59,805 were pledged at June 30, 2016 and 2015, respectively, to secure public deposits and commitments as required or permitted by law. At June 30, 2016 and 2015, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, with an aggregate book value greater than 10% of shareholders’ equity.

The following table summarizes the securities with unrealized and unrecognized losses at June 30, 2016 and 2015, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position:

	Less than 12 Months					12 Months or more					Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2016
Obligations of states and political subdivisions		572		(6	)		641		(2	)		1,213		(8	)
Mortgage-backed securities - residential		4,899		(12	)		4,836		(14	)		9,735		(26	)
Collateralized mortgage obligations - residential		—		—			1,212		(3	)		1,212		(3	)
Total available-for-sale	$	5,471	$	(18	)	$	6,689	$	(19	)	$	12,160	$	(37	)

	Less than 12 Months					12 Months or more					Total
Available-for-sale	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss

June 30, 201 5
Obligations of U.S. government-sponsored entities and agencies	$	3,719	$	(31	)	$	—	$	—		$	3,719	$	(31	)
Obligations of states and political subdivisions		18,796		(352	)		2,145		(53	)		20,941		(405	)
Mortgage-backed securities - residential		24,322		(200	)		2,031		(26	)		26,353		(226	)
Collateralized mortgage obligations - residential		3,321		(34	)		—		—			3,321		(34	)
Total available-for-sale	$	50,158	$	(617	)	$	4,176	$	(79	)	$	54,334	$	(696	)

Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under FASB ASC Topic 320,

Accounting for Certain Investments in Debt and Equity Securities

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

As of June 30, 2016, the Corporation’s securities portfolio consisted of 245 available-for-sale securities. There were 16 securities in an unrealized loss position at June 30, 2016, nine of which were in a continuous loss position for twelve or more months. The unrealized losses of the obligations of states and political subdivisions were mainly attributable to the spreads for these types of securities being wider at June 30, 2016 than when these securities were purchased. Management monitors the financial data of the individual municipalities to ensure they meet minimum credit standards. At June 30, 2016, all of the mortgage-backed securities and collateralized mortgage obligations held by the Corporation were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The decline in fair value of these securities is attributable to higher than projected prepayment speeds increasing the premium amortization. Since

the Corporation does not intend to sell these securities and it is not likely the Corporation will be required to sell these securities at an unrealized loss position prior to any anticipated recovery in fair value, which may be maturity, management does not believe there is any other-than-temporary impairment related to these securities at June 30, 2016. Also, there was no other-than-temporary impairment recognized at June 30, 2015.