SECURITIES

Available for Sale

The amortized cost and approximate fair value of securities available for sale as of September 30, 2016 and December 31, 2015 are summarized as follows:

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(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2016
U.S. government agencies	$	13,670	$	32	$	(49	)	$	13,653
State and political subdivisions	32,698		1,341		(8		)	34,031
Mortgage-backed securities -
U.S. government-sponsored enterprises	41,493		567		(114		)	41,946
Corporate Debt	2,000		—		—			2,000
	$	89,861	$	1,940	$	(171	)	$	91,630



December 31, 2015
U.S. government agencies	$	12,792	$	51	$	(55	)	$	12,788
State and political subdivisions	37,771		507		(129		)	38,149
Mortgage-backed securities -
U.S. government-sponsored enterprises	43,069		206		(436		)	42,839
	$	93,632	$	764	$	(620	)	$	93,776

Securities with a carrying value of approximately $33.7 million and $33.4 million at September 30, 2016 and December 31, 2015, 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 September 30, 2016 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	198		200
Due after five years through ten years	6,392		6,620
Due after ten years	28,108		29,211
Total bonds and obligations	34,698		36,031
U.S. government agencies	13,670		13,653
Mortgage-backed securities:
U.S. government-sponsored enterprises	41,493		41,946
Total available for sale securities	$	89,861	$	91,630

Gross gains on sales of securities available for sale were $89 thousand and $64 thousand for the three months ended September 30, 2016 and 2015, respectively. Gross realized losses on sales of securities available for sale were less than $1 thousand and $53 thousand for the three months ended September 30, 2016 and 2015, respectively.

Gross realized gains on sales of securities available for sale were $353 thousand and $368 thousand and gross losses were less than $1 thousand and $101 thousand for the nine months ended September 30, 2016 and 2015, 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 September 30, 2016 and December 31, 2015.

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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
September 30, 2016
U.S. government agencies	$	2,129	$	(16	)	$	2,229	$	(33	)	$	4,358	$	(49	)
State and political subdivisions	597		(8		)	—		—			597		(8		)
Mortgage-backed securities -
U.S. government-sponsored enterprises	14,405		(107		)	865		(7		)	15,270		(114		)
Total temporarily impaired securities	$	17,131	$	(131	)	$	3,094	$	(40	)	$	20,225	$	(171	)



December 31, 2015
U.S. government agencies	$	5,888	$	(23	)	$	2,473	$	(32	)	$	8,361	$	(55	)
State and political subdivisions	5,780		(107		)	2,998		(22		)	8,778		(129		)
Mortgage-backed securities -
U.S. government-sponsored enterprises	31,885		(436		)	—		—			31,885		(436		)
Total temporarily impaired securities	$	43,553	$	(566	)	$	5,471	$	(54	)	$	49,024	$	(620	)

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 September 30, 2016, 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 September 30, 2016 and December 31, 2015, the decline 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 September 30, 2016, there were three securities with a fair value of $4.4 million that had an unrealized loss that amounted to $49 thousand. As of September 30, 2016, 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 September 30, 2016 were deemed to be other-than-temporarily impaired (“OTTI”).

At December 31, 2015, there were six securities with a fair value of $8.4 million that had an unrealized loss that amounted to $55 thousand.

State and Political Subdivisions

At September 30, 2016 and December 31, 2015, 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 September 30, 2016, there was one security with a fair value of $597 thousand that had an unrealized loss that amounted to $8 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, 2015, there were 15 securities with a fair value of $8.8 million that had an unrealized loss that amounted to $129 thousand.

Mortgage-Backed Securities

At September 30, 2016 and December 31, 2015, 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 September 30, 2016, there were nine securities with a fair value of $15.3 million that had an unrealized loss that amounted to $114 thousand. As of September 30, 2016, 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 September 30, 2016 were deemed to be OTTI.

At December 31, 2015, there were 18 securities with a fair value of $31.9 million that had an unrealized loss that amounted to $436 thousand.

Corporate Debt

At September 30, 2016, we did not have any Corporate Debt securities in an unrealized loss position.

Held to Maturity Securities

The amortized cost and approximate fair value of securities held to maturity as of September 30, 2016 and December 31, 2015 are summarized as follows:

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(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2016
State and political subdivisions	$	6,628	$	235	$	—	$	6,863
December 31, 2015
State and political subdivisions	$	6,834	$	174	$	—	$	7,008

During the nine months ended September 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 nine months ended September 30, 2016.

The amortized cost and carrying value of securities held to maturity at September 30, 2016 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	$	3,767	$	3,767
Due after one year through five years	—		—
Due after five years through ten years	1,818		1,925
Due after ten years	1,043		1,171
Total held to maturity securities	$	6,628	$	6,863

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 September 30, 2016, 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, 2015, we did not have any held to maturity securities in an unrealized loss position.