Note 4 - Investment Securities Available-for-Sale

The following tables present the amortized cost and estimated fair values of investment securities at June 30, 2016 and December 31, 2015, all of which were available-for-sale:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
June 30, 2016:
U.S Government agencies	$	2,202	$	61	$	—	$	2,263
State and municipal		44,264		933		14		45,183
U.S. Government agencies and sponsored enterprises (GSEs) - residential:
Mortgage-backed securities		16,100		273		—		16,373
Corporate debt obligations		10,040		262		48		10,254
Equity securities, financial services		193		32		45		180

	$	72,799	$	1,561	$	107	$	74,253


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
December 31, 2015:
U.S Treasuries	$	103	$	—	$	—	$	103
U.S Government agencies		4,708		29		—		4,737
State and municipal		34,197		587		14		34,770
U.S. Government agencies and sponsored enterprises (GSEs) - residential:
Mortgage-backed securities		25,942		116		35		26,023
Collateralized mortgage obligations (CMOs)		1,741		35		3		1,773
Corporate debt obligations		7,989		17		62		7,945
Equity securities, financial services		471		31		2		499

	$	75,151	$	815	$	116	$	75,850

The amortized cost and fair value of debt securities available-for-sale at June 30, 2016, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to prepay obligations, with or without call or prepayment penalties:


	Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	231	$	234
Due after one year through five years		1,629		1,667
Due after five years through ten years		11,255		11,492
Due after ten years		43,391		44,307

		56,506		57,700

Mortgage-backed securities		16,100		16,373
Equity securities		193		180

		16,293		16,553

	$	72,799	$	74,253

Securities with an amortized cost of $40,364,000 and a fair value of $41,652,000 were pledged at June 30, 2016 as collateral for public fund deposits and for other purposes as required or permitted by law. In comparison, at December 31, 2015, securities with an amortized cost of $52,384,000 and a fair value of $53,039,000 were pledged for the same purposes.

Information with respect to securities with gross unrealized losses at June 30, 2016 and December 31, 2015 aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:


	Less Than 12 Months				More Than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
June 30, 2016:
Available-for-sale:
State and municipal	$	4,080	$	9	$	287	$	5	$	4,367	$	14
Corporate debt obligations		3,452		48		—		—		3,452		48
Equity securities, financial services		118		45		—		—		118		45

	$	7,650	$	102	$	287	$	5	$	7,937	$	107

December 31, 2015:
Available-for-sale:
State and municipal	$	—	$	—	$	652	$	14	$	652	$	14
Mortgage-backed securities		9,513		35		—		—		9,513		35
Collateralized mortgage obligations (CMOs)		725		3		—		—		725		3
Corporate debt obligations		3,937		62		—		—		3,937		62
Equity securities, financial services		164		2		—		—		164		2

	$	14,339	$	102	$	652	$	14	$	14,991	$	116

Management evaluates securities for other-than-temporary impairment, on at least a quarterly basis. It is management’s intent to hold all investments until maturity unless market, economic, credit quality or specific investment concerns warrant a sale of securities. Consideration is given to (1) the length of time and the extent to which the fair value of securities has been less than cost, (2) the credit quality or financial condition and near-term prospects of the issuer, and (3) the intent and ability of the corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At June 30, 2016, eight securities, comprised of five state and municipal securities, one corporate debt obligation and two equity securities, had unrealized losses as compared with a total of sixteen securities at December 31, 2015. Management believes the unrealized losses relate to changes in interest rates since the time the individual securities were purchased as opposed to underlying credit issues. As the Company does not intend to sell any of these debt securities, and it is more likely than not that the Company will not be required to sell any debt securities before the cost bases are recovered, no declines were deemed to be other-than-temporary.

There were 71 securities sold during the second quarter of 2016, while a total of 92 securities were sold during the six months ended June 30, 2016. The sales were initiated to take advantage of increased market values due to a reduction in the yield curve. For the three months ended June 30, 2016, a gain $338,000 and a loss of $4,000, resulting in a net gain of $334,000 was recorded. For the six months ended June 30, 2016, gains of $338,000 and losses of $6,000, resulting in a net gain of $332,000 were recorded due to the sale of securities as well as several municipal bonds that were either fully or partially called. There were no securities sold during the three and six months ended June 30, 2015. However, a loss of $41,000 was recorded during the six months ended June 30, 2015 due to several municipal bonds that were either fully or partially called, resulting in the acceleration of premium expense associated with those specific securities.