5.Securities

The Company’s investment portfolio includes primarily bonds issued by U.S. Government sponsored agencies (approximately 21%), mortgage-backed securities issued by Government-sponsored agencies and backed by residential mortgages (approximately 56%) and municipal bonds (approximately 22%) as of March 31, 2016. Most of the municipal bonds are general obligation bonds with maturities or pre-refunding dates within 5 years. The remaining 1% of the portfolio includes a group of equity investments in other financial institutions.

The amortized cost and fair value of securities as of March 31, 2016 and December 31, 2015, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.


		March 31, 2016
Securities Available for Sale						Gross		Gross
		Amortized		Fair		Unrealized		Unrealized
Type and maturity		Cost		Value		Gains		Losses
Obligations of U.S. Government agencies and corporations
Within one year	$	-	$	-	$	-	$	-
After one year but within five years		22,490		22,568		82		(4)
After five years but within ten years		7,500		7,512		14		(2)
		29,990		30,080		96		(6)
Obligations of state and political subdivisions
Within one year		5,096		5,103		7		-
After one year but within five years		16,686		16,866		187		(7)
After five years but within ten years		10,120		10,347		227		-
After ten years		-		-		-		-
		31,902		32,316		421		(7)
Mortgage-backed securities		80,405		81,268		909		(47)
Equity securities		1,692		2,224		563		(31)
Total	$	143,989	$	145,888	$	1,989	$	(91)


		December 31, 2015
Securities Available for Sale						Gross		Gross
		Amortized		Fair		Unrealized		Unrealized
Type and maturity		Cost		Value		Gains		Losses
Obligations of U.S. Government agencies and corporations
Within one year	$	1,000	$	1,003	$	3	$	-
After one year but within five years		24,489		24,264		19		(244)
After five years but within ten years		7,495		7,465		7		(37)
		32,984		32,732		29		(281)
Obligations of state and political subdivisions
Within one year		5,756		5,771		15		-
After one year but within five years		16,070		16,151		101		(20)
After five years but within ten years		7,204		7,282		78		-
After ten years		330		331		1		-
		29,360		29,535		195		(20)
Mortgage-backed securities		88,159		87,741		213		(631)
Equity securities		1,692		2,319		645		(18)
Total	$	152,195	$	152,327	$	1,082	$	(950)

Certain obligations of the U.S. Government and state and political subdivisions are pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law. The carrying value of the pledged assets was $44,596,000 and $45,101,000 at March 31, 2016 and December 31, 2015, respectively.

In addition to cash received from the scheduled maturities of securities, some investment securities available for sale are sold or called at current market values during the course of normal operations.

The following chart summarizes proceeds received from sales or calls of investment securities transactions and the resulting realized gains and losses (in thousands):


		Three Months Ended
		March 31,
		2016		2015
Gross proceeds from sales of securities	$	-	$	12,896
Securities available for sale:
Gross realized gains from sold and called securities	$	-	$	41
Gross realized losses from sold and called securities		-		(58)

Accounting Standards Codification (ASC) Topic 320, Investments – Debt and Equity Securities, clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are taken before an assessment is made as to whether the entity will recover the cost basis of the investment. For equity securities, consideration is given to management’s intention and ability to hold the securities until recovery of unrealized losses in assessing potential other-than-temporary impairment. More specifically, factors considered to determine other-than-temporary impairment status for individual equity holdings include the length of time the stock has remained in an unrealized loss position, the percentage of unrealized loss compared to the carrying cost of the stock, dividend reduction or suspension, market analyst reviews and expectations, and other pertinent factors that would affect expectations for recovery or further decline.

In instances when a determination is made that an other-than-temporary impairment exists and the entity does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, the other-than-temporary impairment is separated into the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive (loss) income.

The following table shows gross unrealized losses and fair value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2016 and December 31, 2015 (in thousands):


		Unrealized Losses at March 31, 2016

		Less Than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Obligations of U.S. Government
agencies and corporations	$	4,496	$	(6)	$	-	$	-	$	4,496	$	(6)
Obligations of state and political
subdivisions		1,029		(3)		694		(4)		1,723		(7)
Mortgage-backed securities		5,336		(5)		11,172		(42)		16,508		(47)
Debt securities		10,861		(14)		11,866		(46)		22,727		(60)

Equity securities		186		(15)		52		(16)		238		(31)

Total temporarily impaired securities	$	11,047	$	(29)	$	11,918	$	(62)	$	22,965	$	(91)


		Unrealized Losses at December 31, 2015

		Less Than 12 Months				12 Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Obligations of U.S. Government
agencies and corporations	$	10,887	$	(102)	$	12,814	$	(179)	$	23,701	$	(281)
Obligations of state and political
subdivisions		7,469		(13)		692		(7)		8,161		(20)
Mortgage-backed securities		57,454		(631)		-		-		57,454		(631)
Debt securities		75,810		(746)		13,506		(186)		89,316		(932)

Equity securities		62		(3)		75		(15)		137		(18)

Total temporarily impaired securities	$	75,872	$	(749)	$	13,581	$	(201)	$	89,453	$	(950)

At March 31, 2016, 3 U.S. Government agency and corporations securities had unrealized losses that, in the aggregate, totaled 0.02% of amortized cost. None of these securities have been in a continuous loss position for 12 months or more.

At March 31, 2016, 7 obligations of state and political subdivisions had unrealized losses that, in the aggregate, totaled 0.02% of amortized cost. Two of these securities has been in a continuous loss position for 12 months or more.

At March 31, 2016, 6 mortgage-backed securities had an unrealized loss that totaled 0.06% of amortized cost. Four of these securities has been in a continuous loss position for 12 months or more.

The mortgage-backed securities in the Company’s portfolio are government sponsored enterprise (GSE) pass-through instruments issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC), which guarantees the timely payment of principal on these investments.

The unrealized losses noted above are considered to be temporary impairments. The decline in the values of the debt securities is due only to interest rate fluctuations, rather than erosion of issuer credit quality. As a result, the payment of contractual cash flows, including principal repayment, is not at risk. As the Company does not intend to sell the securities, does not believe the Company will be required to sell the securities before recovery and expects to recover the entire amortized cost basis, none of the debt securities are deemed to be other-than-temporarily impaired.

Equity securities owned by the Company consist of common stock of various financial services providers and are evaluated quarterly for evidence of other-than-temporary impairment. There were four equity securities that were in an unrealized loss position for 12 months or more as of March 31, 2016. Individually and collectively, these four equity securities have insignificant unrealized losses. Management has identified no other-than-temporary impairment as of, or for the periods ended March 31, 2016, March 31, 2015 and December 31, 2015, respectively, in the equity portfolio. Management continues to track the performance of each stock owned to determine if it is prudent to recognize any other-than-temporary impairment charges. The Company has the ability and intent to hold its equity securities until recovery of unrealized losses.