NOTE 2 – SECURITIES

Information related to the fair value and amortized cost of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) at December 31 is provided in the tables below.

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gain		Losses		Value
2016
U.S. Treasury securities	$	990	$	13	$	0	$	1,003
U.S. government sponsored agencies		6,312		10		(81)		6,241
Agency residential mortgage-backed securities		351,108		3,604		(3,144)		351,568
State and municipal securities		146,917		1,784		(3,322)		145,379
Total	$	505,327	$	5,411	$	(6,547)	$	504,191

2015
U.S. Treasury securities	$	988	$	15	$	0	$	1,003
U.S. government sponsored agencies		7,178		19		(77)		7,120
Agency residential mortgage-backed securities		357,984		5,087		(2,399)		360,672
State and municipal securities		105,753		3,773		(250)		109,276
Total	$	471,903	$	8,894	$	(2,726)	$	478,071

Information regarding the fair value and amortized cost of available for sale debt securities by maturity as of December 31, 2016 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without prepayment penalty.

	Amortized		Fair
(dollars in thousands)	Cost		Value
Due in one year or less	$	3,370	$	3,403
Due after one year through five years		22,002		22,404
Due after five years through ten years		47,028		47,882
Due after ten years		81,819		78,934
		154,219		152,623
Mortgage-backed securities		351,108		351,568
Total debt securities	$	505,327	$	504,191

Security proceeds, gross gains and gross losses for 2016, 2015 and 2014 were as follows:

(dollars in thousands)	2016		2015		2014
Sales of securities available for sale
Proceeds	$	12,095	$	7,787	$	13,766
Gross gains		83		42		3
Gross losses		17		0		231

The Company sold fifteen securities with a total book value of $12.0 million and a total fair value of $12.1 million during 2016. The Company sold two securities with a total book value of $7.7 million and a total fair value of $7.8 million during 2015. The Company sold four securities with a total book value of $14.0 million and a total fair value of $13.8 million during 2014. The remaining gains during 2014 were from calls.

Securities with carrying values of $168.3 million and $122.7 million were pledged as of December 31, 2016 and 2015, as collateral for securities sold under agreements to repurchase, borrowings from the FHLB and for other purposes as permitted or required by law.

Information regarding securities with unrealized losses as of December 31, 2016 and 2015 is presented below. The tables distribute the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
2016
U.S. government sponsored agencies	$	3,290	$	81	$	0	$	0	$	3,290	$	81
Agency residential mortgage-backed
securities		181,699		2,882		7,080		262		188,779		3,144
State and municipal securities		77,434		3,180		2,361		142		79,795		3,322
Total temporarily impaired	$	262,423	$	6,143	$	9,441	$	404	$	271,864	$	6,547

2015
U.S. government sponsored agencies	$	0	$	0	$	3,895	$	77	$	3,895	$	77
Agency residential mortgage-backed
securities		151,792		1,521		30,116		878		181,908		2,399
State and municipal securities		11,364		78		8,326		172		19,690		250
Total temporarily impaired	$	163,156	$	1,599	$	42,337	$	1,127	$	205,493	$	2,726

The number of securities with unrealized losses as of December 31, 2016 and 2015 is presented below.

	Less than	12 months
	12 months	or more	Total
2016
U.S. government sponsored agencies	1	0	1
Agency residential mortgage-backed securities	59	2	61
State and municipal securities	121	4	125
Total temporarily impaired	181	6	187

2015
U.S. government sponsored agencies	0	1	1
Agency residential mortgage-backed securities	46	9	55
State and municipal securities	21	12	33
Total temporarily impaired	67	22	89

There were no debt securities with credit losses recognized in income during 2016, 2015 or 2014.

Ninety-nine percent of the securities are backed by the U.S. government, government agencies, government sponsored agencies or are A-rated or better, except for certain non-local or local municipal securities, which are not rated. For the government, government-sponsored agency and municipal securities, management did not have concerns of credit losses and there was nothing to indicate that full principal will not be received. Management considered the unrealized losses on these securities to be primarily interest rate driven and does not expect material losses given current market conditions unless the securities are sold. However, at this time management does not have the intent to sell and it is more likely than not that it will not be required to sell these securities before the recovery of their amortized cost basis.

The Company does not have a history of actively trading securities, but keeps the securities available for sale should liquidity or other needs develop that would warrant the sale of securities. While these securities are held in the available for sale portfolio, it is management's current intent and ability to hold them until a recovery in fair value or maturity.