Note

Securities

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, as of the dates indicated, follows:

	December 31, 2019
Available for sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government agencies and corporations	$	119,903	$	1,995	$	775	$	121,123
States and political subdivisions		88,092		791		644		88,239
Mortgage-backed securities		223,173		45		1,435		221,783
Corporate debt securities		3,998		120		---		4,118
Total securities available for sale	$	435,166	$	2,951	$	2,854	$	435,263

	December 31, 2018
Available for sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government agencies and corporations	$	306,264	$	449	$	6,666	$	300,047
States and political subdivisions		118,564		1,218		1,166		118,616
Mortgage-backed securities		586		42		---		628
Corporate debt securities		6,014		---		295		5,719
Total securities available for sale	$	431,428	$	1,709	$	8,127	$	425,010

Prior to the

second

quarter of

2018,

the Company designated securities in its portfolio as either available for sale or held to maturity. During the

second

quarter of

2018,

the Company re-designated all of its held to maturity securities to available for sale. The securities were re-designated to provide opportunities to maximize asset utilization. At the time of transfer, the securities had a fair value of

$119,790

and an amortized cost of

$118,662,

resulting in an unrealized gain of

$1,128

which was added to accumulated other comprehensive income at the date of re-designation.

The amortized cost and fair value of single maturity securities available for sale at

December 31, 2019,

by contractual maturity, are shown below. Expected maturities

may

differ from contractual maturities because borrowers

may

have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities included in these totals are categorized by final maturity at

December 31, 2019.

	December 31, 20 1 9
Available for sale:	Amortized Cost		Fair Value
Due in one year or less	$	55,186	$	55,302
Due after one year through five years		6,342		6,505
Due after five years through ten years		145,040		144,260
Due after ten years		228,598		229,196
Total securities available for sale	$	435,166	$	435,263

Information pertaining to securities with gross unrealized losses at

December 31, 2019

and

2018

aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	December 31, 2019
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government agencies and corporations	$	53,244	$	738	$	38,962	$	37
State and political subdivisions		35,934		596		591		48
Mortgage-backed securities		181,279		1,435		---		---
Total temporarily impaired securities	$	270,457	$	2,769	$	39,553	$	85

	December 31, 2018
	Less Than 12 Months				12 Months or More
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Government agencies and corporations	$	17,730	$	216	$	259,992	$	6,450
State and political subdivisions		16,882		352		20,758		814
Corporate debt securities		4,842		194		876		101
Total temporarily impaired securities	$	39,454	$	762	$	281,626	$	7,365

The Company had

166

securities with a fair value of

$310,010

that were temporarily impaired at

December 31, 2019.

The total unrealized loss on these securities was

$2,854.

Of the temporarily impaired total,

securities with a fair value of

$39,553

and an unrealized loss of

$85

have been in a continuous loss position for

months or more. The Company has determined that these securities are temporarily impaired at

December 31, 2019

for the reasons set out below.

U.S. Government agencies.

The unrealized losses of

$37

on U.S. Government agency securities stemmed from

securities with a fair value of

$38,962.

The unrealized losses were caused by interest rate and market fluctuations. The contractual terms of the investments do

not

permit the issuer to settle the securities at a price less than the cost basis of the investments. The Company is monitoring bond market trends to develop strategies to address unrealized losses. Because the Company does

not

intend to sell the investments and it is

not

likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which

may

be at maturity, the Company does

not

consider this investments to be other-than-temporarily impaired.

States and political subdivisions.

This category exhibits unrealized losses of

$48

security with a fair value of

$591.

The Company reviewed financial statements and cash flows for the security and determined that the unrealized loss is primarily the result of interest rate and market fluctuations and

not

associated with impaired financial status. The contractual terms of the investment do

not

permit the issuer to settle the security at a price less than the cost basis of the investment. Because the Company does

not

intend to sell the investment and it is

not

likely that the Company will be required to sell the investment before recovery of its amortized cost basis, which

may

be at maturity, the Company does

not

consider the investment to be other-than-temporarily impaired.

Restricted stock.

The Company holds restricted stock of

$1,220

as of

December 31, 2019

and as of

December 31, 2018.

Restricted stock is reported separately from available-for-sale securities and held-to-maturity securities. As a member of the Federal Reserve and the FHLB, NBB is required to maintain certain minimum investments in the common stock of those entities. Required levels of investment are based upon NBB’s capital and a percentage of qualifying assets. The Company purchases stock from or sells stock back to the correspondents based on their calculations. The stock is held by member institutions only and is

not

actively traded.

Redemption of FHLB stock is subject to certain limitations and conditions. At its discretion, the FHLB

may

declare dividends on the stock. In addition to dividends, NBB also benefits from its membership with FHLB through eligibility to borrow from the FHLB, using as collateral NBB’s capital stock investment in the FHLB and qualifying NBB real estate mortgage loans totaling

$533,963

December 31, 2019.

Management reviews for impairment based upon the ultimate recoverability of the cost basis of the FHLB stock, and at

December 31, 2019,

management did

not

determine any impairment.

Management regularly monitors the credit quality of the investment portfolio. Changes in ratings are noted and follow-up research on the issuer is undertaken when warranted. Management intends to carefully monitor any changes in bond quality.

Pledged Securities

December 31, 2019

and

2018,

securities with a carrying value of

$220,299

and

$196,062,

respectively, were pledged to secure municipal deposits and for other purposes as required or permitted by law.

Realized Securities Gains and Losses

During

2019,

the Company realized net securities gains of

$566,

including net gains of

$438

on the sale of securities and

$128

on calls of securities. The sales of securities were pursuant to a restructuring plan to manage interest rate risk. During

2018,

the

$17

realized securities gain stemmed from the call of

one

security with a gain of

and the sale of another security for a gain of

$16.

During

2017,

the Company sold a small investment in community bank stock that resulted in a gain of

$4.

The investment was classified as available for sale and had a book value of

$189.

All other net realized gains resulted from calls of securities. Information pertaining to realized gains and losses on sold and called securities follows:

	For the year ended December 31, 201 9
	Proceeds		Book Value		Gross Gain		Gross Loss		Net Gain
Available for sale	$	348,032	$	347,466	$	1,157	$	591	$	566

	For the year ended December 31, 2018
	Proceeds		Book Value		Gross Gain		Gross Loss		Net Gain
Available for sale	$	17,287	$	17,270	$	17	$	---	$	17
Held to maturity		6,430		6,430		---		---		---

	For the year ended December 31, 2017
	Proceeds		Book Value		Gross Gain		Gross Loss		Net Gain
Available for sale	$	13,620	$	13,614	$	10	$	---	$	10
Held to maturity		8,975		8,971		4		---		4