Note 2 - Investment Securities

Carrying amounts and fair values of securities available for sale and held to maturity are summarized below:

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
Securities available for sale
U.S. Government agencies		56,522		33		940		55,615
GSE - Mortgage-backed securities and CMO’s		21,253		12		374		20,891
State and political subdivisions		14,368		27		196		14,199
Corporate bonds		5,042		7		11		5,038
Total securities available for sale	$	97,185	$	79	$	1,521	$	95,743

December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
Securities held to maturity
U.S. Government agencies	$	1,348	$	—	$	9	$	1,339
State and political subdivisions		6,925		23		36		6,912
Corporate bonds		3,185		25		—		3,210
Total securities held to maturity	$	11,458	$	48	$	45	$	11,461

Note 2 - Investment Securities (Continued)

December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
Securities available for sale
U.S. Treasury	$	4,017	$	—	$	3	$	4,014
U.S. Government agencies		58,506		28		863		57,671
GSE - Mortgage-backed securities and CMO’s		26,195		39		586		25,648
State and political subdivisions		14,123		71		658		13,536
Corporate bonds		5,054		14		38		5,030
Total securities available for sale	$	107,895	$	152	$	2,148	$	105,899

December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
Securities held to maturity
U.S. Government agencies	$	1,754	$	—	$	17	$	1,737
State and political subdivisions		6,974		7		60		6,921
Corporate bonds		3,262		14		—		3,276
Total securities held to maturity	$	11,990	$	21	$	77	$	11,934

At December 31, 2017 and December 31, 2016, the Company owned Federal Reserve Bank stock reported at cost of $508,000 and $507,000, respectively. Also, at December 31, 2017 and December 31, 2016, the Company owned Federal Home Loan Bank Stock (FHLB) of $559,000 and $545,000, respectively. The investments in Federal Reserve stock and FHLB stock are required investments related to the Company’s membership in, and borrowings with, these banks and classified as restricted stock on the consolidated balance sheet. These investments are carried at cost since there is no ready market and redemption has historically been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at December 31, 2017.

Results from sales and calls of securities available for sale for the years ended December 31, 2017, 2016 and 2015 are as follows:

	2017			2016		2015
	(dollars in thousands)
Gross proceeds from sales and calls	$	8,918		$	20,225	$	32,780
Realized gains from sales	$	—		$	544	$	536
Realized losses from sales		(14	)		—		—
Net realized gains (losses)	$	(14	)	$	544	$	536

At December 31, 2017, 2016 and 2015 securities available for sale with a carrying amount of $75.5 million, $74.8 million and $68.8 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

Note 2 - Investment Securities (Continued)

The following tables show the gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2017 and December 31, 2016. We believe these unrealized losses on investment securities are a result of a volatile market and fluctuations in market prices due to a rise in interest rates, which will adjust if rates decline. Management does not believe these fluctuations are a reflection of the credit quality of the investments. At December 31, 2017, the unrealized losses on available for sale securities less than twelve months related to six government agency bonds, four government sponsored enterprise (GSE) mortgage backed securities, one corporate bonds and one state and political subdivision bond. The Company had fifteen government agency bonds, twelve GSE mortgage backed securities and seven state and political subdivision bonds that had been in a loss position for more than twelve months. At December 31, 2017, the unrealized losses on held to maturity securities related to one government agency security and five state and political subdivision bonds. At December 31, 2016, the unrealized losses on available for sale securities related to one United States Treasury note, twenty-three government agency bonds, fourteen GSE mortgage backed securities, two corporate bonds and seven state and political subdivision bond. At December 31, 2016, the unrealized losses on held to maturity securities related to one government agency security and eight state and political subdivision bonds.

December 31, 2017	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Gov’t agencies		9,028		112		43,352		828		52,380		940
GSE-Mortgage-backed securities and CMO’s		5,074		37		14,057		337		19,131		374
State and political		1,182		1		10,317		195		11,499		196
Corporate bonds		2,008		11		—		—		2,008		11
Total securities available for sale	$	17,292	$	161	$	67,726	$	1,360	$	85,018	$	1,521

December 31, 2017	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Held to maturity temporary impairment
U.S. Gov’t agencies	$	1,338	$	9	$	—	$	—	$	1,338	$	9
State and political		4,269		36		—		—		4,269		36
Total securities held to maturity	$	5,607	$	45	$	—	$	—	$	5,607	$	45

December 31, 2016	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,014	$	3	$	—	$	—	$	4,014	$	3
U.S. Gov’t agencies		48,192		807		4,164		56		52,356		863
GSE-Mortgage-backed securities and CMO’s		16,250		395		5,251		191		21,501		586
State and political		9,994		658		—		—		9,994		658
Corporate bonds		1,999		27		800		11		2,799		38
Total securities available for sale	$	80,449	$	1,890	$	10,215	$	258	$	90,664	$	2,148

Note 2 - Investment Securities (Continued)

December 31, 2016	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Held to maturity temporary impairment
U.S. Gov’t agencies	$	1,895	$	17	$	—	$	—	$	1,895	$	17
State and political		6,056		60		—		—		6,056		60
Total securities held to maturity	$	7,951	$	77	$	—	$	—	$	7,951	$	77

Declines in the fair value of the investment portfolio are believed by management to be temporary in nature. When evaluating an investment for other-than-temporary impairment management considers among other things, the length of time and the extent to which the fair value has been in a loss position, the financial condition of the issuer and the intent and the ability of the Company to hold the investment until the loss position is recovered.

Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality but that the losses are temporary in nature. At December 31, 2017, the Company does not intend to sell and is not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.

The following table shows contractual maturities of the entire investment portfolio as of December 31, 2017:

	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within one year	$	810	$	820
Due after one but within five years		51,122		50,336
Due after five but within ten years		20,628		20,498
Due after ten years		14,830		14,659
Mortgage backed securities		21,253		20,891
	$	108,643	$	107,204

The mortgage-backed securities are shown separately as they are not due at a single maturity date.