NOTE 3: Securities

The Corporation’s debt and equity securities, all of which are classified as available for sale, at December 31, 2016 and 2015 are summarized as follows:


	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
U.S. government agencies and corporations	$	16,526	$	—	$	(414)	$	16,112
Mortgage-backed securities		77,210		228		(622)		76,816
Obligations of states and political subdivisions		114,157		3,265		(324)		117,098
	$	207,893	$	3,493	$	(1,360)	$	210,026


	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
U.S. government agencies and corporations	$	18,759	$	—	$	(258)	$	18,501
Mortgage-backed securities		76,957		513		(443)		77,027
Obligations of states and political subdivisions		118,389		5,640		(81)		123,948
	$	214,105	$	6,153	$	(782)	$	219,476

The amortized cost and estimated fair value of securities at December 31, 2016 and 2015, by the earlier of contractual maturity or expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.


	December 31, 2016				December 31, 2015
	Amortized				Amortized
(Dollars in thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	28,039	$	28,042	$	26,624	$	26,789
Due after one year through five years		149,487		151,102		136,259		139,640
Due after five years through ten years		22,122		22,271		37,314		38,196
Due after ten years		8,245		8,611		13,908		14,851
	$	207,893	$	210,026	$	214,105	$	219,476

Proceeds from the maturities and calls of securities available for sale in 2016 were $56.46 million, resulting in gross realized gains of $17,000. Proceeds from the sales of securities available for sale in 2016 were $900,000, resulting in gross realized gains of $61,000 and gross realized losses of $26,000. Proceeds from the maturities, calls and sales of securities available for sale in 2015 were $36.45 million, resulting in gross realized gains of $29,000; and in 2014 were $38.66 million, resulting in gross realized gains of $50,000 and gross realized losses of $21,000.

The Corporation pledges securities to primarily secure public deposits and repurchase agreements. Securities with an aggregate amortized cost of $113.07 million and an aggregate fair value of $114.16 million were pledged at December 31, 2016. Securities with an aggregate amortized cost of $91.93 million and an aggregate fair value of $95.13 million were pledged at December 31, 2015.

Securities in an unrealized loss position at December 31, 2016, by duration of the period of the unrealized loss, are shown below.


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. government agencies and corporations	$	16,111	$	414	$	—	$	—	$	16,111	$	414
Mortgage-backed securities		54,227		621		671		1		54,898		622
Obligations of states and political subdivisions		21,835		283		1,891		41		23,726		324
Total temporarily impaired securities	$	92,173	$	1,318	$	2,562	$	42	$	94,735	$	1,360

There were 156 debt securities totaling $94.74 million considered temporarily impaired at December 31, 2016. The primary cause of the temporary impairments in the Corporation’s investments in debt securities was fluctuations in interest rates. Interest rates increased during 2016, and particularly during the fourth quarter of 2016 more significantly in the short portion of the United States Treasury security yield curve, thereby increasing unrealized losses on the Corporation’s debt securities. Interest rates in the municipal bond sector, which includes the Corporation’s obligations of states and political subdivisions, were also higher during 2016, driven by an increase in supply of municipal bonds and the expectation of tax reform, which would mean lower valuations to comparable taxable bonds if tax rates are lowered. At December 31, 2016, approximately 97 percent of the Corporation’s obligations of states and political subdivisions, as measured by market value, were rated “A” or better by Standard & Poor’s or Moody’s Investors Service. Of those in a net unrealized loss position, approximately 97 percent were rated “A” or better, as measured by market value, at December 31, 2016. For the approximately three percent not rated “A” or better, as measured by market value at December 31, 2016, the Corporation considers these to meet regulatory credit quality standards, such that the securities have low risk of default by the obligor, and the full and timely repayment of principal and interest is expected over the expected life of the investment. Because the Corporation intends to hold these investments in debt securities to maturity and it is more likely than not that the Corporation will not be required to sell these investments before a recovery of unrealized losses, the Corporation does not consider these investments to be other-than-temporarily impaired at December 31, 2016 and no other-than-temporary impairment has been recognized.

Securities in an unrealized loss position at December 31, 2015, by duration of the period of the unrealized loss, are shown below.


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
U.S. government agencies and corporations	$	9,530	$	69	$	8,971	$	189	$	18,501	$	258
Mortgage-backed securities		27,085		397		2,252		46		29,337		443
Obligations of states and political subdivisions		5,157		32		4,666		49		9,823		81
Total temporarily impaired securities	$	41,772	$	498	$	15,889	$	284	$	57,661	$	782

The Corporation’s investment in restricted stocks totaled $3.40 million at December 31, 2016. Restricted stocks are generally viewed as long-term investments, which are carried at cost because there is no market for the stock other than the FHLBs with respect to FHLB stock, or member institutions with respect to CBB stock. Therefore, when evaluating restricted stock for impairment, their respective values are based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Corporation does not consider its investment in restricted stocks to be other-than-temporarily impaired at December 31, 2016 and no impairment has been recognized. Total restricted stocks is shown as a separate line item on the balance sheet and is not a part of the available for sale securities portfolio.