NOTE 3 SECURITIES

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:


	(In Thousands)
	March 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale:
U.S. Treasury	$	33,989	$	11	$	(129	)	$	33,871
U.S. Government agency		106,374		410		(309	)		106,475
Mortgage-backed securities		27,435		621		(40	)		28,016
State and local governments		75,978		1,809		(79	)		77,708

	$	243,776	$	2,851	$	(557	)	$	246,070


	(In Thousands)
	December 13, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale:
U.S. Treasury	$	25,833	$	—	$	(440	)	$	25,393
U.S. Government agency		120,154		391		(1,311	)		119,234
Mortgage-backed securities		29,067		557		(62	)		29,562
State and local governments		72,765		1,671		(133	)		74,303

	$	247,819	$	2,619	$	(1,946	)	$	248,492

Investment securities will at times depreciate to an unrealized loss position. The Company utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as an other than temporary impairment.

1.	The fair value of the security has significantly declined from book value.

2.	A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

3.	Dividends have been reduced or eliminated or scheduled interest payments have not been made.

4.	The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

5.	Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Company currently does not hold any securities with other than temporary impairment.

Information pertaining to securities with gross unrealized losses at March 31, 2015 and December 31, 2014, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:


	(In Thousands)
	March 31, 2015
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	—		$	—	$	(129	)	$	20,464
U.S. Government agency		—			—		(309	)		56,987
Mortgage-backed securities		—			—		(40	)		4,013
State and local governments		(46	)		6,071		(33	)		3,929

Total available-for-sale securities	$	(46	)	$	6,071	$	(511	)	$	85,393


	(In Thousands)
	December 31, 2014
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	—		$	—	$	(440	)	$	25,393
U.S. Government agency		(1	)		5,458		(1,310	)		82,803
Mortgage-backed securities		—			—		(62	)		7,900
State and local governments		(31	)		3,442		(102	)		7,756

Total available-for-sale securities	$	(32	)	$	8,900	$	(1,914	)	$	123,852

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. Additionally, the decline in value is primarily due to changes in interest rates since the securities were purchased. The fair value is expected to recover as the bonds approach the maturity date.

Below are the gross realized gains and losses as of March 31 for each of the years presented.


	(In Thousands)
	2015		2014
Gross realized gains	$	109	$	122
Gross realized losses		—		—

Net realized gains	$	109	$	122

Tax expense related to net realized gains	$	37	$	42

The net realized gain on sales and related tax expense is a reclassification out of accumulated other comprehensive income (loss). The net realized gain is included in net gain on sale of securities available-for-sale and the related tax expense is included in income tax expense in the condensed consolidated statements of income and comprehensive income.

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


	(In Thousands)
	Amortized
	Cost		Fair Value
One year or less	$	16,889	$	17,109
After one year through five years		155,066		155,808
After five years through ten years		37,255		37,854
After ten years		7,131		7,283

Total	$	216,341	$	218,054
Mortgage-backed securities		27,435		28,016

Total	$	243,776	$	246,070

Investments with a carrying value and fair value of $176.9 million at March 31, 2015 were pledged to secure public deposits and securities sold under repurchase agreements. This amount is just $8 thousand less than the figure at December 31, 2014.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of March 31, 2015.