NOTE 3 SECURITIES

The amortized cost and fair value of securities, with gross unrealized gains and losses at March 31, 2018 and December 31, 2017, follows:


	(In Thousands)
	March 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale:
U.S. Treasury	$	21,193	$	—	$	(354	)	$	20,839
U.S. Government agencies		82,184		—		(2,691	)		79,493
Mortgage-backed securities		38,283		30		(1,451	)		36,862
State and local governments		56,436		357		(1,128	)		55,665

Total available-for-sale securities	$	198,096	$	387	$	(5,624	)	$	192,859


	(In Thousands)
	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-Sale:
U.S. Treasury	$	21,219	$	—	$	(241	)	$	20,978
U.S. Government agencies		82,198		—		(1,732	)		80,466
Mortgage-backed securities		40,236		64		(790	)		39,510
State and local governments		55,512		437		(505	)		55,444

Total available-for-sale securities	$	199,165	$	501	$	(3,268	)	$	196,398

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.

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

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

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

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

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, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:


	(In Thousands)
	March 31, 2018
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(87	)	$	6,877	$	(267	)	$	13,962
U.S. Government agencies		(619	)		27,015		(2,072	)		52,478
Mortgage-backed securities		(173	)		8,977		(1,278	)		26,477
State and local governments		(525	)		32,785		(603	)		11,212

Total available-for-sale securities	$	(1,404	)	$	75,654	$	(4,220	)	$	104,129


	(In Thousands)
	December 31, 2017
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(36	)	$	6,924	$	(205	)	$	14,054
U.S. Government agencies		(314	)		27,328		(1,418	)		53,139
Mortgage-backed securities		(70	)		7,149		(720	)		28,080
State and local governments		(205	)		24,999		(300	)		11,567

Total available-for-sale securities	$	(625	)	$	66,400	$	(2,643	)	$	106,840

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 for the three months ended March 31.


	Three Months
	(In Thousands)
	2018		2017
Gross realized gains	$	—	$	31
Gross realized losses		—		—

Net realized gains	$	—	$	31

Tax expense related to net realized gains	$	—	$	11

The net realized gains 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 available-for-sale securities and the related tax expense is included in income taxes in the condensed consolidated statements of income and comprehensive income.

The amortized cost and fair value of debt securities at March 31, 2018, 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	$	21,660	$	21,626
After one year through five years		84,900		83,471
After five years through ten years		50,406		48,228
After ten years		2,847		2,672

Total	$	159,813	$	155,997
Mortgage-backed securities		38,283		36,862

Total	$	198,096	$	192,859

Investments with a carrying value of $82.1 million and $82.9 million at March 31, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of March 31, 2018 and December 31, 2017.