Note 3: Available-for-Sale Securities

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of available-for-sale securities are as follows:

			Gross		Gross
($ in thousands)	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available-for-Sale Securities:
December 31, 2016:
U.S. Treasury and
Government agencies	$	13,341	$	69	$	(52	)	$	13,358
Mortgage-backed securities		62,035		204		(636	)		61,603
State and political subdivisions		14,606		530		(39	)		15,097
Equity securities		70		-		-			70

	$	90,052	$	803	$	(727	)	$	90,128

			Gross		Gross
($ in thousands)	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available-for-Sale Securities:
December 31, 2015:
U.S. Treasury and
Government agencies	$	10,804	$	101	$	-		$	10,905
Mortgage-backed securities		61,459		311		(427	)		61,343
State and political subdivisions		16,519		999		-			17,518
Equity securities		23		-		-			23

	$	88,805	$	1,411	$	(427	)	$	89,789

The amortized cost and fair value of securities available for sale at December 31, 2016, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale
	Amortized		Fair
($ in thousands)	Cost		Value

Within one year	$	455	$	455
Due after one year through five years		7,750		7,870
Due after five years through ten years		7,045		7,225
Due after ten years		12,697		12,905
		27,947		28,455

Mortgage-backed securities and equity securities		62,105		61,673

Totals	$	90,052	$	90,128

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $44.3 million at December 31, 2016, and $46.2 million at December 31, 2015. Securities delivered for repurchase agreements (not included above) were $14.6 million at December 31, 2016 and $15.8 million at December 31, 2015.

Gross gains of $0.26 million were realized from sales of available-for-sale securities in 2016. There were no realized gains or losses on available-for-sale securities in 2015. The net $0.26 million gain on sale in 2016 was a reclassification from accumulated other comprehensive income and is included in the net gain on sales of securities. The related tax expense for net security gains was $0.09 million in 2016 and was a reclassification from accumulated other comprehensive income and is included in the income tax expense line in the income statement.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2016 and 2015, was $52.2 million and $37.2 million, respectively, which was approximately 58% and 41%, respectively, of the Company's available-for-sale investment portfolio.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables present securities with unrealized losses at December 31, 2016 and 2015:

($ in thousands)	Less than 12 Months					12 Months or Longer					Total
December 31, 2016	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale Securities:
U.S. Treasury and Government agencies	$	6,044	$	(52	)	$	-	$	-		$	6,044	$	(52	)
Mortgage-backed securities		44,344		(607	)		703		(29	)		45,047		(636	)
State and political subdivisions		1,095		(39	)		-		-			1,095		(39	)


	$	51,483	$	(698	)	$	703	$	(29	)	$	52,186	$	(727	)

($ in thousands)	Less than 12 Months						12 Months or Longer					Total
December 31, 2015		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale Securities:

Mortgage-backed securities	$	30,184	$	(253	)	$	7,061	$	(174	)	$	37,245	$	(427	)

The unrealized loss on the securities portfolio has increased by $0.30 million as of December 31, 2016, from the prior year. Management reviews these securities on a quarterly basis and has determined that no impairment exists. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation. When the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.