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
	Amortized		Unrealized		Unrealized
($ in thousands)	Cost		Gains		Losses			Fair Value
Available for Sale Securities:
December 31, 2017:
U.S. Treasury and Government agencies	$	12,715	$	62	$	(69	)	$	12,708
Mortgage-backed securities		57,355		97		(690	)		56,762
State and political subdivisions		12,829		439		(18	)		13,250
Equity securities		70		-		-			70

	$	82,969	$	598	$	(777	)	$	82,790

			Gross		Gross
	Amortized		Unrealized		Unrealized
($ in thousands)	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

The amortized cost and fair value of securities available for sale at December 31, 2017, 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	$	1,560	$	1,590
Due after one year through five years		7,363		7,427
Due after five years through ten years		10,624		10,731
Due after ten years		5,997		6,210
		25,544		25,958

Mortgage-backed securities and equity securities		57,425		56,832

Totals	$	82,969	$	82,790

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $38.9 million at December 31, 2017, and $44.3 million at December 31, 2016. Securities delivered for repurchase agreements (not included above) were $19.1 million at December 31, 2017 and $14.6 million at December 31, 2016.

Gross gains of $0.13 million, and gross losses of $0.01 million was a reclassification from accumulated other comprehensive income and is included in the net gain on sales of securities for 2017. Gross gains of $0.26 million was a reclassification from accumulated other comprehensive income and is included in the net gain on sales of securities in 2016. The related tax expense for net security gains for 2017 was $0.04 million and for 2016 was $0.09 million and was a reclassification from accumulated other comprehensive income and is included in the income tax expense line in the income statement. There were no realized gains or losses on available-for-sale securities in 2015.

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, 2017 and 2016, was $59.3 million and $52.2 million, respectively, which was approximately 72 percent and 58 percent, 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, 2017 and 2016:

($ in thousands)	Less than 12 Months					12 Months or Longer					Total
December 31, 2017	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Securities:
U.S. Treasury and Government agencies	$	5,675	$	(27	)	$	2,559	$	(42	)	$	8,234	$	(69	)
Mortgage-backed securities		35,205		(319	)		14,673		(371	)		49,878		(690	)
State and political subdivisions		905		(4	)		326		(14	)		1,231		(18	)

	$	41,785	$	(350	)	$	17,558	$	(427	)	$	59,343	$	(777	)

($ 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
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	)

The unrealized loss on the securities portfolio has increased by $0.05 million as of December 31, 2017, 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.