SECURITIES AVAILABLE FOR SALE

3 Months Ended

Mar. 31, 2013

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE

2. SECURITIES AVAILABLE FOR SALE

INVESTMENT SECURITIES

Period-end securities are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
Available for Sale
March 31, 2013
U.S. government agencies	$	74,639	$	81	$	(154	)	$	74,566
States and political subdivisions	80,395		3,975		(391		)	83,979
Mortgage-backed - residential	63,107		1,369		(321		)	64,155
Equity securities	270		34		—			304
Total	$	218,411	$	5,459	$	(866	)	$	223,004
December 31, 2012
U.S. government agencies	$	48,730	$	122	$	(21	)	$	48,831
States and political subdivisions	77,867		4,887		(147		)	82,607
Mortgage-backed - residential	59,424		1,635		(22		)	61,037
Equity securities	270		35		—			305
Total	$	186,291	$	6,679	$	(190	)	$	192,780

The amortized cost and fair value of securities at March 31, 2013 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.  Securities not due at a single maturity are shown separately.

	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	—	$	—
Due after one year through five years	11,159		11,297
Due after five years through ten years	72,606		73,783
Due after ten years	71,269		73,465
	155,034		158,545
Mortgage-backed - residential	63,107		64,155
Equity	270		304
Total	$	218,411	$	223,004

Proceeds from sales of securities during the first three months of 2013 and 2012 were $10.5 million and $12.8 million.  Gross gains of $289 thousand and $160 thousand and no gross losses were realized on those sales, respectively.  The tax provision related to these realized gains and losses was $98 thousand and $54 thousand, respectively.

Securities with unrealized losses at March 31, 2013 and at December 31, 2012 not recognized in income are as follows:

March 31, 2013

	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss		Value		Loss
U.S. Government agencies	$	40,476	$	(154	)	$	—	$	—	$	40,476	$	(154	)
States and municipals	13,460		(391		)	—		—		13,460		(391		)
Mortgage-backed - residential	19,553		(321		)	—		—		19,553		(321		)
Total temporarily impaired	$	73,489	$	(866	)	$	—	$	—	$	73,489	$	(866	)

December 31, 2012

	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss		Value		Loss
U.S. Government agencies	$	11,979	$	(21	)	$	—	$	—	$	11,979	$	(21	)
States and municipals	7,519		(147		)	—		—		7,519		(147		)
Mortgage-backed - residential	5,773		(22		)	—		—		5,773		(22		)
Total temporarily impaired	$	25,271	$	(190	)	$	—	$	—	$	25,271	$	(190	)

The Company evaluates securities for other than temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  In analyzing an issuer’s financial condition, we may consider many factors including, (1) whether the securities are issued by the federal government or its agencies, (2) whether downgrades by bond rating agencies have occurred, (3) the results of reviews of the issuer’s financial condition and near-term prospects, (4) the length of time and the extent to which the fair value has been less than cost, and (5) whether we intend to sell the investment security or more likely than not will be required to sell the investment security before its anticipated recovery.

Unrealized losses on securities included in the tables above have not been recognized into income because (1) all rated securities are investment grade and are of high credit quality, (2) management does not intend to sell and it is more likely than not that management would not be required to sell the securities prior to their anticipated recovery, (3) management believes the decline in fair value is largely due to changes in interest rates and (4) management believes the declines in fair value are temporary.  The Company believes the fair value is expected to recover as the securities approach maturity.