Note 3 - Investment Securities Available for Sale

3 Months Ended

Mar. 31, 2013

Marketable Securities [Table Text Block]

3.         INVESTMENT SECURITIES AVAILABLE FOR SALE

Investment securities available for sale consisted of the following as of the dates indicated (in thousands):

	March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal securities	$	42,640	$	734	$	(29	)	$	43,345
Corporate debt securities		8,000		5		(22	)		7,983
Total	$	50,640	$	739	$	(51	)	$	51,328

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Municipal securities	$	44,562	$	849	$	(18	)	$	45,393
Corporate debt securities		8,000		--		(68	)		7,932
Total	$	52,562	$	849	$	(86	)	$	53,325

The following tables summarize the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other-than-temporarily impaired (“OTTI”) (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	March 31, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Municipal securities	$	2,512	$	27	$	124	$	2	$	2,636	$	29
Corporate debt securities		998		2		1,980		20		2,978		22
Total	$	3,510	$	29	$	2,104	$	22	$	5,614	$	51

	December 31, 2012
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Municipal securities	$	4,033	$	18	$	--	$	--	$	4,033	$	18
Corporate debt securities		3,980		20		3,952		48		7,932		68
Total	$	8,013	$	38	$	3,952	$	48	$	11,965	$	86

On a quarterly basis, management conducts a formal review of securities for the presence of OTTI.  Management assesses whether an OTTI is present when the fair value of a security is less than its amortized cost basis at the balance sheet date.  For such securities, OTTI is considered to have occurred if the Company intends to sell the security, if it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis or if the present values of expected cash flows is not sufficient to recover the entire amortized cost.

The unrealized losses are primarily a result of increases in market yields since the time of purchase.  In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired.  Additionally, the unrealized losses are also considered temporary because scheduled coupon payments have been made, it is anticipated that the entire principal balance will be collected as scheduled, and management neither intends to sell the securities nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount.

The Company has pledged investment securities available for sale with carrying values of approximately $1.6 million as of March 31, 2013 and December 31, 2012, as collateral for certain deposits in excess of $250,000.  In addition, at March 31, 2013 and December 31, 2012 the Company has pledged investment securities available for sale with carrying values of approximately $8.0 million and $7.9 million, respectively, as collateral for the primary discount window.

The scheduled contractual maturities of debt securities at March 31, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2013
	Amortized Cost		Fair Value		Weighted Average Rate
Within one year	$	276	$	276		3.37%
Due from one year to five years		19,539		19,636		2.17%
Due from five years to ten years		19,504		19,838		2.73%
Due after ten years		11,321		11,578		3.78%
Total	$	50,640	$	51,328		2.75%

As of March 31, 2013 and December 31, 2012, investments with amortized cost of approximately $34.8 million and $36.8 million, respectively, have call options held by the issuer, of which approximately $7.8 million and $9.2 million, respectively, are or were callable within one year.