Note 2 – Securities

Available-for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2013
Obligations of U.S. government-sponsored entities and agencies	$	11,679	$	9	$	(73)	$	11,615
Obligations of state and political subdivisions		40,418		763		(778)		40,403
Mortgage-backed securities – residential		55,326		729		(363)		55,692
Collateralized mortgage obligations		5,105		32		(1)		5,136
Trust preferred security		202		—		(40)		162
Total securities	$	112,730	$	1,533	$	(1,255)	$	113,008

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
September 30, 2013
Obligations of state and political subdivisions	$	3,000	$	—	$	(65)	$	2,935

Available–for-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2013
Obligations of U.S. government-sponsored entities and agencies	$	4,700	$	6	$	(48)	$	4,658
Obligations of state and political subdivisions		39,777		805		(770)		39,812
Mortgage-backed securities - residential		46,834		552		(497)		46,889
Collateralized mortgage obligations		5,740		11		(43)		5,708
Trust preferred security		202		—		(40)		162
Total securities	$	97,253	$	1,374	$	(1,398)	$	97,229

Held-to-Maturity	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
June 30, 2013
Obligations of state and political subdivisions	$	3,000	$	—	$	(74)	$	2,926

Proceeds from the sale of available-for-sale securities were as follows:

	Three Months Ended
	September 30,
	2013		2012
Proceeds from sales	$	—	$	530
Gross realized gains		—		21

The amortized cost and fair values of debt securities at September 30, 2013, by expected 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 date, primarily mortgage-backed securities, collateralized mortgage obligations and the trust preferred security are shown separately.

	Amortized		Estimated Fair
Available-for-Sale	Cost		Value
Due in one year or less	$	1,500	$	1,500
Due after one year through five years		4,197		4,309
Due after five years through ten years		22,190		22,222
Due after ten years		24,210		23,987
Total		52,097		52,018

Mortgage-backed securities – residential		55,326		55,692
Collateralized mortgage obligations		5,105		5,136
Trust preferred security		202		162
Total available-for-sale securities	$	112,730	$	113,008

Held-to-Maturity

Due after ten years		3,000		2,935
Total held-to-maturity securities	$	3,000	$	2,935

The following table summarizes the securities with unrealized and unrecognized losses at September 30, 2013 and June 30, 2013, aggregated by investment category and length of time that individual securities have been in a continuous unrealized or unrecognized loss position:

	Less than 12 Months				12 Months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Avaliable-for-sale	Value		Loss		Value		Loss		Value		Loss
September 30, 2013
Obligations of U.S. government- sponsored entities and agencies	$	9,456	$	(73)	$	—	$	—	$	9,456	$	(73)
Obligations of states and political subdivisions		17,091		(728)		682		(50)		17,773		(778)
Mortgage-backed securities - residential		20,952		(363)		—		—		20,952		(363)
Collateralized mortgage obligations		816		(1)		—		—		816		(1)
Trust preferred security		—		—		162		(40)		162		(40)
Total temporarily impaired	$	48,315	$	(1,165)	$	844	$	(90)	$	49,159	$	(1,255)

	Less than 12 Months				12 Months or more				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held-to-maturity	Value		Loss		Value		Loss		Value		Loss
September 30, 2013
Obligations of states and political subdivisions	$	3,000	$	(65)	$	—	$	—	$	2,935	$	(65)

	Less than 12 Months				12 Months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale	Value		Loss		Value		Loss		Value		Loss
June 30, 2013
Obligation of U.S. government- sponsored entities and agencies	$	4,418	$	(48)	$	—	$	—	$	4,418	$	(48)
Obligations of states and political subdivisions		17,826		(766)		107		(4)		17,933		(770)
Mortgage-backed securities - residential		28,836		(497)		—		—		28,836		(497)
Collateralized mortgage obligations		4,696		(43)		—		—		4,696		(43)
Trust preferred security		—		—		162		(40)		162		(40)
Total temporarily impaired	$	55,776	$	(1,354)	$	269	$	(44)	$	56,045	$	(1,398)

	Less than 12 Months				12 Months or more				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held-to-maturity	Value		Loss		Value		Loss		Value		Loss
June 30, 2013
Obligations of states and political subdivisions	$	2,926	$	(74)	$	—	$	—	$	2,926	$	(74)

Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under FASB ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities. However, the trust preferred security is evaluated using the model outlined in FASB ASC Topic 325, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transfer in Securitized Financial Assets.

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

The unrealized and unrecognized losses within the securities portfolio as of September 30, 2013 have not been recognized into income because the decline in fair value is not attributed to credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery. The decline in fair value of the residential mortgage-backed securities is attributable to higher than projected prepayment speeds increasing the premium amortization. The decline in fair value of obligations of state and political subdivisions is largely due to spreads for these securities being wider at September 30, 2013 than when the securities were purchased and due to changes in interest rates. The fair value is expected to recover as the securities approach maturity.

Under the ASC Topic 325 model, the present value of the remaining cash flows as estimated at the preceding evaluation date are compared to the current expected remaining cash flows. An OTTI is deemed to have occurred if there has been an adverse change in the remaining expected future cash flows. The analysis of the trust preferred security falls within the scope of ASC Topic 325.

The Corporation owns a trust preferred security, which represents collateralized debt obligations (CDOs) issued by other banks, bank holding companies and insurance companies. The security is part of a pool of issuers that support a more senior tranche of securities. The cash interest payments for the trust preferred security are being deferred as a result of an increase in principal and/or interest deferrals by the issuers of the underlying securities during the period of 2008 through 2011. The accumulated other-than-temporary impairment loss recognized in earnings in periods prior to 2012 was $780. According to the September 30, 2013 cash flow analysis, the expected cash flows were above the recorded amortized cost of the trust preferred security and the Corporation has received pricing indications that are very near the securities adjusted amortized cost of $202. Therefore, management does not believe there is any additional other-than-temporary impairment related to this security at September 30, 2013.