Note 2 – Securities

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Available –for-Sale	Cost		Gains		Losses		Value
December 31, 2013
Obligations of U.S. government-sponsored entities and agencies	$	12,347	$	10	$	(164)	$	12,193
Obligations of state and political subdivisions		41,917		638		(967)		41,588
Mortgage-backed securities – residential		59,487		538		(519)		59,506
Collateralized mortgage obligations		2,930		47		—		2,977
Trust preferred security		202		68		—		270
Total securities	$	116,883	$	1,301	$	(1,650)	$	116,534

Gross

Amortized

Unrecognized

Fair

Held-to-Maturity

Cost

Gains

Losses

Value

December 31, 2013

Obligations of state and political subdivisions

3,000

—

(76)

2,924

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Available–for-Sale	Cost		Gains		Losses		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

Gross

Amortized

Unrecognized

Fair

Held-to-Maturity

Cost

Gains

Losses

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				Six Months Ended
	December 31,				December 31,
	2013		2012		2013		2012
Proceeds from sales	$	2,765	$	149	$	2,765	$	679
Gross realized gains		33		2		33		23
Gross realized losses		1		—		1		—

The amortized cost and fair values of debt securities at December 31, 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
	Cost		Value
Available-for-Sale
Due in one year or less	$	1,500	$	1,502
Due after one year through five years		7,359		7,500
Due after five years through ten years		22,612		22,371
Due after ten years		22,793		22,408
Total		54,264		53,781

Mortgage-backed securities – residential		59,487		59,506
Collateralized mortgage obligations		2,930		2,977
Trust preferred security		202		270
Total available-for-sale securities	$	116,883	$	116,534

Held-to-Maturity

Due after ten years		3,000		2,924
Total held-to-maturity securities	$	3,000	$	2,924

The following table summarizes the securities with unrealized and unrecognized losses at December 31, 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
Available-for-sale	Value		Loss		Value		Loss		Value		Loss
December 31, 2013
Obligations of U.S. government- sponsored entities and agencies	$	8,546	$	(164)	$	—	$	—	$	8,546	$	(164)
Obligations of states and political subdivisions		17,699		(776)		2,495		(191)		20,194		(967)
Mortgage-backed securities - residential		25,271		(393)		4,658		(126)		29,929		(519)
Total temporarily impaired	$	51,516	$	(1,333)	$	7,153	$	(317)	$	58,669	$	(1,650)

	Less than 12 Months				12 Months or more				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held-to-maturity	Value		Loss		Value		Loss		Value		Loss
December 31, 2013
Obligations of states and political subdivisions	$	3,000	$	(76)	$	—	$	—	$	2,924	$	(76)

	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 December 31, 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, obligations of state and political subdivisions and obligations of U.S. government-sponsored agencies is largely 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. It was unclear whether the Corporation would be able to continue to hold this trust preferred security under the Volcker Rule that was issued on December 10, 2013. On January 14, 2014, an interim rule amending the treatment of certain CDOs under the Volcker Rule, allows the Corporation to continue to hold this trust preferred security since it is primarily invested in qualifying collateral. Management has the intent to hold this security for the foreseeable future. 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 December 31, 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 above 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 December 31, 2013.