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INVESTMENT SECURITIES
9 Months Ended
Sep. 30, 2013
Investments, Debt and Equity Securities [Abstract]  
INVESTMENT SECURITIES
NOTE 6: INVESTMENT SECURITIES
 
The amortized cost and approximate fair values of securities as of September 30, 2013 and December 31, 2012 are as follows:
 
     
September 30, 2013
 
     
Amortized Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair Value
 
     
(Unaudited; In Thousands)
 
 
Available-for-sale Securities
                       
 
Federal agencies
  $ 39,519     $ 271     $ (1,146 )   $ 38,644  
 
State and municipal
    35,594       830       (1,309 )     35,115  
 
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
    45,750       426       (1,129 )     45,047  
 
Corporate
    3,165       1       (400 )     2,766  
 
Total investment securities
  $ 124,028     $ 1,528     $ (3,984 )   $ 121,572  
                                   
 
     
December 31, 2012
 
     
Amortized Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair Value
 
     
(In Thousands)
 
 
Available-for-sale Securities
                               
 
Federal agencies
  $ 42,581     $ 849     $ (21 )   $ 43,409  
 
State and municipal
    29,331       1,865       (34 )     31,162  
 
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
    35,258       774       (10 )     36,022  
 
Corporate
    3,652       47       (522 )     3,177  
 
Total investment securities
  $ 110,822     $ 3,535     $ (587 )   $ 113,770  
 
 
The amortized cost and fair value of available-for-sale securities at September 30, 2013, by contractual maturity, are shown below. Expected maturities will 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 Cost
   
Fair Value
 
     
(Unaudited; In Thousands)
 
 
Within one year
  $ 6,722     $ 6,789  
 
One to five years
    17,375       17,479  
 
Five to ten years
    32,832       32,064  
 
After ten years
    21,349       20,193  
        78,278       76,525  
 
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
    45,750       45,047  
 
Totals
  $ 124,028     $ 121,572  
 
No securities were pledged at September 30, 2013 or at December 31, 2012 to secure FHLB advances. Securities with a carrying value of $12,464,000 and $18,826,000 were pledged at September 30, 2013 and December 31, 2012 to secure public deposits and for other purposes as permitted or required by law.
 
Proceeds from sales of securities available for sale during the nine-month periods ended September 30, 2013 and September 30, 2012 were $12,826,000 and $6,561,000. Gross gains of $300,000 and $450,000 resulting from sales and calls of available-for-sale securities were realized for the nine-month periods ended September 30, 2013 and September 30, 2012, respectively. Gross losses of $105,000 were realized for the nine-month period ended September 30, 2013, and there were no losses for the period ended September 30, 2012.
 
Proceeds from sales of securities available for sale during the three-month periods ended September 30, 2013 and September 30, 2012 were $5,009,000 and $1,740,000. Gross gains of $106,000 and $119,000 resulting from sales and calls of available-for-sale securities were realized for the three-month periods ended September 30, 2013 and September 30, 2012, respectively. Gross losses of $105,000 were realized for the three-month period ended September 30, 2013, and there were no losses for the period ended September 30, 2012.
 
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 September 30, 2013 was $73,192,000 which is approximately 60.2% of the Corporation’s investment portfolio. The fair value of these investments at December 31, 2012 was $11,879,000, which represented approximately 10.4% of the Corporation’s investment portfolio. Management has the ability and intent to hold securities with unrealized losses to recovery, which may be maturity. Based on evaluation of available evidence, including recent changes in market interest rates, management believes that any declines in fair values 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 credit portion of the loss recognized in net income and the noncredit portion of the loss would be recognized in accumulated other comprehensive income in the period the other-than-temporary impairment is identified.
 
The following tables show the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2013 and December 31, 2012:
 
     
September 30, 2013
 
     
Less than 12 Months
   
12 Months or More
   
Total
 
 
Description of Securities
 
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
 
     
(Unaudited; In Thousands)
 
                                       
 
Federal agencies
  $ 24,328     $ (1,146 )   $ -     $ -     $ 24,328     $ (1,146 )
 
State and municipal
    16,534       (1,309 )     -       -       16,534       (1,309 )
 
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
    30,065       (1,129 )     -       -       30,065       (1,129 )
 
Corporate
    997       (2 )     1,268       (398 )     2,265       (400 )
                                                   
 
Total temporarily impaired securities
  $ 71,924     $ (3,586 )   $ 1,268     $ (398 )   $ 73,192     $ (3,984 )
 
 
     
December 31, 2012
 
     
Less than 12 Months
   
12 Months or More
   
Total
 
 
Description of Securities
 
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
 
     
(In Thousands)
 
                                       
 
Federal agencies
  $ 3,979     $ (21 )   $ -     $ -     $ 3,979     $ (21 )
 
State and municipal
    3,856       (34 )     -       -       3,856       (34 )
 
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
    2,847       (10 )     -       -       2,847       (10 )
 
Corporate
    -       -       1,197       (522 )     1,197       (522 )
                                                   
 
Total temporarily impaired securities
  $ 10,682     $ (65 )   $ 1,197     $ (522 )   $ 11,879     $ (587 )
 
Federal Agencies
 
The unrealized losses on the Corporation’s investments in direct obligations of U.S. government agencies were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2013.
 
 
State and Municipal
 
The unrealized losses on the Corporation’s investments in securities of state and political subdivisions were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2013.
 
 
Government-Sponsored Enterprise (GSE) Residential Mortgage-Backed and Other Asset-Backed Agency Securities
 
The unrealized losses on the Corporation’s investment in residential mortgage-backed agency securities were primarily caused by interest rate changes. The Corporation expects to recover the amortized cost bases over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2013.
 
 
Corporate Securities
 
The unrealized losses on the Corporation’s investment in corporate securities were due primarily to losses on two pooled trust preferred issues held by the Corporation. The two, ALESCO 9A and PRETSL XXVII, had unrealized losses at September 30, 2013 of $388,000 and $10,000 respectively. At December 31, 2012, the unrealized losses on these two investments were $465,000 and $56,000, respectively. These two securities are both “A” tranche investments (A2A and A-1 respectively) and have performed as agreed since purchase. The two are rated Ba2 and A2, respectively, by Moody’s indicating these securities are considered low medium-grade to below investment grade quality and credit risk. Both provide good collateral coverage at those tranche levels, providing protection for the Corporation. The Corporation has reviewed the pricing reports for these investments and has determined that the decline in the market price is not other than temporary and indicates thin trading activity rather than a true decline in the value of the investment. Factors considered in reaching this determination included the class or “tranche” held by the Corporation, the collateral coverage position of the tranches, the number of deferrals and defaults on the issues, projected and actual cash flows and the credit ratings. These two investments represent 1.34% of the book value of the Corporation’s investment portfolio and approximately 1.04% of market value. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, and the Corporation expects to receive all contractual cash flows related to these investments. Based upon these factors, the Corporation has determined these securities are not other-than-temporarily impaired at September 30, 2013.