NOTE 2 – SECURITIES

The amortized cost and fair value of securities at period-end were as follows (dollars in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2014
Available for Sale:
U.S. Treasury and federal agency securities	$	67,769	$	62	$	(715	)	$	67,116
U.S. Agency MBS and CMOs		17,517		36		(289	)		17,264
Tax-exempt state and municipal bonds		36,286		333		(221	)		36,398
Taxable state and municipal bonds		26,131		433		(85	)		26,479
Corporate bonds and other debt securities		13,307		66		(19	)		13,354
Other equity securities		1,500		---		(10	)		1,490
	$	162,510	$	930	$	(1,339	)	$	162,101
Held to Maturity
Tax-exempt state and municipal bonds	$	31,744	$	102	$	(75	)	$	31,771

December 31, 2013
Available for Sale:
U.S. Treasury and federal agency securities	$	55,701	$	92	$	(1,354	)	$	54,439
U. S. Agency MBS and CMOs		20,029		9		(673	)		19,365
Tax-exempt state and municipal bonds		27,920		47		(1,118	)		26,849
Taxable state and municipal bonds		26,306		307		(285	)		26,328
Corporate bonds and other debt securities		11,211		64		(63	)		11,212
Other equity securities		1,500		---		(34	)		1,466
	$	142,667	$	519	$	(3,527	)	$	139,659
Held to Maturity:
Tax-exempt state and municipal bonds	$	19,248	$	46	$	(16	)	$	19,278

There were no sales of securities in the three month periods ended September 30, 2014 and 2013. Proceeds from sales of available for sale securities were $5.2 million in the nine month period ended September 30, 2014 resulting in net gains on sale of $51,000, as reported in the Consolidated Statements of Income. This resulted in reclassifications of $51,000 ($33,000 net of tax) from accumulated other comprehensive income to gain on sale of securities in the Consolidated Statements of Income in the nine month period ended September 30, 2014. Proceeds from the sale of securities available for sale were $3.8 million in the nine month period ended September 30, 2013 resulting in net gains on sale of $80,000, as reported in the Consolidated Statements of Income. This resulted in reclassifications of $80,000 ($52,000 net of tax) from accumulated other comprehensive income to gain on sale of securities in the Consolidated Statements of Income in the nine month period ended September 30, 2013.

Contractual maturities of debt securities at September 30, 2014 were as follows (dollars in thousands):

	Held–to-Maturity Securities				Available-for-Sale Securities
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	19,075	$	19,035	$	4,424	$	4,450
Due from one to five years		745		746		92,569		92,577
Due from five to ten years		5,624		5,690		38,215		38,051
Due after ten years		6,300		6,300		25,802		25,533
	$	31,744	$	31,771	$	161,010	$	160,611

Securities with unrealized losses at September 30, 2014 and December 31, 2013, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (dollars in thousands):

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
September 30, 2014	Value		Loss			Value		Loss			Value		Loss
U.S. Treasury and federal agency securities	$	17,499	$	(48	)	$	40,350	$	(667	)	$	57,849	$	(715	)
U.S. Agency MBS and CMOs		1,497		(6	)		12,617		(283	)		14,114		(289	)
Tax-exempt state and municipal bonds		23,642		(107	)		8,726		(189	)		32,368		(296	)
Taxable state and municipal bonds		3,053		(12	)		4,173		(73	)		7,226		(85	)
Corporate bonds and other debt securities		2,702		(2	)		1,988		(17	)		4,690		(19	)
Other equity securities		---		---			1,490		(10	)		1,490		(10	)
Total temporarily impaired	$	48,393	$	(175	)	$	69,344	$	(1,239	)	$	117,737	$	(1,414	)

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2013	Value		Loss			Value		Loss			Value		Loss
U.S. Treasury and federal agency securities	$	43,212	$	(1,354	)	$	---	$	---		$	43,212	$	(1,354	)
U.S. Agency MBS and CMOs		18,494		(673	)		---		---			18,494		(673	)
Tax-exempt state and municipal bonds		21,359		(1,066	)		831		(68	)		22,190		(1,134	)
Taxable state and municipal bonds		9,599		(256	)		1,015		(29	)		10,614		(285	)
Corporate bonds and other debt securities		3,928		(63	)		---		---			3,928		(63	)
Other equity securities		1,466		(34	)		---		---			1,466		(34	)
Total temporarily impaired	$	98,058	$	(3,446	)	$	1,846	$	(97	)	$	99,904	$	(3,543	)

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Management determined that no OTTI charges were necessary during the three and nine month periods ended September 30, 2014 and 2013.

Securities with a carrying value of approximately $1.0 million were pledged as security for public deposits, letters of credit and for other purposes required or permitted by law at September 30, 2014 and December 31, 2013.