NOTE 4. SECURITIES

The amortized cost and estimated fair value of securities available for sale with gross unrealized gains and losses are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
December 31, 2014:
U.S. Government sponsored agencies	$	14,953	$	-	$	(275	)	$	14,678
State, county and municipal securities		137,873		3,935		(433	)		141,375
Corporate debt securities		10,812		228		-			11,040
Mortgage-backed securities		369,581		6,534		(1,403	)		374,712

Total debt securities	$	533,219	$	10,697	$	(2,111	)	$	541,805


December 31, 2013:
U.S. Government sponsored agencies	$	14,947	$	-	$	(1,021	)	$	13,926
State, county and municipal securities		112,659		2,269		(2,174	)		112,754
Corporate debt securities		10,311		275		(261	)		10,325
Collateralized debt obligations		1,480		-		-			1,480
Mortgage-backed securities		349,441		2,347		(4,038	)		347,750

Total debt securities	$	488,838	$	4,891	$	(7,494	)	$	486,235

The following table shows the gross unrealized losses and estimated fair value of securities aggregated by category and length of time that securities have been in a continuous unrealized loss position at December 31, 2014 and 2013.


	Less Than 12 Months					12 Months or More					Total
Description of Securities	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(Dollars in Thousands)
December 31, 2014:
U. S. Government sponsored agencies	$	-	$	-		$	14,678	$	(275	)	$	14,678	$	(275	)
State, county and municipal securities		15,038		(70	)		19,665		(363	)		34,703		(433	)
Corporate debt securities		-		-			-		-			-		-
Mortgage-backed securities		36,760		(221	)		46,812		(1,182	)		83,572		(1,403	)

Total temporarily impaired securities	$	51,798	$	(291	)	$	81,155	$	(1,820	)	$	132,953	$	(2,111	)


December 31, 2013:
U. S. Government sponsored agencies	$	13,926	$	(1,021	)	$	-	$	-		$	13,926	$	(1,021	)
State, county and municipal securities		47,401		(1,882	)		3,794		(292	)		51,195		(2,174	)
Corporate debt securities		-		-			4,826		(261	)		4,826		(261	)
Collateralized debt obligations		-		-			-		-			-		-
Mortgage-backed securities		94,989		(2,493	)		23,388		(1,545	)		118,377		(4,038	)

Total temporarily impaired securities	$	156,316	$	(5,396	)	$	32,008	$	(2,098	)	$	188,324	$	(7,494	)

As of December 31, 2014, the Company’s security portfolio consisted of 340 securities, 66 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed and state, county and municipal securities, as discussed below.

At December 31, 2014, the Company held 37 mortgage backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

At December 31, 2014, the Company held 26 state, county and municipal securities and 3 U.S. government sponsored agency securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2014.

During 2014 and 2013, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities, except for one security that began deferring interest during the fourth quarter of 2010. The Company’s investments in subordinated debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information or credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at December 31, 2014 or 2013.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at December 31, 2014, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at December 31, 2014, these investments are not considered impaired on an other-than-temporary basis.

At December 31, 2014 and 2013, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

The amortized cost and estimated fair value of debt securities available for sale as of December 31, 2014, by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without penalty. Securities not due at a single maturity date are shown separately. Therefore, these securities are not included in the maturity categories in the following maturity summary.


	Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)

Due in one year or less	$	5,693	$	5,757
Due from one year to five years		45,110		46,340
Due from five to ten years		63,043		64,201
Due after ten years		49,792		50,795
Mortgage-backed securities		369,581		374,712

	$	533,219	$	541,805

Securities with a carrying value of approximately $286.6 million and $399.0 million at December 31, 2014 and 2013, respectively, serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law.

Gains and losses on sales of securities available for sale consist of the following:


		December 31,
		2014			2013			2012
		(Dollars in Thousands)
Gross gains on sales of securities	$		141			$ 353			$ 420
Gross losses on sales of securities			(3	)		(182	)		(98	)

Net realized gains on sales of securities available for sale	$		138			$ 171			$ 322