NOTE 2 - INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2013

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

NOTE 2 – INVESTMENT SECURITIES

The amortized cost of securities and their approximate fair value were as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
June 30, 2013
Available-for-Sale:
Obligations of U.S. government sponsored agencies	$	19,669	$	—	$	(1,117	)	$	18,552
Obligations of state and political subdivisions		8,262		229		(60	)		8,431
Government sponsored agency mortgage-backed securities		274,858		2,580		(5,860	)		271,578
Corporate debt securities		6,000		—		(1,238	)		4,762
Equity securities		3,000		—		(23	)		2,977
	$	311,789	$	2,809	$	(8,298	)	$	306,300
Held-to-Maturity:
Government sponsored agency mortgage-backed securities	$	6	$	—	$	—		$	6
December 31, 2012
Available-for-Sale:
Obligations of U.S. government sponsored agencies	$	21,003	$	115	$	—		$	21,118
Obligations of state and political subdivisions		10,698		499		—			11,197
Government sponsored agency mortgage-backed securities		239,543		6,152		(64	)		245,631
Corporate debt securities		6,000		—		(1,244	)		4,756
Equity securities		3,000		113		—			3,113
	$	280,244	$	6,879	$	(1,308	)	$	285,815
Held-to-Maturity:
Government sponsored agency mortgage-backed securities	$	6	$	—	$	—		$	6

For the three months ended June 30, 2013 there were no gross realized gains on sales or calls of available for sale securities. For the three months ended June 30, 2012 there were $968,000 gross realized gains on sales or calls of available for sale securities. For the three months ended June 30, 2013 and 2012 there were no gross realized losses on sales or calls of securities categorized as available for sale securities. For the three months ended June 30, 2013 there were no gross proceeds from sales or calls of available for sale securities. For the three months ended June 30, 2012 there were $76,989,000 in gross proceeds from sales or calls of available for sale securities. There were no sales or transfers of held to maturity securities for the three months ended June 30, 2013 and 2012. For the three months ended June 30, 2013 and 2012, there were no gross proceeds from maturities or calls of held to maturity securities.

For the six months ended June 30, 2013 and 2012 there were $543,000 and $968,000, respectively, in gross realized gains on sales or calls of available for sale securities. For the six months ended June 30, 2013 there were no gross realized losses on sales or calls of securities categorized as available for sale securities. For the six months ended June 30, 2012 there were $9,000 in gross realized losses on sales or calls of securities categorized as available for sale securities. For the six months ended June 30, 2013 and 2012 there were $17,085,000 and $78,439,000, respectively, in gross proceeds from sales or calls of available for sale securities. There were no sales or transfers of held to maturity securities for the six months ended June 30, 2013 and 2012. For the six months ended June 30, 2013 and 2012, there were no gross proceeds from maturities or calls of held to maturity securities. Expected maturities of all investment securities are consistent with those reported in the December 31, 2012 Form 10-K.

At June 30, 2013 and December 31, 2012, securities having fair value amounts of approximately $300,983,000 and $276,308,000, respectively, were pledged to secure public deposits, short-term borrowings, treasury, tax and loan balances and for other purposes required by law or contract. The Company pledges most of its securities at the Federal Home Loan Bank (“FHLB”) to provide borrowing capacity. See “Liquidity” on page 44.

Investment securities are evaluated for other-than-temporary impairment on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary.  Management utilizes criteria such as the magnitude and duration of the decline and the intent and ability of the Company to retain its investment in the issues for a period of time sufficient to allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary.  The term "other-than-temporary" is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.  Once a decline in value is determined to be other-than-temporary, and management does not intend to sell the security or it is more likely than not that the Company will not be required to sell the security before recovery, only the portion of the impairment loss representing credit exposure is recognized as a charge to earnings, with the balance recognized as a charge to other comprehensive income. If management intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovering its forecasted cost, the entire impairment loss is recognized as a charge to earnings. For debt securities, the credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

A summary of investments securities in an unrealized loss for less than twelve months and twelve months or longer is as follows (in thousands).

	As of June 30, 2013
	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Description of Securities
Obligations of U.S. government sponsored agencies	$	18,552	$	(1,117	)	$	—	$	—			18,552		(1,117	)
Obligations of state and political subdivisions		1,108		(60	)		—		—			1,108		(60	)
Government sponsored agency mortgage-backed securities		175,628		(5,860	)		—		—			175,628		(5,860	)
Corporate debt securities		—		—			4,762		(1,238	)		4,762		(1,238	)
Equity securities		2,977		(23	)		—		—			2,977		(23	)
Total impaired securities	$	198,265	$	(7,060	)	$	4,762	$	(1,238	)	$	203,027	$	(8,298	)

	As of December 31, 2012
	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Description of Securities
Government sponsored agency mortgage-backed securities	$	34,878	$	(64	)	$	—	$	—		$	34,878	$	(64	)
Corporate debt securities		—		—			4,756		(1,244	)		4,756		(1,244	)
Total impaired securities	$	34,878	$	(64	)	$	4,756	$	(1,244	)	$	39,634	$	(1,308	)

As of June 30, 2013 and December 31, 2012, there were two corporate debt securities in a loss position for twelve months or more. There is a current active market for these securities and management believes that the unrealized losses on the Company’s investment in these corporate debt securities is due to the yield of the securities and is not attributable to changes in credit quality. The two corporate debt securities are each a $3,000,000 single-issuer trust preferred security issued by two separate large publicly-traded financial institutions. The securities are tied to the front-end of the yield curve, three-month LIBOR (a short-term interest rate) and have a spread over that. In addition, the payments on both of these securities have been made as agreed and are considered current. The Company does not intend to sell and does not believe it will be required to sell these securities and expects a full recovery of value. The Company did not consider these investments to be other-than-temporarily impaired at June 30, 2013 or December 31, 2012.

Management periodically evaluates each investment security for other-than-temporary impairment, relying primarily on industry analyst reports, observation of market conditions and interest rate fluctuations. Management has the ability and intent to hold securities with established maturity dates until recovery of fair value, which may be at maturity, and believes it will be able to collect all amounts due according to the contractual terms for all of the underlying investment securities; therefore, management does not consider these investments to be other-than-temporarily impaired.