NOTE 3 - SECURITIES

The amortized cost and fair value of securities available for sale and related unrealized gains/losses recognized in accumulated other comprehensive income was as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
As of September 30, 2014
Available for Sale
U. S. government agency	$	577	$	5	$	—		$	582
State and municipal	304,700		19,304		(306		)	323,698
Mortgage-backed securities-residential (GSE’s)	154,664		3,499		(1,259		)	156,904
Collateralized mortgage obligations (GSE’s)	354,174		2,180		(5,635		)	350,719
Equity securities	4,689		—		—			4,689
Other securities	3,508		1		—			3,509
Total available for sale	$	822,312	$	24,989	$	(7,200	)	$	840,101

As of December 31, 2013
Available for Sale
U. S. government agency	$	793	$	5	$	—		$	798
State and municipal	321,151		12,173		(2,212		)	331,112
Mortgage-backed securities-residential (GSE’s)	186,054		3,175		(3,800		)	185,429
Collateralized mortgage obligations (GSE’s)	372,896		1,642		(9,229		)	$	365,309
Equity securities	4,939		—		—			4,939
Other securities	3,527		—		(8		)	3,519
Total available for sale	$	889,360	$	16,995	$	(15,249	)	$	891,106

The amortized cost and fair value of the investment securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity or with no maturity are shown separately.

	Available for Sale
September 30, 2014	Amortized Cost		Fair Value
Within one year	$	15,516	$	15,707
One through five years	51,381		53,390
Six through ten years	128,201		135,014
After ten years	113,687		123,678
Mortgage-backed securities-residential (Government Sponsored Entity)	154,664		156,904
Collateralized mortgage obligations (Government Sponsored Entity)	354,174		350,719
Equity securities	4,689		4,689
Total available for sale securities	$	822,312	$	840,101

Proceeds from sales of securities available for sale were $21,972 and $79,136 for the nine months ended September 30, 2014 and 2013, respectively. Gross gains of $542 and $912 and gross losses of $546 and $77 were realized on these sales during 2014 and 2013, respectively.

Proceeds from sales of securities available for sale were $0 and $782 for the three months ended September 30, 2014 and 2013, respectively. Gross gains of $0 and $2 and gross losses of $0 and $0 were realized on these sales during 2014 and 2013, respectively.

Below is a summary of securities with unrealized losses as of September 30, 2014 and December 31, 2013 presented by length of time the securities have been in a continuous unrealized loss position.

	Less than 12 months					12 months or longer					Total
September 30, 2014 Description of securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	2,489	$	(11	)	$	15,981	$	(295	)	$	18,470	$	(306	)
Mortgage-backed securities-residential (GSE’s)	10,200		(26		)	49,874		(1,233		)	60,074		(1,259		)
Collateralized mortgage obligations (GSE’s)	75,368		(648		)	150,728		(4,987		)	226,096		(5,635		)
Total temporarily impaired	$	88,057	$	(685	)	$	216,583	$	(6,515	)	304,640		$	(7,200	)

	Less than 12 months					12 months or longer					Total
December 31, 2013 Description of securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	31,660	$	(1,791	)	$	4,153	$	(421	)	$	35,813	$	(2,212	)
Mortgage-backed securities-residential (GSE’s)	114,036		(3,800		)	—		—			114,036		(3,800		)
Collateralized mortgage obligations (GSE’s)	267,579		(9,040		)	4,100		(189		)	271,679		(9,229		)
Other securities	—		—			993		(8		)	993		(8		)
Total temporarily impaired	$	413,275	$	(14,631	)	$	9,246	$	(618	)	$	422,521	$	(15,249	)

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment 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 ASC 320. However, certain purchased beneficial interests, including non-agency mortgage-backed securities, asset-backed securities, and collateralized debt obligations, that had credit ratings at the time of purchase of below AA are evaluated using the model outlined in ASC 325-10.

In determining OTTI under ASC 320, 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.

When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of September 30, 2014, the Company’s securities portfolio consisted of 1,009 securities, 108 of which were in an unrealized loss position. Unrealized losses on state and municipal securities of $306 have not been recognized into income because management has the ability to hold for a period of time sufficient to allow for any anticipated recovery in fair value and it is unlikely that management will be required to sell the securities before their anticipated recovery. The decline in value is primarily attributable to temporary illiquidity and the current rate environment and not necessarily the expected cash flows of the individual securities. The Company monitors the financial condition of these issuers. The fair value of these debt securities is expected to recover as the securities approach their maturity date.

At September 30, 2014, almost all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value of approximately $1,259 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 September 30, 2014.

The Company’s collateralized mortgage obligation securities portfolio includes agency collateralized mortgage obligations with a market value of $350,719 which had unrealized losses of approximately $5,635 at September 30, 2014. The Company monitors to insure it has adequate credit support and as of September 30, 2014, the Company believes there is no OTTI and 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. All securities are investment grade.