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Securities

9 Months Ended

Sep. 30, 2014

NOTE 3 - SECURITIES

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of securities at September 30, 2014 and December 31, 2013 were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Approximate
($ in thousands)	Cost		Gains		Losses			Fair Value
Available-for-Sale Securities:
September 30, 2014:
U.S. Treasury and Government agencies	$	18,034	$	142	$	(40	)	$	18,136
Mortgage-backed securities		43,722		477		(359	)		43,840
State and political subdivisions		18,111		1,045		(7	)		19,149
Equity securities		23		-		-			23

	$	79,890	$	1,664	$	(406	)	$	81,148

			Gross		Gross
	Amortized		Unrealized		Unrealized
($ in thousands)	Cost		Gains		Losses			Fair Value
Available-for-Sale Securities:
December 31, 2013:
U.S. Treasury and Government agencies	$	11,305	$	120	$	(125	)	$	11,300
Mortgage-backed securities		57,322		417		(516	)		57,223
State and political subdivisions		17,937		546		(328	)		18,155
Money Market Mutual Fund		3,092		-		-			3,092
Equity securities		23		-		-			23

	$	89,679	$	1,083	$	(969	)	$	89,793

The amortized cost and fair value of securities available for sale at September 30, 2014, 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		Fair
($'s in thousands)	Cost		Value
September 30, 2014:
Within one year	$	470	$	479
Due after one year through five years		1,866		1,935
Due after five years through ten years		7,319		7,498
Due after ten years		26,490		27,373
		36,145		37,285

Mortgage-backed securities & equity securities		43,745		43,863

	$	79,890	$	81,148

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $72.2 million at September 30, 2014 and $42.3 million at December 31, 2013. The fair value of securities delivered for repurchase agreements was $20.4 million at September 30, 2014 and $17.5 million at December 31, 2013.

Gross gains of $0.06 million resulting from sales of available-for-sale securities, were realized during the nine-month period ending September 30, 2014. There were no realized gains or losses from sales of available-for-sale securities for the three-month period ending September 30, 2014. There were realized gains of $0.05 million from sales of available-for-sale securities for the three- and nine-month periods ending September 30, 2013. The $0.06 million and the $0.05 million gain on sale was a reclassification from accumulated other comprehensive income (OCI) and is included in the net gain on sales of securities. The related $0.02 million and the $0.02 million in tax expense is a reclassification from OCI and is included in the income tax expense line item in the income statement.

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 was $27.2 million at September 30, 2014, and $35.8 million at December 31, 2013, which was approximately 33.5 and 39.9 percent, respectively, of the Company’s available-for-sale investment portfolio at such dates. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value 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 loss recognized in net income in the period the other-than-temporary impairment is identified.

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

($ in thousands)	Less than 12 Months					12 Months or Longer					Total
September 30, 2014	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale Securities:
U.S. Treasury and Government agencies	$	5,043	$	(16	)	$	2,976	$	(24	)	$	8,019	$	(40	)
Mortgage-backed securities		10,999		(69	)		7,315		(290	)		18,314		(359	)
State and political subdivisions		-		-			844		(7	)		844		(7	)

	$	16,042	$	(85	)	$	11,135	$	(321	)	$	27,177	$	(406	)

($ in thousands)	Less than 12 Months					12 Months or Longer					Total
December 31, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale Securities:
U.S. Treasury and Government agencies	$	3,834	$	(125	)	$	-	$	-		$	3,834	$	(125	)
Mortgage-backed securities		24,773		(410	)		2,333		(106	)		27,106		(516	)
State and political subdivisions		4,868		(328	)		-		-			4,868		(328	)

	$	33,475	$	(863	)	$	2,333	$	(106	)	$	35,808	$	(969	)

The total unrealized loss as of September 30, 2014 in the securities portfolio is contained in 33 percent of the portfolio with a potential loss of $0.4 million, which is down from the $1.0 million unrealized loss at December 31, 2013. The unrealized losses are contained within 22 individual securities and are not segregated by type or duration of security. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation. Consideration is given to (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, and (3) the intent of the Company to not sell the investment and whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost. Management has determined there is no other-than-temporary-impairment on these securities.