5. Securities

6 Months Ended

Jun. 30, 2013

Available-for-sale Securities [Abstract]

Securities

NOTE 5. SECURITIES

The amortized cost, unrealized gains, unrealized losses and estimated fair values of securities at June 30, 2013, December 31, 2012, and June 30, 2012 are summarized as follows:

	June 30, 2013
		Amortized		Unrealized		Estimated
Dollars in thousands		Cost		Gains		Losses		Fair Value
Available for Sale
Taxable debt securities:
U. S. Government agencies
and corporations	$	35,605	$	1,186	$	27	$	36,764
Residential mortgage-backed securities:
Government-sponsored agencies		147,738		2,313		1,510		148,541
Nongovernment-sponsored agencies		12,373		326		42		12,657
State and political subdivisions		13,838		2		493		13,347
Corporate debt securities		3,966		27		34		3,959
Total taxable debt securities		213,520		3,854		2,106		215,268
Tax-exempt debt securities:
State and political subdivisions		76,225		1,647		2,037		75,835
Residential mortgage-backed securities:
Government-sponsored agencies		—		—		—		—
Total tax-exempt debt securities		76,225		1,647		2,037		75,835
Equity securities		77		—		—		77
Total available for sale securities	$	289,822	$	5,501	$	4,143	$	291,180

	December 31, 2012
		Amortized		Unrealized		Estimated
Dollars in thousands		Cost		Gains		Losses		Fair Value
Available for Sale
Taxable debt securities
U. S. Government agencies
and corporations	$	28,128	$	892	$	—	$	29,020
Residential mortgage-backed securities:
Government-sponsored agencies		133,812		3,250		492		136,570
Nongovernment-sponsored entities		15,380		509		144		15,745
State and political subdivisions		12,187		71		89		12,169
Corporate debt securities		1,959		29		38		1,950
Total taxable debt securities		191,466		4,751		763		195,454
Tax-exempt debt securities
State and political subdivisions		79,403		4,104		237		83,270
Residential mortgage-backed securities		2,738		—		—		2,738
Total tax-exempt debt securities		82,141		4,104		237		86,008
Equity securities		77		—		—		77
Total available for sale securities	$	273,684	$	8,855	$	1,000	$	281,539

	June 30, 2012
		Amortized		Unrealized		Estimated
Dollars in thousands		Cost		Gains		Losses		Fair Value
Available for Sale
Taxable debt securities:
U. S. Government agencies
and corporations	$	18,000	$	665	$	2	$	18,663
Residential mortgage-backed securities:
Government-sponsored agencies		157,618		3,846		297		161,167
Nongovernment-sponsored agencies		23,188		550		477		23,261
State and political subdivisions		8,672		27		43		8,656
Corporate debt securities		1,951		16		127		1,840
Total taxable debt securities		209,429		5,104		946		213,587
Tax-exempt debt securities:
State and political subdivisions		69,036		3,733		251		72,518
Residential mortgage-backed securities:
Government-sponsored agencies		2,969		—		—		2,969
Total tax-exempt debt securities		72,005		3,733		251		75,487
Equity securities		77		—		—		77
Total available for sale securities	$	281,511	$	8,837	$	1,197	$	289,151

The maturities, amortized cost and estimated fair values of securities at June 30, 2013, are summarized as follows:

		Available for Sale
		Amortized		Estimated
Dollars in thousands		Cost		Fair Value
Due in one year or less	$	73,257	$	73,674
Due from one to five years		84,882		85,636
Due from five to ten years		20,782		20,872
Due after ten years		110,824		110,921
Equity securities		77		77
	$	289,822	$	291,180

The proceeds from sales, calls and maturities of available for sale securities, including principal payments received on mortgage-backed obligations, and the related gross gains and losses realized, for the six months ended June 30, 2013 are as follows:

	Proceeds from			Gross realized
		Calls and	Principal
Dollars in thousands	Sales	Maturities	Payments	Gains	Losses
Securities available for sale	$          29,389	$            1,058	$          32,768	$        167	$        183

During the three and six months ended June 30, 2013 and 2012, we recorded other-than-temporary impairment losses on residential mortgage-backed nongovernment sponsored entity securities as follows:

	Three Months Ended June 30,		Six Months Ended
In thousands	2013	2012	2013	2012
Total other-than-temporary impairment losses	$               (27)	$             (370)	$            (117)	$            (882)
Portion of loss recognized in
other comprehensive income	-	264	37	547
Net impairment losses recognized in earnings	$               (27)	$             (106)	$              (80)	$            (335)

Activity related to the credit component recognized on debt securities available for sale for which a portion of other-than-temporary impairment was recognized in other comprehensive income for the three and six months ended June 30, 2013 is as follows:

	Three Months Ended		Six Months Ended
	June 30, 2013		June 30, 2013
In thousands	Total		Total
Beginning Balance	$	2,957	$	2,904
Additions for the credit component on debt securities in which
other-than-temporary impairment was not previously recognized		27		80
Securities sold during the period		—		—
Ending Balance	$	2,984	$	2,984

At June 30, 2013, our debt securities with other-than-temporary impairment in which only the amount of loss related to credit was recognized in earnings consisted solely of residential mortgage-backed securities issued by nongovernment-sponsored entities. We utilize third party vendors to estimate the portion of loss attributable to credit using a discounted cash flow models. The vendors estimate cash flows of the underlying collateral of each mortgage-backed security using models that incorporate their best estimates of current key assumptions, such as default rates, loss severity and prepayment rates. Assumptions utilized vary widely from security to security, and are influenced by such factors as underlying loan interest rates, geographical location of underlying borrowers, collateral type and other borrower characteristics.

Our vendors performing these valuations also analyze the structure of each mortgage-backed instrument in order to determine how the estimated cash flows of the underlying collateral will be distributed to each security issued from the structure. Expected principal and interest cash flows on the impaired debt securities are discounted predominantly using unobservable discount rates which the vendors assume that market participants would utilize in pricing the specific security. Based on the discounted expected cash flows derived from our vendor’s models, we expect to recover the remaining unrealized losses on residential mortgage-backed securities issued by nongovernment sponsored entities.

Provided below is a summary of securities available for sale which were in an unrealized loss position at June

30, 2013 and December 31, 2012, including debt securities for which a portion of other-than-temporary impairment has been recognized in other comprehensive income.

	June 30, 2013
	Less than 12 months					12 months or more					Total
		Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
Dollars in thousands		Fair Value		Loss			Fair Value		Loss			Fair Value		Loss
Temporarily impaired securities
Taxable debt securities
U. S. Government agencies
and corporations	$	3,786	$	(27	)	$	—	$	—		$	3,786	$	(27	)
Residential mortgage-backed securities:
Government-sponsored agencies		65,600		(1,352	)		8,045		(158	)		73,645		(1,510	)
Nongovernment-sponsored entities		632		(6	)		1,056		(5	)		1,688		(11	)
State and political subdivisions		9,997		(489	)		386		(4	)		10,383		(493	)
Corporate debt securities		2,965		(34	)		—		—			2,965		(34	)
Tax-exempt debt securities
State and political subdivisions		38,852		(2,037	)		—		—			38,852		(2,037	)
Total temporarily impaired securities		121,832		(3,945	)		9,487		(167	)		131,319		(4,112	)
Other-than-temporarily impaired securities
Taxable debt securities
Residential mortgage-backed securities:
Nongovernment-sponsored entities		—		—			29		(31	)		29		(31	)
Total other-than-temporarily
impaired securities		—		—			29		(31	)		29		(31	)
Total	$	121,832	$	(3,945	)	$	9,516	$	(198	)	$	131,348	$	(4,143	)

	December 31, 2012
	Less than 12 months					12 months or more					Total
		Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
Dollars in thousands		Fair Value		Loss			Fair Value		Loss			Fair Value		Loss
Temporarily impaired securities
Taxable debt securities
U. S. Government agencies
and corporations	$	—	$	—		$	—	$	—		$	—	$	—
Residential mortgage-backed securities:
Government-sponsored agencies		36,498		(414	)		8,997		(78	)		45,495		(492	)
Nongovernment-sponsored entities		—		(4	)		1,478		(14	)		1,478		(18	)
State and political subdivisions		3,766		(85	)		387		(4	)		4,153		(89	)
Corporate debt securities		—		—			962		(38	)		962		(38	)
Tax-exempt debt securities
State and political subdivisions		19,934		(237	)		—		—			19,934		(237	)
Total temporarily impaired securities		60,198		(740	)		11,824		(134	)		72,022		(874	)
Other-than-temporarily impaired securities
Taxable debt securities
Residential mortgage-backed securities:
Nongovernment-sponsored entities		265		(6	)		593		(120	)		858		(126	)
Total other-than-temporarily
impaired securities		265		(6	)		593		(120	)		858		(126	)
Total	$	60,463	$	(746	)	$	12,417	$	(254	)	$	72,880	$	(1,000	)

We held 123 available for sale securities having an unrealized loss at June 30, 2013. We do not intend to sell these securities, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost bases. We believe that this decline in value is primarily attributable to the lack of market liquidity and to changes in market interest rates and not due to credit quality. Accordingly, no additional other-than-temporary impairment charge to earnings is warranted at this time.