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Note 6 - Investment Securities Available For Sale
3 Months Ended
Mar. 31, 2013
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE 6 - INVESTMENT SECURITIES AVAILABLE FOR SALE

The amortized cost and fair values of securities available for sale are as follows:

   
March 31, 2013
 
(Dollar amounts in thousands)
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government agency securities
  $ 25,277     $ 556     $ (81 )   $ 25,752  
Obligations of states and political subdivisions:
                               
Taxable
    5,892       597       -       6,489  
Tax-exempt
    84,379       3,985       (391 )     87,973  
Mortgage-backed securities in government-sponsored entities
    63,710       1,481       (165 )     65,026  
Private-label mortgage-backed securities
    4,216       481       -       4,697  
Total debt securities
    183,474       7,100       (637 )     189,937  
Equity securities in financial institutions
    750       -       -       750  
Total
  $ 184,224     $ 7,100     $ (637 )   $ 190,687  

   
December 31, 2012
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government agency securities
  $ 24,485     $ 566     $ (91 )   $ 24,960  
Obligations of states and political subdivisions:
                               
Taxable
    6,888       738       -       7,626  
Tax-exempt
    80,391       4,683       (104 )     84,970  
Mortgage-backed securities in government-sponsored entities
    69,238       1,929       (65 )     71,102  
Private-label mortgage-backed securities
    4,553       511       -       5,064  
Total debt securities
    185,555       8,427       (260 )     193,722  
Equity securities in financial institutions
    750       -       -       750  
Total
  $ 186,305     $ 8,427     $ (260 )   $ 194,472  

The amortized cost and fair value of debt securities at March 31, 2013, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollar amounts in thousands)
 
Amortized
Cost
   
Fair
Value
 
             
Due in one year or less
  $ 2,915     $ 2,985  
Due after one year through five years
    4,543       4,811  
Due after five years through ten years
    21,842       22,805  
Due after ten years
    154,174       159,336  
                 
Total
  $ 183,474     $ 189,937  

Proceeds from the sales of securities available-for-sale and the gross realized gains and losses for the three months ended March 31 are as follows:

    2013     2012  
Proceeds from sales   $ 7,438       -  
Gross realized gains     204       -  
Gross realized losses     (19 )     -  

Investment securities with an approximate carrying value of $66,318,142 and $52,126,000 at March 31, 2013 and 2012, respectively, were pledged to secure deposits and other purposes as required by law.

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

   
March 31, 2013
 
   
Less than Twelve Months
   
Twelve Months or Greater
   
Total
 
(Dollar amounts in thousands)
 
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
 
                                     
U.S. government agency securities
  $ 11,925     $ (81 )   $ -     $ -     $ 11,925     $ (81 )
Obligations of states and political subdivisions
    14,834       (391 )     -       -       14,834       (391 )
Mortgage-backed securities in government-sponsored entities
    15,768       (165 )     -       -       15,768       (165 )
Total
  $ 42,527     $ (637 )   $ -     $ -     $ 42,527     $ (637 )

   
December 31, 2012
 
   
Less than Twelve Months
   
Twelve Months or Greater
   
Total
 
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
 
                                                 
U.S. government agency securities
  $ 9,938     $ (91 )   $ -     $ -     $ 9,938     $ (91 )
Obligations of states and political subdivisions
    9,240       (104 )     -       -       9,240       (104 )
Mortgage-backed securities in government-sponsored entities
    12,353       (65 )     -       -       12,353       (65 )
Total
  $ 31,531     $ (260 )   $ -     $ -     $ 31,531     $ (260 )

There were 49 securities considered temporarily impaired at March 31, 2013.

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The Company assesses whether the unrealized loss is other-than-temporary.

OTTI losses are recognized in earnings when the Company has the intent to sell the debt security or it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if the Company does not expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.

An unrealized loss is generally deemed to be other than temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. As a result the credit loss component of an OTTI is recorded as a component of investment securities gains (losses) in the accompanying Consolidated Statement of Income, while the remaining portion of the impairment loss is recognized in other comprehensive income, provided the Company does not intend to sell the underlying debt security and it is “more likely than not” that the Company will not have to sell the debt security prior to recovery.

Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for more than 97% of the total available-for-sale portfolio as of March 31, 2013 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of significant unrealized loss positions within the obligations of state and political subdivisions security portfolio. The Company’s assessment was concentrated mainly on private-label collateralized mortgage obligations of approximately $4.2 million for which the Company evaluates credit losses on a quarterly basis. The gross unrealized gain position related to these private-label collateralized mortgage obligations amounted to $481,000 on March 31, 2013. The Company considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

 
 
The length of time and the extent to which the fair value has been less than the amortized cost basis.
       
 
 
Changes in the near term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions;

 
 
The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and
 
 
 
Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

For the three months ended March 31, 2013 and 2012, there were no available-for-sale debt securities with an unrealized loss that suffered OTTI.