Note 6 - Investment Securities Available For Sale

6 Months Ended

Jun. 30, 2014

Investments, Debt and Equity Securities [Abstract]

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:

	June 30, 2014
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	25,665	$	245	$	(849	)	$	25,061
Obligations of states and political subdivisions:
Taxable		2,957		122		-			3,079
Tax-exempt		94,530		2,852		(1,689	)		95,693
Mortgage-backed securities in government-sponsored entities		37,279		813		(493	)		37,599
Private-label mortgage-backed securities		3,026		292		-			3,318
Total debt securities		163,457		4,324		(3,031	)		164,750
Equity securities in financial institutions		750		6		-			756
Total	$	164,207	$	4,330	$	(3,031	)	$	165,506

	December 31, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	27,289	$	135	$	(1,661	)	$	25,763
Obligations of states and political subdivisions:
Taxable		3,787		46		(38	)		3,795
Tax-exempt		86,524		1,562		(3,267	)		84,819
Mortgage-backed securities in government-sponsored entities		38,816		535		(1,028	)		38,323
Private-label mortgage-backed securities		3,366		327		-			3,693
Total debt securities		159,782		2,605		(5,994	)		156,393
Equity securities in financial institutions		750		-		-			750
Total	$	160,532	$	2,605	$	(5,994	)	$	157,143

The amortized cost and fair value of debt securities at June 30, 2014, 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.

	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	684	$	694
Due after one year through five years		4,774		4,996
Due after five years through ten years		23,549		23,871
Due after ten years		134,450		135,189
Total	$	163,457	$	164,750

Proceeds from the sales of securities available for sale and the gross realized gains and losses for the three and six months ended June 30 are as follows:

(Dollar amounts in thousands)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2014		2013			2014			2013
Proceeds from sales	$	980	$	533		$	1,494		$	8,135
Gross realized gains		64		-			64			204
Gross realized losses		-		(10	)		(6	)		(29	)

Investment securities with an approximate carrying value of $65.8 million and $66.3 million at June 30, 2014 and December 31, 2013, 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.

	June 30, 2014
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-		$	16,599	$	(849	)	$	16,599	$	(849	)
Obligations of states and political subdivisions		9,511		(104	)		19,616		(1,585	)		29,127		(1,689	)
Mortgage-backed securities in government-sponsored entities		1,075		(3	)		20,334		(490	)		21,409		(493	)
Total	$	10,586	$	(107	)	$	56,549	$	(2,924	)	$	67,135	$	(3,031	)

	December 31, 2013
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	13,130	$	(929	)	$	7,166	$	(732	)	$	20,295	$	(1,661	)
Obligations of states and political subdivisions
Taxable		1,301		(38	)		-		-			1,301		(38	)
Tax-exempt		26,743		(2,883	)		2,678		(383	)		29,421		(3,267	)
Mortgage-backed securities in government-sponsored entities		18,082		(757	)		5,248		(271	)		23,330		(1,028	)
Total	$	59,255	$	(4,608	)	$	15,092	$	(1,386	)	$	74,347	$	(5,994	)

There were 86 securities considered temporarily impaired at June 30, 2014.

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 98% of the total available-for-sale portfolio as of June 30, 2014 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of prolonged 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 $3.0 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 $292,000 on June 30, 2014. 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 and six months ended June 30, 2014 and 2013, there were no available-for-sale debt securities with an unrealized loss that suffered OTTI. Management does not believe any individual unrealized loss as of June 30, 2014 or December 31, 2013 represented an other-than-temporary impairment. The unrealized losses on debt securities are primarily the result of interest rate changes. These conditions will not prohibit the Company from receiving its contractual principal and interest payments on these debt securities. The fair value of these debt securities is expected to recover as payments are received on these securities and they approach maturity. 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.