NOTE 2. SECURITIES AVAILABLE FOR SALE

At March 31, 2014 and December 31, 2013, the investment securities portfolio was comprised exclusively of securities classified as “available for sale,” resulting in investment securities being carried at fair value. The amortized cost and fair values of investment securities available for sale at March 31, 2014 and December 31, 2013 were:


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2014
U.S. Government Agencies	$	25,265	$	0	$	282	$	24,983
U.S. Government Sponsored Enterprises (GSE)		24,204		74		465		23,813
States and political subdivisions		66,340		843		2,414		64,769
GSE residential mortgage-backed securities		158,080		1,335		215		159,200
GSE residential collateralized mortgage obligations (CMOs)		95,590		367		749		95,208
GSE commercial CMOs		65,391		78		1,725		63,744

Total debt securities		434,870		2,697		5,850		431,717
Equity securities		50		19		0		69

Totals	$	434,920	$	2,716	$	5,850	$	431,786

December 31, 2013
U.S. Government Agencies	$	25,610	$	34	$	193	$	25,451
U.S. Government Sponsored Enterprises (GSE)		14,431		5		722		13,714
States and political subdivisions		75,494		417		4,367		71,544
GSE residential mortgage-backed securities		198,449		895		725		198,619
GSE residential collateralized mortgage obligations (CMOs)		40,502		251		221		40,532
GSE commercial CMOs		59,812		0		2,798		57,014

Total debt securities		414,298		1,602		9,026		406,874
Equity securities		50		19		0		69

Totals	$	414,348	$	1,621	$	9,026	$	406,943

The following table shows gross unrealized losses and fair value of the Company’s available for sale securities that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2014 and December 31, 2013:


	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2014
U.S. Government Agencies	$	13,302	$	115	$	11,680	$	167	$	24,982	$	282
U.S. Government Sponsored Enterprises (GSE)		17,291		308		2,039		157		19,330		465
States and political subdivisions		20,503		1,224		16,036		1,190		36,539		2,414
GSE residential mortgage-backed securities		12,558		123		9,725		92		22,283		215
GSE residential collateralized mortgage obligations (CMOs)		44,020		749		0		0		44,020		749
GSE commercial CMOs		15,271		335		29,456		1,390		44,727		1,725

Total temporarily impaired securities	$	122,945	$	2,854	$	68,936	$	2,996	$	191,881	$	5,850

December 31, 2013
U.S. Government Agencies	$	17,454	$	193	$	0	$	0	$	17,454	$	193
U.S. Government Sponsored Enterprises (GSE)		12,049		722		0		0		12,049		722
States and political subdivisions		53,606		4,367		0		0		53,606		4,367
GSE residential mortgage-backed securities		125,468		716		7,447		9		132,915		725
GSE residential collateralized mortgage obligations (CMOs)		14,033		220		44		1		14,077		221
GSE commercial CMOs		38,298		1,248		18,716		1,550		57,014		2,798

Total temporarily impaired securities	$	260,908	$	7,466	$	26,207	$	1,560	$	287,115	$	9,026

The Company had 53 securities and 77 securities at March 31, 2014 and December 31, 2013 in which the amortized cost exceeds their values, as discussed below.

U.S. Agencies and Government Sponsored Enterprises (GSE). Thirty four U.S. Agencies and GSE securities, including mortgage-backed securities, have amortized costs which exceed their fair values, 22 of which are in the less than 12 months category at March 31, 2014. At December 31, 2013, the Company had 46 U.S. Government Agencies and GSE securities, including mortgage-backed and collateralized mortgage obligations with unrealized losses, 38 GSE securities have amortized costs which exceed their fair values for less than 12 months, and eight have amortized costs which exceed their fair values for more than 12 months. These unrealized losses have been caused by a rise in interest rates from the time the securities were purchased. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the par value bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2014 or at December 31, 2013.

State and Political Subdivisions. Nineteen state and political subdivision securities have amortized costs which exceeded their fair value, 11 of which are in the less than 12 months category at March 31, 2014. At December 31, 2013, 31 state and political subdivision securities have an amortized cost which exceed their fair value for less than 12 months. These unrealized losses have been caused by a rise in interest rates from the time the securities were purchased. Management considers the investment rating, the state of the issuer of the security and other credit support in determining whether the security is other-than-temporarily impaired. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2014 or at December 31, 2013.

The amortized cost and fair values of securities available for sale at March 31, 2014 by contractual maturity are shown below. Contractual maturities will differ from expected maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available for Sale
(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	1,560	$	1,563
Due after one year through five years		7,422		7,403
Due after five years through ten years		32,311		31,502
Due after ten years		74,516		73,097
Mortgage-backed securities and collateralized mortgage obligations		319,061		318,152

Total debt securities		434,870		431,717
Equity securities		50		69

	$	434,920	$	431,786

Proceeds from sales of securities available for sale for the quarters ended March 31, 2014 and 2013 were $67,567,000 and $19,786,000. Gross gains on the sales of securities were $646,000 and $259,000 for the quarters ended March 31, 2014 and 2013. Gross losses on securities available for sale were $49,000 and $137,000 for the quarters ended March 31, 2014 and 2013.

Securities with a fair value of $221,172,000 and $241,911,000 at March 31, 2014 and December 31, 2013 were pledged to secure public funds and for other purposes as required or permitted by law.