NOTE 2. SECURITIES AVAILABLE FOR SALE

At June 30, 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 June 30, 2014 and December 31, 2013 were:


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2014
U.S. Government Agencies	$	24,646	$	0	$	238	$	24,408
U.S. Government Sponsored Enterprises (GSE)		1,464		0		0		1,464
States and political subdivisions		53,538		690		1,395		52,833
GSE residential mortgage-backed securities		154,773		2,629		57		157,345
GSE residential collateralized mortgage obligations (CMOs)		88,240		885		498		88,627
GSE commercial CMOs		65,273		708		766		65,215

Total debt securities		387,934		4,912		2,954		389,892
Equity securities		50		19		0		69

Totals	$	387,984	$	4,931	$	2,954	$	389,961


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 the individual securities have been in a continuous unrealized loss position at June 30, 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
June 30, 2014
U.S. Government Agencies	$	12,987	$	87	$	11,421	$	151	$	24,408	$	238
States and political subdivisions		0		0		35,574		1,395		35,574		1,395
GSE residential mortgage-backed securities		11,623		25		10,122		32		21,745		57
GSE residential collateralized mortgage obligations (CMOs)		41,474		498		0		0		41,474		498
GSE commercial CMOs		0		0		34,952		766		34,952		766

Total temporarily impaired securities	$	66,084	$	610	$	92,069	$	2,344	$	158,153	$	2,954


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 40 securities and 77 securities at June 30, 2014 and December 31, 2013 in which the amortized cost exceeds their values, as discussed below.

U.S. Agencies and Government Sponsored Enterprises (GSE). Twenty-four U.S. Agencies and GSE securities, including mortgage-backed securities, have amortized costs which exceed their fair values, 11 of which are in the less than 12 months category at June 30, 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 basis of the investments. Because, at period end, the Company did 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 basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2014 or at December 31, 2013.

State and Political Subdivisions. Sixteen state and political subdivision securities have amortized costs which exceeded their fair value for more than 12 months at June 30, 2014. At December 31, 2013, 31 state and political subdivision securities have an amortized cost which exceeds 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, at period end, the Company did 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 basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2014 or at December 31, 2013.

The amortized cost and fair values of securities available for sale at June 30, 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	$	1,464	$	1,464
Due after one year through five years		380		381
Due after five years through ten years		16,578		16,439
Due after ten years		61,226		60,421
Mortgage-backed securities and collateralized mortgage obligations		308,286		311,187

Total debt securities		387,934		389,892
Equity securities		50		69

	$	387,984	$	389,961

Gross gains on the sales of securities were $874,000 and $0 for the three months ended June 30, 2014 and 2013. Gross losses on securities available for sale were $272,000 and $0 for the three months ended June 30, 2014 and 2013. Gross gains on the sales of securities were $1,519,000 and $259,000 for the six months ended June 30, 2014 and 2013. Gross losses on securities available for sale were $320,000 and $137,000 for the six months ended June 30, 2014 and 2013.

Securities with a fair value of $223,282,000 and $241,911,000 at June 30, 2014 and December 31, 2013 were pledged to secure public funds and for other purposes as required or permitted by law.