Note 10 – Investments

Although the Company currently has the intent and the ability to hold the securities in its investment portfolio to maturity, the securities are all marketable and are classified as “available for sale” to allow maximum flexibility with regard to interest rate risk and liquidity management. Pursuant to FASB's guidance on accounting for debt and equity securities, available for sale securities are carried on the Company's financial statements at their estimated fair market values, with monthly tax-effected “mark-to-market” adjustments made vis-à-vis accumulated other comprehensive income in shareholders' equity.

Amortized Cost And Estimated Fair Value
The amortized cost and estimated fair value of investment securities available-for-sale are as follows (dollars in thousands, unaudited):
	September 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

US Government agencies	$	4,464	$	6	$	(81	)	$	4,389
Mortgage-backed securities		359,954		3,804		(1,644	)		362,114
State and poltical subdivisions		96,199		2,923		(499	)		98,623
Equity securities		1,373		1,189		-			2,562
Total investment securities	$	461,990	$	7,922	$	(2,224	)	$	467,688

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

US Government agencies	$	5,395	$	18	$	(109	)	$	5,304
Mortgage-backed securities		320,223		3,269		(2,771	)		320,721
State and political subdivisons		97,361		1,723		(2,521	)		96,563
Equity securities		1,336		1,120		-			2,456
Total investment securities	$	424,315	$	6,130	$	(5,401	)	$	425,044

At September 30, 2014 and December 31, 2013, the Company had 164 securities and 197 securities, respectively, with unrealized losses. Management has evaluated those securities as of the respective dates, and does not believe that any of the associated unrealized losses are other than temporary. Gross unrealized losses on our investment securities as of the indicated dates are disclosed in the table below, categorized by investment type and by the duration of time that loss positions on individual securities have continuously existed (over or under twelve months).

Investment Portfolio - Unrealized Losses
(dollars in thousands, unaudited)	September 30, 2014
	Less than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value

US Government agencies	$	(19	)	$	1,260	$	(62	)	$	1,937
Mortgage-backed securities		(576	)		99,447		(1,068	)		68,444
State and political subdivisions		(10	)		2,451		(489	)		23,571
Other securities		-			-		-			-
Total	$	(605	)	$	103,158	$	(1,619	)	$	93,952

	December 31, 2013
	Less than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value


US Government agencies	$	(92	)	$	1,913	$	(17	)	$	1,920
Mortgage-backed securities		(642	)		21,747		(2,129	)		124,317
State and political subdivisions		(461	)		6,799		(2,060	)		38,083
Other securities		-			-		-			-
Total	$	(1,195	)	$	30,459	$	(4,206	)	$	164,320

The table below summarizes the Company's gross realized gains and losses as well as gross proceeds from the sales of securities, for the periods indicated:

Investment Portfolio - Realized Gains/(Losses)
(dollars in thousands, unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014			2013

Proceeds from sales of securities available for sale	$	-	$	-	$	8,360		$	723

Gross gains on sale of securities available for sale	$	-	$	-	$	289		$	6
Gross losses on sale of securities available for sale		-		-		(2	)		-
Net gains on sale of securities available for sale	$	-	$	-	$	287		$	6

The amortized cost and estimated fair value of investment securities available-for-sale at September 30, 2014 and December 31, 2013 are shown below, by the remaining time to contractual maturity dates. The expected life of investment securities may not be consistent with contractual maturity dates, since the issuers of the securities could have the right to call or prepay obligations with or without penalties.

Estimated Fair Value of Contractual Maturities
(dollars in thousands, unaudited)	September 30, 2014
	Amortized Cost		Fair Value


Maturing within one year	$	1,204	$	1,212
Maturing after one year through five years		213,652		216,249
Maturing after five years through ten years		76,629		77,761
Maturing after ten years		50,748		51,294


Investment securities not due at a single maturity date:
U.S Government agencies collateralized by
mortgage obligations		118,384		118,610
Other securities		1,373		2,562
	$	461,990	$	467,688

	December 31, 2013
	Amortized Cost		Fair Value


Maturing within one year	$	2,294	$	2,316
Maturing after one year through five years		241,396		242,493
Maturing after five years through ten years		59,572		59,402
Maturing after ten years		49,674		47,737


Investment securities not due at a single maturity date:
U.S Government agencies collateralized by
mortgage obligations		70,043		70,640
Other securities		1,336		2,456
	$	424,315	$	425,044

At September 30, 2014, the Company's investment portfolio included securities issued by 268 different government municipalities and agencies located within 27 states with a fair value of $98.6 million. The largest exposure to any single municipality or agency was a $4.5 million (fair value) bond issued for water utility improvements by the Arizona State Water Infrastructure Finance Authority, to be repaid by future water revenue.

The Company's investments in bonds issued by states, municipalities and political subdivisions are evaluated in accordance with Supervision and Regulation Letter 12-15 (SR 12-15) issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Organization Ratings”, and other regulatory guidance. Credit ratings are considered in our analysis only as a guide to the historical default rate associated with similarly-rated bonds. There have been no significant differences in our internal analyses compared with the ratings assigned by the third party credit rating agencies.

The following table summarizes the amortized cost and fair values of general obligation and revenue bonds in the Company's investment securities portfolio at the indicated dates, identifying the state in which the issuing municipality or agency operates for our largest geographic concentrations:

Revenue and General Obligation Bonds by Location
dollars in thousands, unaudited	September 30, 2014				December 31, 2013

	Amortized		Fair Market		Amortized		Fair Market
General obligation bonds	Cost		Value		Cost		Value
State of issuance
California	$	20,026	$	21,219	$	20,638	$	21,272
Texas		12,831		12,958		11,340		11,024
Illinois		8,287		8,392		8,965		8,702
Ohio		7,640		7,703		7,659		7,485
Washington		5,981		6,109		5,487		5,340
Arizona		2,077		2,417		2,100		2,050
Other states		19,776		19,930		20,666		20,429
Total General Obligation Bonds		76,618		78,728		76,855		76,302

Revenue bonds
State of issuance
Arizona		4,617		4,508		4,700		4,341
Texas		3,284		3,394		2,762		2,719
California		2,219		2,284		2,519		2,579
Washington		1,168		1,204		1,170		1,211
Ohio		322		335		324		339
Other states		7,971		8,170		6,758		6,742
Total Revenue Bonds		19,581		19,895		18,233		17,931

Certificates of participation (All California)		-		-		2,273		2,330

Total Obligations of States
and Political Subdivisions	$	96,199	$	98,623	$	97,361	$	96,563

The revenue bonds in the Company's investment securities portfolios were issued by government municipalities and agencies to fund public services such as utilities (water, sewer, and power), educational facilities, and general public and economic improvements. The primary sources of revenue for these bonds are delineated in the table below, which shows the amortized cost and fair market values for the largest revenue concentrations as of the indicated dates.

Revenue Bonds by Type
dollars in thousands, unaudited	September 30, 2014				December 31, 2013

	Amortized		Fair Market		Amortized		Fair Market
Revenue bonds	Cost		Value		Cost		Value
Revenue source:
Water	$	8,010	$	8,010	$	7,409	$	7,144
College & University		2,731		2,840		2,203		2,187
Electric & Power		1,882		1,921		1,888		1,895
Sales Tax		1,672		1,715		1,673		1,688
Lease		1,356		1,344		1,155		1,063
Other sources		3,930		4,065		3,905		3,954
Total Revenue Bonds	$	19,581	$	19,895	$	18,233	$	17,931