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SECURITIES | 12 Months Ended
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Dec. 31, 2014
SECURITIES [Abstract] |
SECURITIES | (3) SECURITIES Amortized cost and estimated fair value of securities available for sale at December 31, 2014 and 2013 are as follows (amounts in thousands):
|  | 2014 |  |  | 2013 |
|  | Amortized Cost |  |  | Estimated Fair Value |  |  | Amortized Cost |  |  | Estimated Fair Value |
Obligations of U.S. Government and U.S. Government sponsored enterprises |  | $ | 180,535 |  |  | $ | 181,673 |  |  | $ | 187,098 |  |  | $ | 188,106 |
Mortgage-backed securities, residential |  |  | 60,787 |  |  |  | 61,660 |  |  |  | 104,069 |  |  |  | 104,356 |
Collateralized mortgage obligations |  |  | 335 |  |  |  | 338 |  |  |  | 1,001 |  |  |  | 1,015 |
Obligations of states and political subdivisions |  |  | 30,677 |  |  |  | 31,451 |  |  |  | 37,339 |  |  |  | 38,376 |
Corporate bonds and notes |  |  | 1,502 |  |  |  | 1,533 |  |  |  | 2,879 |  |  |  | 2,946 |
SBA loan pools |  |  | 1,296 |  |  |  | 1,304 |  |  |  | 1,471 |  |  |  | 1,488 |
Trust preferred securities |  |  | 1,906 |  |  |  | 2,028 |  |  |  | 1,898 |  |  |  | 2,034 |
Corporate stocks |  |  | 285 |  |  |  | 520 |  |  |  | 444 |  |  |  | 7,695 |
Total |  | $ | 277,323 |  |  | $ | 280,507 |  |  | $ | 336,199 |  |  | $ | 346,016 |
Gross unrealized gains and losses on securities available for sale at December 31, 2014 and 2013, were as follows (amounts in thousands):
|  | 2014 |  |  | 2013 |
|  | Unrealized |  |  | Unrealized |  |  | Unrealized |  |  | Unrealized |
|  | Gains |  |  | Losses |  |  | Gains |  |  | Losses |
Obligations of U.S. Government and U.S. Government sponsored enterprises |  | $ | 1,300 |  |  | $ | 162 |  |  | $ | 1,914 |  |  | $ | 906 |
Mortgage-backed securities, residential |  |  | 892 |  |  |  | 19 |  |  |  | 1,037 |  |  |  | 750 |
Collateralized mortgage obligations |  |  | 3 |  |  |  | - |  |  |  | 14 |  |  |  | - |
Obligations of states and political subdivisions |  |  | 802 |  |  |  | 28 |  |  |  | 1,059 |  |  |  | 22 |
Corporate bonds and notes |  |  | 35 |  |  |  | 4 |  |  |  | 76 |  |  |  | 9 |
SBA loan pools |  |  | 11 |  |  |  | 3 |  |  |  | 17 |  |  |  | - |
Trust preferred securities |  |  | 122 |  |  |  | - |  |  |  | 136 |  |  |  | - |
Corporate stocks |  |  | 235 |  |  |  | - |  |  |  | 7,253 |  |  |  | 2 |
Total |  | $ | 3,400 |  |  | $ | 216 |  |  | $ | 11,506 |  |  | $ | 1,689 |
The amortized cost and estimated fair value of debt securities available for sale are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (amounts in thousands):
|  | December 31, 2014 |
|  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |
Within one year |  | $ | 37,087 |  |  | $ | 37,552 |
After one, but within five years |  |  | 172,100 |  |  |  | 173,534 |
After five, but within ten years |  |  | 5,433 |  |  |  | 5,599 |
After ten years |  |  | - |  |  |  | - |
Mortgage-backed securities, residential |  |  | 60,787 |  |  |  | 61,660 |
Collateralized mortgage obligations |  |  | 335 |  |  |  | 338 |
SBA loan pools |  |  | 1,296 |  |  |  | 1,304 |
Total |  | $ | 277,038 |  |  | $ | 279,987 |
Actual maturities may differ from contractual maturities above because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. The proceeds from sales and calls of securities resulting in gains or losses are listed below (amounts in thousands):
|  | 2014 |  |  | 2013 |  |  | 2012 |
Proceeds |  | $ | 36,258 |  |  | $ | 2,650 |  |  | $ | 26,210 |
Gross gains |  | $ | 6,869 |  |  | $ | 16 |  |  | $ | 301 |
Tax expense |  | $ | 2,641 |  |  | $ | 6 |  |  | $ | 116 |
Amortized cost and estimated fair value of securities held to maturity at December 31, 2014 and 2013 are as follows (amounts in thousands):
| 2014 |  | 2013 |
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value |
Obligations of states and political subdivisions |  | $ | 5,175 |  |  | $ | 5,535 |  |  | $ | 5,472 |  |  | $ | 5,891 |
Time deposits with other financial institutions |  |  | 656 |  |  |  | 662 |  |  |  | 1,023 |  |  |  | 1,039 |
|  | $ | 5,831 |  |  | $ | 6,197 |  |  | $ | 6,495 |  |  | $ | 6,930 |
Gross unrealized gains and losses on securities held to maturity at December 31, 2014 and 2013, were as follows (amounts in thousands):
| 2014 |  | 2013 |
| Unrealized |  | Unrealized |  | Unrealized |  | Unrealized |
| Gains |  | Losses |  | Gains |  | Losses |
Obligations of states and political subdivisions |  | $ | 360 |  |  | $ | - |  |  | $ | 419 |  |  | $ | - |
Time deposits with other financial institutions |  |  | 6 |  |  |  | - |  |  |  | 16 |  |  |  | - |
Total |  | $ | 366 |  |  | $ | - |  |  | $ | 435 |  |  | $ | - |
There were no sales of securities held to maturity in 2014 or 2013. The contractual maturity of securities held to maturity is as follows at December 31, 2014 (amounts in thousands):
| December 31, 2014 |
| Amortized |  | Fair |
| Cost |  | Value |
Within one year |  | $ | 2,629 |  |  | $ | 2,658 |
After one, but within five years |  |  | 2,199 |  |  |  | 2,390 |
After five, but within ten years |  |  | 1,003 |  |  |  | 1,149 |
After ten years |  |  | - |  |  |  | - |
Total |  | $ | 5,831 |  |  | $ | 6,197 |
The following table summarizes the investment securities available for sale with unrealized losses at December 31, 2014 and December 31, 2013 by aggregated major security type and length of time in a continuous unrealized position (amounts in thousands):
|  | Less than 12 months |  |  | 12 months or longer |  |  | Total |
2014 |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
Obligations of U.S. Government and U.S. Government sponsored enterprises |  | $ | 57,512 |  |  | $ | 108 |  |  | $ | 4,945 |  |  | $ | 54 |  |  | $ | 62,457 |  |  | $ | 162 |
Mortgage-backed securities, residential |  |  | 11,051 |  |  |  | 19 |  |  |  | - |  |  |  | - |  |  |  | 11,051 |  |  |  | 19 |
Obligations of states and political subdivisions |  |  | 4,625 |  |  |  | 22 |  |  |  | 1,056 |  |  |  | 6 |  |  |  | 5,681 |  |  |  | 28 |
Corporate bonds and notes |  |  | - |  |  |  | - |  |  |  | 243 |  |  |  | 4 |  |  |  | 243 |  |  |  | 4 |
SBA loan pools |  |  | 276 |  |  |  | 1 |  |  |  | 316 |  |  |  | 2 |  |  |  | 592 |  |  |  | 3 |
Total temporarily impaired securities |  | $ | 73,464 |  |  | $ | 150 |  |  | $ | 6,560 |  |  | $ | 66 |  |  | $ | 80,024 |  |  | $ | 216 |
|  | Less than 12 months |  |  | 12 months or longer |  |  | Total |
2013 |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
Obligations of U.S. Government and U.S. Government sponsored enterprises |  | $ | 83,840 |  |  | $ | 867 |  |  | $ | 1,978 |  |  | $ | 39 |  |  | $ | 85,818 |  |  | $ | 906 |
Mortgage-backed securities, residential |  |  | 63,115 |  |  |  | 750 |  |  |  | - |  |  |  | - |  |  |  | 63,115 |  |  |  | 750 |
Obligations of states and political subdivisions |  |  | 4,589 |  |  |  | 22 |  |  |  | - |  |  |  | - |  |  |  | 4,589 |  |  |  | 22 |
Corporate bonds and notes |  |  | 238 |  |  |  | 9 |  |  |  | - |  |  |  | - |  |  |  | 238 |  |  |  | 9 |
Corporate stocks |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 2 |  |  |  | 2 |  |  |  | 2 |
Total temporarily impaired securities |  | $ | 151,782 |  |  | $ | 1,648 |  |  | $ | 1,980 |  |  | $ | 41 |  |  | $ | 153,762 |  |  | $ | 1,689 |
Other-Than-Temporary-Impairment As of December 31, 2014, the majority of the Corporation’s unrealized losses in the investment securities portfolio related to obligations of U.S. Government and U.S. Government sponsored enterprises and mortgage-backed securities. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell these securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at December 31, 2014. During the fourth quarter of 2013, the Corporation sold one CDO consisting of a pool of trust preferred securities that had an amortized cost of $600 thousand. Total proceeds from the sale of this CDO, was $600 thousand resulting in a slight loss. The Corporation recognized $29 thousand of additional credit loss in OTTI during 2013. This CDO was sold in light of the uncertainty surrounding the recently released rules contained in the “Volcker Rule” regarding the ability of banks to hold these types of securities and based on current market conditions. The table below presents a roll forward of the cumulative credit losses recognized in earnings for the periods ended December 31, 2014, 2013 and 2012 (amounts in thousands):
|  | 2014 |  |  | 2013 |  |  | 2012 |
Beginning balance, January 1, |  | $ | 1,939 |  |  | $ | 3,506 |  |  | $ | 3,506 |
Amounts related to credit loss for which other-than-temporary impairment was not previously recognized |  |  | - |  |  |  | - |  |  |  | - |
Additions/Subtractions: |  |  |  |  |  |  |  |  |  |  |  |
Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis |  |  | - |  |  |  | - |  |  |  | - |
Reductions for increase in cash flows expected to be collected that are recognized over the remaining life of the security |  |  | - |  |  |  | - |  |  |  | - |
Reductions for previous credit losses realized on securities sold during the year |  |  | - |  |  |  | (1,596 | ) |  |  | - |
Reductions for previous credit losses realized on securities liquidated during the year |  |  | (1,939 | ) |  |  | - |  |  |  | - |
Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized |  |  | - |  |  |  | 29 |  |  |  | - |
Ending balance, December 31, |  | $ | - |  |  | $ | 1,939 |  |  | $ | 3,506 |
During the first quarter of 2014, the Corporation received notice that one CDO consisting of a pool of trust preferred securities was liquidated and recorded $500 thousand in other operating income during the first quarter of 2014 to reflect proceeds received from the liquidation. The Corporation does not own any other CDO’s in its investment securities portfolio. The fair value of securities pledged to secure public funds on deposit or for other purposes as required by law was $190.7 million at December 31, 2014 and $188.9 million at December 31, 2013. The table below shows the securities pledged to secure securities sold under agreements to repurchase at December 31, 2014 and 2013. (amounts in thousands)
|  | 2014 |  |  | 2013 |
|  | Amortized Cost |  |  | Fair Value |  |  | Amortized Cost |  |  | Fair Value |
Obligations of U.S. Government and U. S. Government sponsored enterprises |  | $ | 36,195 |  |  | $ | 36,641 |  |  | $ | 33,746 |  |  | $ | 34,369 |
Mortgage-backed securities, residential |  |  | 7,934 |  |  |  | 8,350 |  |  |  | 11,802 |  |  |  | 12,365 |
Collateralized mortgage obligations |  |  | 48 |  |  |  | 48 |  |  |  | 205 |  |  |  | 207 |
Total |  | $ | 44,177 |  |  | $ | 45,039 |  |  | $ | 45,753 |  |  | $ | 46,941 |
There are no securities of a single issuer (other than securities of U.S. Government sponsored enterprises) that exceed 10% of shareholders' equity at December 31, 2014 or 2013. The Corporation has an equity investment in Cephas Capital Partners, L.P. This small business investment company was established for the purpose of providing financing to small businesses in market areas served by the Corporation, including minority-owned small businesses and those that are anticipated to create jobs for the low to moderate income levels in the targeted areas. As of December 31, 2014 and 2013, these investments totaled $0.7 million and $1.0 million, respectively, are included in other assets, and are accounted for under the equity method of accounting.

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