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Note 5 - Investment Securities Available For Sale
 9 Months Ended
Sep. 30, 2012
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE 5 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The amortized cost and fair values of securities available-for-sale are as follows:

   
September 30, 2012
 
(Dollar amounts in thousands)
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government agency securities
  $ 16,733     $ 537     $ (2 )   $ 17,268  
Obligations of states and political subdivisions:
                               
Taxable
    8,198       864       -       9,062  
Tax-exempt
    78,808       4,827       (29 )     83,606  
Mortgage-backed securities in government-sponsored entities
    60,139       2,328       -       62,467  
Private-label mortgage-backed securities
    5,418       570       (2 )     5,986  
Total debt securities
    169,296       9,126       (33 )     178,389  
Equity securities in financial institutions
    750       1       -       751  
Total
  $ 170,046     $ 9,127     $ (33 )   $ 179,140  

   
December 31, 2011
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government agency securities
  $ 31,520     $ 427     $ (14 )   $ 31,933  
Obligations of states and political subdivisions:
                               
Taxable
    8,207       766       -       8,973  
Tax-exempt
    75,807       3,681       (61 )     79,427  
Mortgage-backed securities in government-sponsored entities
    63,808       1,819       (54 )     65,573  
Private-label mortgage-backed securities
    7,005       411       (95 )     7,321  
Total debt securities
    186,347       7,104       (224 )     193,227  
Equity securities in financial institutions
    750       -       -       750  
Total
  $ 187,097     $ 7,104     $ (224 )   $ 193,977  

The amortized cost and fair value of debt securities at September 30, 2012, 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.

(Dollar amounts in thousands)
 
Amortized
Cost
   
Fair
Value
 
             
Due in one year or less
  $ 3,003     $ 3,038  
Due after one year through five years
    4,834       5,093  
Due after five years through ten years
    14,682       15,545  
Due after ten years
    146,777       154,713  
                 
Total
  $ 169,296     $ 178,389  

Proceeds from the sales of securities available-for-sale and the gross realized gains and losses are as follows:

   
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Proceeds from sales
  $ 5,622     $ 14,233     $ 27,426     $ 24,305  
Gross realized gains
    154       6       462       21  
Gross realized losses
    (2 )     -       (14 )     (37 )

Gross realized losses for the nine months ended September 30, 2011 were the result of other-than-temporary impairment (“OTTI”) taken on equity securities.

Investment securities with an approximate carrying value of $55,600,000 and $55,800,000 at September 30, 2012 and 2011, 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.

   
September 30, 2012
 
   
Less than Twelve Months
   
Twelve Months or Greater
   
Total
 
(Dollar amounts in thousands)
 
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
 
                                     
U.S. government agency securities
  $ 1,998     $ (2 )   $ -     $ -     $ 1,998     $ (2 )
Obligations of states and political subdivisions
    1,671       (29 )     -       -       1,671       (29 )
Private-label mortgage-backed securities
    -       -       370       (2 )     370       (2 )
Total
  $ 3,669     $ (31 )   $ 370     $ (2 )   $ 4,039     $ (33 )

   
December 31, 2011
 
   
Less than Twelve Months
   
Twelve Months or Greater
   
Total
 
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
   
Fair
Value
   
Gross
Unrealized
Losses
 
                                     
U.S. government agency securities
  $ 1,986     $ (14 )   $ -     $ -     $ 1,986     $ (14 )
Obligations of states and political subdivisions
    2,707       (40 )     919       (21 )     3,626       (61 )
Mortgage-backed securities in government sponsored entities
    8,992       (54 )     -       -       8,992       (54 )
Private-label mortgage-backed securities
    1,628       (42 )     398       (53 )     2,026       (95 )
Equity securities in financial institutions
    -       -                                  
Total
  $ 15,313     $ (150 )   $ 1,317     $ (74 )   $ 16,630     $ (224 )

There were 7 securities that were considered temporarily impaired at September 30, 2012.

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 OTTI. A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. 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 96% of the total available-for-sale portfolio as of September 30, 2012 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of significant 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 $5.4 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 $570,000 and the gross unrealized loss position was $2,000 on September 30, 2012. 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 nine months ended September 30, 2012, there were no available-for-sale debt securities with an unrealized loss that suffered OTTI.