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Note 3 - Investment Securities Available For Sale
 12 Months Ended
Dec. 31, 2012
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
3.     INVESTMENT SECURITIES AVAILABLE FOR SALE

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

   
December 31, 2012
 
(Dollar amounts in thousands)
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
U.S. government agency securities
  $ 24,485     $ 566       (91 )   $ 24,960  
Obligations of states and political subdivisions:
                               
Taxable
    6,888       738       -       7,626  
Tax-exempt
    80,391       4,683       (104 )     84,970  
Mortgage-backed securities in government-sponsored entities
    69,238       1,929       (65 )     71,102  
Private-label mortgage-backed securities
    4,553       511       -       5,064  
Total debt securities
    185,555       8,427       (260 )     193,722  
Equity securities in financial institutions
    750       -       -       750  
Total
  $ 186,305     $ 8,427     $ (260 )   $ 194,472  

   
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 December 31, 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
  $ 2,179     $ 2,239  
Due after one year through five years
    5,555       5,870  
Due after five years through ten years
    22,310       23,240  
Due after ten years
    155,511       162,373  
                 
Total
  $ 185,555     $ 193,722  

Investment securities with an approximate carrying value of $62,518,000 and $53,724,000 at December 31, 2012 and 2011, respectively, were pledged to secure deposits and other purposes as required by law.

Proceeds from the sales of securities available-for-sale and the gross realized gains and losses for the year ended December, 31 are as follows:

   
2012
   
2011
   
2010
 
Proceeds from sales
  $ 32,985       24,127       5,874  
Gross realized gains
    704       830       74  
Gross realized losses
    (94 )     (809 )     (29 )
Impairment losses
    -       (194 )     (34 )


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.

   
December 31, 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
  $ 9,938     $ (91 )   $ -     $ -     $ 9,938     $ (91 )
Obligations of states and political subdivisions
    9,240       (104 )     -       -       9,240       (104 )
Mortgage-backed securities in government-sponsored entities
    12,353       (65 )     -       -       12,353       (65 )
Total
  $ 31,531     $ (260 )   $ -     $ -     $ 31,531     $ (260 )

   
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 )
Total
  $ 15,313     $ (150 )   $ 1,317     $ (74 )   $ 16,630     $ (224 )

There were 34 securities that were considered temporarily impaired at December 31, 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 other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The accounting literature requires the Company to assess whether the unrealized loss is other-than-temporary.

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 97.0 percent of the total available-for-sale portfolio as of December 31, 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 $4.6 million, for which the Company evaluates credit losses on a quarterly basis. Gross unrealized gains related to private-label collateralized mortgage obligations amounted to $511,000, with no associated gross unrealized loss. 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.

 
·
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.

The Company determined equity securities in financial institutions to be other than temporarily impaired and recognized a loss of $194,000 in 2011.   In 2010, investment in a private-label collateralized mortgage obligation was deemed impaired, resulting in a loss of $35,000.  These amounts represent a before-tax, non-cash charge, and were recorded as reductions to noninterest income.