NOTE 4. Securities

Amortized costs and fair values of securities available for sale at March 31, 2014 and December 31, 2013 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
	March 31, 2014
	(in thousands)
Obligations of U.S. government corporations and agencies	$	37,912	$	485	$	(1,076	)	$	37,321
Mortgage-backed securities	14,262		458		(81		)	14,639
Obligations of states and political subdivisions	41,360		1,203		(190		)	42,373
Corporate securities	7,506		945		—			8,451
Equity securities	1,044		122		—			1,166
	$	102,084	$	3,213	$	(1,347	)	$	103,950
	December 31, 2013
	(in thousands)
Obligations of U.S. government corporations and agencies	$	35,890	$	439	$	(1,585	)	$	34,744
Mortgage-backed securities	14,896		422		(121		)	15,197
Obligations of states and political subdivisions	42,442		969		(295		)	43,116
Corporate securities	7,495		928		—			8,423
Equity securities	1,044		74		—			1,118
	$	101,767	$	2,832	$	(2,001	)	$	102,598

During the three months ended March 31, 2014, the Company sold no available for sale securities. During the three months ended March 31, 2013, the Company sold $2.5 million in available for sale securities for a net gain of $390 thousand.

The fair value and gross unrealized losses for securities available for sale, totaled by the length of time that individual securities have been in a continuous gross unrealized loss position, at March 31, 2014 and December 31, 2013 were as follows:



	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	March 31, 2014
	(in thousands)
Obligations of U.S. government corporations and agencies	$	20,940	$	937	$	3,862	$	139	$	24,802	$	1,076
Mortgage-backed securities	1,641		81		—		—		1,641		81
Obligations of states and political subdivisions	5,585		159		478		31		6,063		190
Corporate securities	—		—		—		—		—		—
Equity securities	—		—		—		—		—		—
	$	28,166	$	1,177	$	4,340	$	170	$	32,506	$	1,347
	December 31, 2013
	(in thousands)
Obligations of U.S. government corporations and agencies	$	23,235	$	1,551	$	1,967	$	34	$	25,202	$	1,585
Mortgage-backed securities	2,828		121		—		—		2,828		121
Obligations of states and political subdivisions	8,439		252		466		43		8,905		295
Corporate securities	—		—		—		—		—		—
Equity securities	—		—		—		—		—		—
	$	34,502	$	1,924	$	2,433	$	77	$	36,935	$	2,001

Gross unrealized losses on available for sale securities included forty-two (42) and fifty-one (51) debt securities at March 31, 2014 and December 31, 2013, respectively. The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company’s mortgage-backed securities are issued by U.S. government agencies, which guarantee payments to investors regardless of the status of the underlying mortgages. Consideration is given to the length of time and the amount of an unrealized loss, the financial condition of the issuer, and the intent and ability of the Company to retain its investment in the issuer long enough to allow for an anticipated recovery in fair value. The fair value of a security reflects its liquidity as compared to similar instruments, current market rates on similar instruments, and the creditworthiness of the issuer. Absent any change in the liquidity of a security or the creditworthiness of the issuer, prices will decline as market rates rise and vice-versa. The primary cause of the unrealized losses at March 31, 2014 and December 31, 2013 was changes in market interest rates. Since the losses can be primarily attributed to changes in market interest rates and not expected cash flows or an issuer’s financial condition, the unrealized losses are deemed to be temporary. The continuing economic downturn involving housing, liquidity and credit were also a contributing factor to the unrealized losses on these securities at March 31, 2014 and December 31, 2013. The Company monitors the financial condition of these issuers continuously and will record other-than-temporary impairment if the recovery of value is unlikely.

The Company’s securities are exposed to various risks, such as interest rate, market, currency and credit risks. Due to the level of risk associated with certain securities and the level of uncertainty related to changes in the value of securities, it is at least reasonably possible that changes in risks in the near term would materially affect securities reported in the financial statements. In addition, recent economic uncertainty and market events have led to unprecedented volatility in currency, commodity, credit and equity markets culminating in failures of some banking and financial services firms and government intervention to solidify others. These events underscore the level of investment risk associated with the current economic environment, and accordingly the level of risk in the Company’s securities.

Securities having a carrying value of $4.6 million at March 31, 2014 were pledged to secure securities sold under agreements to repurchase and other purposes required by law.

The composition of restricted investments at March 31, 2014 and December 31, 2013 was as follows:



	March 31, 2014		December 31, 2013
	(in thousands)
Federal Reserve Bank Stock	$	344	$	344
Federal Home Loan Bank Stock	1,874		1,708
Community Bankers’ Bank Stock	140		140
	$	2,358	$	2,192