Securities

6 Months Ended

Jun. 30, 2013

NOTE C - SECURITIES

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of securities at June 30, 2013 and December 31, 2013 were as follows:

			Gross		Gross
($'s in thousands)	Amortized		Unrealized		Unrealized			Approximate
	Cost		Gains		Losses			Fair Value
Available-for-Sale Securities:
June 30, 2013:
U.S. Treasury and Government agencies	$	16,038	$	199	$	(160	)	$	16,077
Mortgage-backed securities		56,443		583		(304	)		56,722
State and political subdivisions		19,089		722		(289	)		19,522
Money Market Mutual Fund		3,035		-		-			3,035
Equity securities		23		-		-			23

	$	94,628	$	1,504	$	(753	)	$	95,379

			Gross		Gross
($'s in thousands)	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Available-for-Sale Securities:
December 31, 2012:
U.S. Treasury and Government agencies	$	14,301	$	210	$	-		$	14,511
Mortgage-backed securities		62,661		1,136		(33	)		63,764
State and political subdivisions		16,789		1,462		(2	)		18,249
Money Market Mutual Fund		2,155		-		-			2,155
Equity securities		23		-		-			23

	$	95,929	$	2,808	$	(35	)	$	98,702

The amortized cost and fair value of securities available for sale at June 30, 2013, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale
	Amortized		Fair
($'s in thousands)	Cost		Value
June 30, 2013:
Within one year	$	1,027	$	1,037
Due after one year through five years		4,476		4,502
Due after five years through ten years		11,250		11,424
Due after ten years		18,374		18,636
		35,127		35,599

Mortgage-backed securities, money market mutual funds & equity securities		59,501		59,780

Totals	$	94,628	$	95,379

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $58.2 million at June 30, 2013 and $49.8 million at December 31, 2012. The fair value of securities delivered for repurchase agreements was $15.0 million at June 30, 2013 and $16.2 million at December 31, 2012.

Gross gains of $0.00 million and $0.02 million resulting from sales of available-for-sale securities, were realized during the three and six month periods ending June 30, 2013, respectively. The $0.02 million gain on sale was a reclassification from accumulated other comprehensive income and is included in the net gain on sales of securities. The related $0.007 million tax benefit is a reclassification from accumulated other comprehensive income and is included in the income tax expense line item in the income statement. There were no realized gains or losses from sales of available-for-sale securities for the three or six month periods ending June 30, 2012.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments was $30.5 million at June 30, 2013, and $6.02 million at December 31, 2012, which was approximately 32.0 and 6.1 percent, respectively, of the Company’s available-for-sale investment portfolio at such dates. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

Securities with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2013 and December 31, 2012 are as follows:

($ in thousands)	Less than 12 Months					12 Months or Longer				Total
June 30, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-Sale Securities:

US Treasury and Government Agencies	$	5,887	$	(160	)	$	-	$	-	$	5,887	$	(160	)
Mortgage-backed securities		19,658		(304	)		-		-		19,658		(304	)
State and political subdivisions		4,994		(289	)		-		-		4,994		(289	)

	$	30,539	$	(753	)	$	-	$	-	$	30,539	$	(753	)

($ in thousands)	Less than 12 Months					12 Months or Longer					Total
December 31, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale Securities:
Mortgage-backed securities	$	5,202	$	(33	)	$	342	$	-		$	5,544	$	(33	)
State and political subdivisions		229		(1	)		251		(1	)		480		(2	)

	$	5,431	$	(34	)	$	593	$	(1	)	$	6,024	$	(35	)

During the quarter ended June 30, 2013, interest rates increased from the quarter ended March 31, 2013. This increase in rates resulted in higher unrealized losses in the investment portfolio. Specifically, at June 30, 2013, 27 bonds in the portfolio (24%) have an unrealized loss. The investment portfolio duration for the Company is in line with peer banks and the percentage decrease in value was in line with our estimates for this level of interest rate increase. In addition, management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern warrants such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell the investment and whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost. Management has determined there is no other-than-temporary-impairment on these securities.