Securities

9 Months Ended

Sep. 30, 2013

NOTE C - SECURITIES

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of securities at September 30, 2013 and December 31, 2012 were as follows:

					Gross			Gross
($'s in thousands)		Amortized			Unrealized			Unrealized				Approximate
	Cost			Gains			Losses				Fair Value
Available-for-Sale Securities:
September 30, 2013:
U.S. Treasury and Government agencies		$	12,610		$	128		$	(117	)		$	12,621
Mortgage-backed securities			53,026			573			(327	)			53,272
State and political subdivisions			18,966			660			(299	)			19,327
Money Market Mutual Funds			1,377			-			-				1,377
Equity securities			23			-			-				23

		$	86,002		$	1,361		$	(743	)		$	86,620

			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 Funds		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 September 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
September 30, 2013:
Within one year	$	1,022	$	1,024
Due after one year through five years		1,387		1,463
Due after five years through ten years		10,950		11,076
Due after ten years		18,217		18,385
		31,576		31,948

Mortgage-backed securities, money market mutual funds & equity securities		54,426		54,672

Totals	$	86,002	$	86,620

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $67.2 million at September 30, 2013 and $49.8 million at December 31, 2012. The fair value of securities delivered for repurchase agreements was $16.6 million at September 30, 2013 and $16.2 million at December 31, 2012.

Gross gains of $0.03 million and $0.05 million resulting from sales of available-for-sale securities, were realized during the three and nine month periods ending September 30, 2013, respectively. The $0.05 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 $0.02 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 nine month periods ending September 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 $25.9 million at September 30, 2013, and $6.0 million at December 31, 2012, which was approximately 29.9 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 September 30, 2013 and December 31, 2012 are as follows:

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

US Treasury and Government Agencies	$	3,995	$	(117	)	$	-	$	-	$	3,995	$	(117	)
Mortgage-backed securities		17,027		(327	)		-		-		17,027		(327	)
State and political subdivisions		4,909		(299	)		-		-		4,909		(299	)

	$	25,931	$	(743	)	$	-	$	-	$	25,931	$	(743	)

($ 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 September 30, 2013, interest rates remained level from the quarter ended June 30, 2013. The increase in rates from December 31, 2012 resulted in higher unrealized losses in the investment portfolio. Specifically, at September 30, 2013, 29 bonds in the portfolio (25%) 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.