NOTE 2 – SECURITIES

Securities consist of the following at June 30, 2013 and December 31, 2012:

 

(Dollars in thousands)		Amortized cost				Gross unrealized gains				Gross unrealized losses				Fair value
June 30, 2013
Available-for-sale:
U.S. Treasury securities		$	1,106			$	—			$	13			$	1,093
Obligations of U.S. government corporations and agencies			33,995				12				1,148				32,859
Mortgage-backed securities in government sponsored entities			69,444				825				1,218				69,051
Asset-backed securities in government sponsored entities			2,796				24				—				2,820
Obligations of states and political subdivisions			16,922				370				183				17,109
Corporate bonds			4,404				80				15				4,469
Total debt securities			128,667				1,311				2,577				127,401
Equity securities in financial institutions			106				9				1				114
Total available-for-sale			128,773				1,320				2,578				127,515
Restricted stock			5,463				—				—				5,463
Total securities		$	134,236			$	1,320			$	2,578			$	132,978
December 31, 2012
Available-for-sale:
U.S. Treasury securities		$	100			$	—			$	—			$	100
Obligations of U.S. government corporations and agencies			35,996				27				43				35,980
Mortgage-backed securities in government sponsored entities			66,933				2,107				1				69,039
Asset-backed securities in government sponsored entities			2,862				—				39				2,823
Obligations of states and political subdivisions			16,194				701				12				16,883
Corporate bonds			4,313				112				28				4,397
Total debt securities			126,398				2,947				123				129,222
Equity securities in financial institutions			69				9				9				69
Total available-for-sale			126,467				2,956				132				129,291
Restricted stock			5,463				—				—				5,463
Total securities		$	131,930			$	2,956			$	132			$	134,754

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

 

(Dollars in thousands)		Amortized cost				Fair value
Available-for-sale:
Due in one year or less		$	821			$	821
Due after one through five years			14,207				14,484
Due after five through ten years			25,113				24,655
Due after ten years			88,526				87,441
Total debt securities available-for-sale		$	128,667			$	127,401

Securities with a carrying value of approximately $87.3 million and $79.2 million were pledged at June 30, 2013 and December 31, 2012, respectively, to secure public deposits, as well as other deposits and borrowings as required or permitted by law.

Restricted stock primarily consists of investments in FHLB and Federal Reserve Bank stock. The Bank’s investment in FHLB stock amounted to approximately $5.0 million at June 30, 2013 and December 31, 2012. Federal Reserve Bank stock was $471 thousand at June 30, 2013 and December 31, 2012.

The following table shows the proceeds from sales of available-for-sale securities and the gross realized gains and losses on the sales of those securities that have been included in earnings as a result of the sales.

 

		Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)		2013				2012				2013				2012
Proceeds		$	500			$	—			$	500			$	—
Realized gains		$	10			$	—			$	10			$	—
Realized losses			—				—				—				—
Impairment losses			—				—				—				—
Net securities gains		$	10			$	—			$	10			$	—

The income tax provision applicable to realized gains amounted to $3 thousand in 2013 and $0 in 2012. There were no tax benefits recognized from gross realized losses in 2013 or 2012.

The following table presents gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2013 and December 31, 2012:

 

		Securities in a continuous unrealized loss position
		Less than 12 months								12 months or more								Total
(Dollars in thousands)		Gross unrealized losses				Fair value				Gross unrealized losses				Fair value				Gross unrealized losses				Fair value
June 30, 2013
U.S. Treasury securities		$	13			$	993			$	—			$	—			$	13			$	993
Obligations of U.S. Government corporations and agencies			1,148				26,849				—				—				1,148				26,849
Mortgage-backed securities in government sponsored entities			1,218				32,565				—				—				1,218				32,565
Obligations of state and political subdivisions			183				5,239				—				—				183				5,239
Corporate bonds			7				568				8				1,357				15				1,925
Total debt securities			2,569				66,214				8				1,357				2,577				67,571
Equity securities in financial institutions			—				—				1				53				1				53
Total temporarily impaired securities		$	2,569			$	66,214			$	9			$	1,410			$	2,578			$	67,624
December 31, 2012
Obligations of U.S. Government corporations and agencies		$	43			$	15,957			$	—			$	—			$	43			$	15,957
Mortgage-backed securities in government sponsored entities			1				344				—				—				1				344
Asset-backed securities in government sponsored entities			39				1,833				—				—				39				1,833
Obligations of states and political subdivisions			12				1,737				—				—				12				1,737
Corporate bonds			4				366				24				975				28				1,341
Total debt securities			99				20,237				24				975				123				21,212
Equity securities in financial institutions			—				—				9				45				9				45
Total temporarily impaired securities		$	99			$	20,237			$	33			$	1,020			$	132			$	21,257

There were sixty (60) securities in an unrealized loss position at June 30, 2013, five (5) of which were in a continuous loss position for twelve months or more. At least quarterly, the Company conducts a comprehensive security-level impairment assessment. The assessments are based on the nature of the securities, the extent and duration of the securities in an unrealized loss position, the extent and duration of the loss and management’s intent to sell or if it is more likely than not that management will be required to sell a security before recovery of its amortized cost basis, which may be maturity. Management believes the Company will fully recover the cost of these securities. It does not intend to sell these securities and likely will not be required to sell them before the anticipated recovery of the remaining amortized cost basis, which may be maturity. As a result, management concluded that these securities were not other-than-temporarily impaired at June 30, 2013.