(4) SECURITIES

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluations. 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 and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At June 30, 2014, the Company has 63 securities with unrealized losses. The carrying amount of securities and their estimated fair values at June 30, 2014, were as follows:


	June 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Restricted:
FHLB stock	$	4,428		—		—			4,428

Available for sale:
U.S. Treasury securities	$	3,973		5		—			3,978
U.S. Agency securities		118,130		2,126		(1,210	)		119,046
Corporate bonds		2,000		5		—			2,005
Taxable municipal bonds		14,119		333		(226	)		14,226
Tax free municipal bonds		61,918		3,643		(227	)		65,334
Trust preferred securities		1,600		—		(111	)		1,489
Mortgage-backed securities:
GNMA		27,450		695		(101	)		28,044
FNMA		65,479		866		(749	)		65,596
FHLMC		1,142		38		—			1,180
NON-AGENCY CMOs		10,811		4		(194	)		10,621
AGENCY CMOs		20,040		206		(126	)		20,120

	$	326,662		7,921		(2,944	)		331,639

The carrying amount of securities and their estimated fair values at December 31, 2013, was as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Restricted:
FHLB stock	$	4,428		—		—			4,428

Available for sale securities:
U.S. Agency securities	$	120,608		1,856		(2,441	)		120,023
Corporate bonds		2,000		—		(16	)		1,984
Taxable municipal bonds		18,337		458		(738	)		18,057
Tax free municipal bonds		64,291		2,066		(898	)		65,459
Trust preferred securities		1,600		—		(111	)		1,489
Mortgage-backed securities:
GNMA		17,327		590		(142	)		17,775
FNMA		70,104		526		(1,938	)		68,692
FHLMC		1,301		35		—			1,336
SLMA CMOs		8,459		—		(374	)		8,085
AGENCY CMOs		16,296		134		(420	)		16,010

	$	320,323		5,665		(7,078	)		318,910

The scheduled maturities of debt securities available for sale at June 30, 2014, were as follows:


	Amortized Cost		Estimated Fair Value
Due within one year	$	195		197
Due in one to five years		20,422		20,711
Due in five to ten years		42,119		42,850
Due after ten years		41,010		42,905

		103,746		106,663
Amortizing agency bonds		97,994		99,415
Mortgage-backed securities		124,922		125,561

Total securities available for sale	$	326,662		331,639

The scheduled maturities of debt securities available for sale at December 31, 2013, were as follows:


	Amortized Cost		Estimated Fair Value
Due within one year	$	501		505
Due in one to five years		12,630		12,954
Due in five to ten years		38,192		37,364
Due in more than ten years		49,284		49,314

		100,607		100,137
Amortizing agency bonds		106,229		106,875
Mortgage-backed securities		113,487		111,898

Total securities available for sale	$	320,323		318,910

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of June 30, 2014, are as follows:


	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale
U.S. government and agency securities:
Agency debt securities	$	9,500		(79	)		37,734		(1,131	)		47,234		(1,210	)
Taxable municipals		571		(4	)		7,595		(222	)		8,166		(226	)
Tax free municipals		—		—			7,242		(227	)		7,242		(227	)
Trust preferred securities		—		—			1,489		(111	)		1,489		(111	)
Mortgage-backed securities:
GNMA		11,316		(88	)		3,180		(13	)		14,496		(101	)
FNMA		2,922		(1	)		27,806		(748	)		30,728		(749	)
NON-AGENCY CMOs		2,499		(49	)		5,407		(145	)		7,906		(194	)
AGENCY CMOs		2,970		(10	)		6,203		(116	)		9,173		(126	)

Total Available for Sale	$	29,778		(231	)		96,656		(2,713	)		126,434		(2,944	)

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of December 31, 2013, were as follows:


	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale
U.S. government and agency securities:
Agency debt securities	$	44,968		(2,107	)		6,793		(334	)		51,761		(2,441	)
Taxable municipal bonds		7,903		(660	)		797		(78	)		8,700		(738	)
Tax free municipal bonds		9,848		(692	)		3,720		(206	)		13,568		(898	)
Trust preferred securities		—		—			1,489		(111	)		1,489		(111	)
Commercial bonds		1,984		(16	)		—		—			1,984		(16	)
Mortgage-backed securities:
GNMA		5,320		(128	)		1,551		(14	)		6,871		(142	)
FNMA		42,464		(1,626	)		6,746		(312	)		49,210		(1,938	)
NON-AGENCY CMOs		5,224		(374	)		—		—			5,224		(374	)
AGENCY CMOs		7,031		(223	)		1,844		(197	)		8,875		(420	)

Total Available for Sale	$	124,742		(5,826	)		22,940		(1,252	)		147,682		(7,078	)

The applicable dates for determining when securities are in an unrealized loss position are June 30, 2014 and December 31, 2013. As such, it is possible that a security had a market value that exceeded its amortized cost on other days during the past twelve-month periods ended June 30, 2014 and December 31, 2013, but is in the “Investments with an Unrealized Loss of less than 12 months” category above.

As shown in the tables above, at June 30, 2014, the Company had approximately $2.9 million in unrealized losses on $126.4 million of securities. The unrealized losses associated with these investment securities are driven by changes in interest rates and the unrealized loss is recorded as a component of equity. These securities will continue to be monitored as a part of our ongoing impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond issuers. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. If a shortfall in future cash flows is identified, a credit loss will be deemed to have occurred and will be recognized as a charge to earnings and a new cost basis for the security will be established.

Because the Company currently does not intend to sell those securities that have an unrealized loss at June 30, 2014, and it is not more-likely-than-not that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2014.

Periodically, available-for-sale securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes. Additionally, if an available-for-sale security loses its investment grade or tax-exempt status, the underlying credit support is terminated or collection otherwise becomes uncertain based on factors known to management, the Company will consider selling the security, but will review each security on a case-by-case basis as these factors become known.

The carrying values of the Company’s investment securities could decline in the future if the financial condition of issuers deteriorates and management determines it is probable that the Company will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future. There is also a risk that other-than-temporary impairment charges may occur in the future if management’s intention to hold these securities to maturity and or recovery changes.

At June 30, 2014, securities with a book value of approximately $185.7 million and a market value of approximately $192.5 million were pledged to various municipalities for deposits in excess of FDIC limits as required by law. The Federal Home Loan Bank of Cincinnati has issued letters of credit in the Bank’s name totaling $13.5 million secured by the Bank’s loan portfolio to secure additional municipal deposits.

At June 30, 2014, securities with a book and market value of $35.1 million were sold under agreements to repurchase from various customers. Furthermore, the Company has two wholesale repurchase agreements with third parties secured by investments with a combined book value of $19.5 million and a market value of $19.4 million. One repurchase agreement is in the amount of $6.0 million and has a maturity of September 18, 2016, and is currently callable on a quarterly basis and has a fixed rate of interest of 4.36%. The second repurchase agreement, in the amount of $10.0 million, has a maturity of September 5, 2014, is currently callable quarterly and has a fixed rate of interest of 4.28%.