NOTE 2. SECURITIES

Information related to the fair value and amortized cost of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) is provided in the tables below.

		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
(dollars in thousands)	Cost	Gain	Losses	Value
March 31, 2015
U.S. Treasury securities	$986	$37	$0	$1,023
Agency residential mortgage-backed securities	363,641	9,358	(796)	372,203
State and municipal securities	100,020	4,237	(286)	103,971
Total	$464,647	$13,632	$(1,082)	$477,197

December 31, 2014
U.S. Treasury securities	$986	$18	$0	$1,004
Agency residential mortgage-backed securities	366,596	7,178	(1,679)	372,095
State and municipal securities	99,399	3,857	(444)	102,812
Total	$466,981	$11,053	$(2,123)	$475,911

There was no other-than-temporary impairment (“OTTI”) recognized in accumulated other comprehensive income (loss) for securities available for sale at March 31, 2015 and December 31, 2014.

Information regarding the fair value and amortized cost of available for sale debt securities by maturity as of March 31, 2015 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.

	Amortized	Fair
(dollars in thousands)	Cost	Value
Due in one year or less	$5,318	$5,368
Due after one year through five years	18,877	19,761
Due after five years through ten years	45,186	47,530
Due after ten years	31,625	32,335
	101,006	104,994
Mortgage-backed securities	363,641	372,203
Total debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$464,647	$477,197

Securities proceeds, gross gains and gross losses are presented below.

	Three months ended March 31,
(dollars in thousands)	2015	2014
Sales of securities available for sale
Proceeds	$7,787	$0
Gross gains	42	0
Gross losses	0	0

The Company sold two securities with a total book value of $7.7 million and a total fair value of $7.8 million during the first three months of 2015. There were no securities sales during the first three months of 2014.

Purchase premiums or discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

Securities with carrying values of $189.3 million and $202.4 million were pledged as of March 31, 2015 and December 31, 2014, as collateral for deposits of public funds, securities sold under agreements to repurchase, borrowings from the Federal Home Loan Bank and for other purposes as permitted or required by law.

Information regarding securities with unrealized losses as of March 31, 2015 and December 31, 2014 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

	Less than 12 months		12 months or more		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
(dollars in thousands)	Value	Losses	Value	Losses	Value	Losses
March 31, 2015
Agency residential mortgage-backed
securities	$40,330	$(289)	$32,433	$(507)	$72,763	$(796)
State and municipal securities	7,433	(70)	9,526	(216)	16,959	(286)
Total temporarily impaired	$47,763	$(359)	$41,959	$(723)	$89,722	$(1,082)

December 31, 2014
Agency residential mortgage-backed
securities	$33,420	$(148)	$102,512	$(1,531)	$135,932	$(1,679)
State and municipal securities	2,458	(28)	16,391	(416)	18,849	(444)
Total temporarily impaired	$35,878	$(176)	$118,903	$(1,947)	$154,781	$(2,123)

The total number of securities with unrealized losses as of March 31, 2015 and December 31, 2014 is presented below.

	Less than	12 months
	12 months	or more	Total
March 31, 2015
Agency residential mortgage-backed securities	14	9	23
State and municipal securities	19	13	32
Total temporarily impaired	33	22	55

December 31, 2014
Agency residential mortgage-backed securities	9	27	36
State and municipal securities	8	29	37
Total temporarily impaired	17	56	73

The following factors are considered in determining whether or not the impairment of these securities is other-than-temporary. In making this determination, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings. Ninety-nine percent of the securities are backed by the U.S. government, government agencies, government sponsored agencies or are A-rated or better, except for certain non-local or local municipal securities, which are not rated. For the government, government-sponsored agency and municipal securities, management did not believe that there would be credit losses or that full principal would not be received. Management considered the unrealized losses on these securities to be primarily interest rate driven and does not expect material losses given current market conditions unless the securities are sold. However, at this time management does not have the intent to sell, and it is more likely than not that it will not be required to sell these securities before the recovery of their amortized cost basis.