NOTE 3 SECURITIES

Amortized cost and estimated fair value of securities available for sale are as follows (dollars in thousands):

	September 30, 2014
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	175,960	$	1,499	$	244	$	177,215
Mortgage-backed securities, residential		63,858		793		80		64,571
Collateralized mortgage obligations		457		7		-		464
Obligations of states and political subdivisions		32,710		982		12		33,680
Corporate bonds and notes		1,505		38		4		1,539
SBA loan pools		1,340		12		3		1,349
Trust preferred securities		1,904		121		-		2,025
Corporate stocks		433		6,823		2		7,254
Total	$	278,167	$	10,275	$	345	$	288,097

	December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	187,098	$	1,915	$	907	$	188,106
Mortgage-backed securities, residential		104,069		1,036		749		104,356
Collateralized mortgage obligations		1,001		14		-		1,015
Obligations of states and political subdivisions		37,339		1,059		22		38,376
Corporate bonds and notes		2,879		76		9		2,946
SBA loan pools		1,471		17		-		1,488
Trust preferred securities		1,898		136		-		2,034
Corporate stocks		444		7,253		2		7,695
Total	$	336,199	$	11,506	$	1,689	$	346,016

Amortized cost and estimated fair value of securities held to maturity are as follows (dollars in thousands):

	September 30, 2014
	Amortized Cost			Unrealized Gains			Unrealized Losses			Estimated Fair Value
Obligations of states and political subdivisions		$	4,774		$	382		$	-		$	5,156
Time deposits with other financial institutions			656			9			-			665
Total		$	5,430		$	391		$	-		$	5,821

	December 31, 2013
	Amortized Cost			Unrealized Gains			Unrealized Losses			Estimated Fair Value
Obligations of states and political subdivisions		$	5,472		$	419		$	-		$	5,891
Time deposits with other financial institutions			1,023			16			-			1,039
Total		$	6,495		$	435		$	-		$	6,930

The amortized cost and estimated fair value of debt securities are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (dollars in thousands):

	September 30, 2014
	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Within One Year	$	26,690	$	27,044	$	1,931	$	1,960
After One, But Within Five Years		178,884		180,813		2,347		2,547
After Five, But Within Ten Years		6,505		6,602		1,152		1,314
		212,079		214,459		5,430		5,821
Mortgage-backed securities, residential		63,858		64,571		-		-
Collateralized mortgage obligations		457		464		-		-
SBA loan pools		1,340		1,349		-		-
Total	$	277,734	$	280,843	$	5,430	$	5,821

The proceeds from sales and calls of securities resulting in gains or losses at September 30, 2014 and September 30, 2013 are listed below (dollars in thousands):

	2014		2013
Proceeds	$	55,610	$	10,534
Gross gains	$	522	$	1
Gross losses	$	-	$	-
Tax expense	$	201	$	-

The following tables summarize the investment securities available for sale with unrealized losses at September 30, 2014 and December 31, 2013 by aggregated major security type and length of time in a continuous unrealized loss position (dollars in thousands):

	Less than 12 months				12 months or longer				Total
September 30, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	45,511	$	159	$	15,698	$	85	$	61,209	$	244
Mortgage-backed securities, residential		22,875		80		-		-		22,875		80
Obligations of states and political subdivisions		3,608		11		326		-		3,934		11
Corporate bonds and notes		-		-		242		5		242		5
SBA loan pools		605		3		-		-		605		3
Corporate stocks		-		-		2		2		2		2
Total temporarily impaired securities	$	72,599	$	253	$	16,268	$	92	$	88,867	$	345

	Less than 12 months				12 months or longer				Total
December 31, 2013	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government and U.S. Government sponsored enterprises	$	83,840	$	867	$	1,978	$	39	$	85,818	$	906
Mortgage-backed securities, residential		63,115		750		-		-		63,115		750
Obligations of states and political subdivisions		4,589		22		-		-		4,589		22
Corporate bonds and notes		238		9		-		-		238		9
Corporate stocks		-		-		2		2		2		2
Total temporarily impaired securities	$	151,782	$	1,648	$	1,980	$	41	$	153,762	$	1,689

Other-Than-Temporary Impairment

As of September 30, 2014, the majority of the Corporation's unrealized losses in the investment securities portfolio related to obligations of U.S. Government and U.S. Government sponsored enterprises and mortgage-backed securities. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell these securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at September 30, 2014.

During the first quarter of 2014, the Corporation received notice that one CDO consisting of a pool of trust preferred securities was liquidated and recorded $500 thousand in other operating income during the first quarter of 2014. The Corporation does not own any other CDO's in its investment securities portfolio.

The tables below present a roll forward of the cumulative credit losses recognized in earnings for the three and nine-month periods ending September 30, 2014 and 2013 (dollars in thousands):

	2014			2013
Beginning balance, January 1,	$	1,939		$	3,506
Amounts related to credit loss for which an other-than-temporary impairment was not previously recognized		-			-
Additions/Subtractions:
Amounts realized for securities sold during the period		-			-
Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis		-			-
Reductions for increase in cash flows expected to be collected that are recognized over the remaining life of the security		-			-
Reductions for previous credit losses realized in securities liquidated during the period		(1,939	)		-
Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized		-			-
Ending balance, September 30,	$	-		$	3,506

	2014		2013
Beginning balance, July 1,	$	-	$	3,506
Amounts related to credit loss for which an other-than-temporary impairment was not previously recognized		-		-
Additions/Subtractions:
Amounts realized for securities sold during the period		-		-
Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis		-		-
Reductions for increase in cash flows expected to be collected that are recognized over the remaining life of the security		-		-
Reductions for previous credit losses realized in securities liquidated during the period		-		-
Increases to the amount related to the credit loss for which other-than-temporary impairment was previously recognized		-		-
Ending balance, September 30,	$	-	$	3,506