NOTE 3. SECURITIES

Securities available for sale were as follows at September 30,

			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED			FAIR
2013	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Trust preferred and corporate securities	$	52,897	$	136	$	(4,249	)	$	48,784
Asset backed securities		-		-		-			-
Agency and instrumentality securities		-		-		-			-
Small business administration securities		10,099		482		-			10,581
Obligations of states and political subdivisions		1,880		-		(153	)		1,727
Non-bank qualified obligations of states and political subdivisions		255,189		-		(16,460	)		238,729
Mortgage-backed securities		596,343		3,968		(18,939	)		581,372
Total debt securities	$	916,408	$	4,586	$	(39,801	)	$	881,193

			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED			FAIR
2012	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Trust preferred and corporate securities	$	67,615	$	1,399	$	(3,517	)	$	65,497
Asset backed securities		40,828		496		-			41,324
Agency and instrumentality securities		39,266		201		-			39,467
Small business administration securities		19,939		-		(25	)		19,914
Obligations of states and political subdivisions		12,593		560		-			13,153
Non-bank qualified obligations of states and political subdivisions		254,789		1,487		(381	)		255,895
Mortgage-backed securities		667,876		13,597		(31	)		681,442
Total debt securities	$	1,102,906	$	17,740	$	(3,954	)	$	1,116,692

Securities held to maturity were as follows at September 30,

			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED			FAIR
2013	COST		GAINS		(LOSSES)			VALUE
	(Dollars in Thousands)
Debt securities
Agency and instrumentality securities	$	10,003	$	-	$	(390	)	$	9,613
Obligations of states and political subdivisions		19,549		13		(1,220	)		18,342
Non-bank qualified obligations of states and political subdivisions		181,547		-		(12,085	)		169,462
Mortgage-backed securities		76,927		-		(3,826	)		73,101
Total debt securities	$	288,026	$	13	$	(17,521	)	$	270,518

			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED		FAIR
2012	COST		GAINS		(LOSSES)		VALUE
	(Dollars in Thousands)
Debt securities
Agency and instrumentality securities	$	-	$	-	$	-	$	-
Obligations of states and political subdivisions		-		-		-		-
Non-bank qualified obligations of states and political subdivisions		-		-		-		-
Mortgage-backed securities		-		-		-		-
Total debt securities	$	-	$	-	$	-	$	-

Included in securities available for sale are trust preferred securities as follows:

At September 30, 2013
Issuer⁽¹⁾	Amortized Cost		Fair Value		Unrealized Gain (Loss)			S&P Credit Rating	Moody's Credit Rating
	(Dollars in Thousands)

Key Corp. Capital I	$	4,984	$	4,100	$	(884	)	BBB-	Baa3
Huntington Capital Trust II SE		4,976		4,075	$	(901	)	BB+	Baa3
PNC Capital Trust		4,959		4,175	$	(784	)	BBB	Baa2
Wells Fargo (Corestates Capital) Trust		4,399		4,050	$	(349	)	A-	A3
Total	$	19,318	$	16,400	$	(2,918	)

________________________________________

⁽¹⁾ Trust preferred securities are single-issuance. There are no known deferrals, defaults or excess subordination.

At September 30, 2012
Issuer⁽¹⁾	Amortized Cost			Fair Value			Unrealized Gain (Loss)				S&P Credit Rating	Moody's Credit Rating
	(Dollars in Thousands)

Key Corp. Capital I		$	4,983		$	3,817		$	(1,166	)	BBB-	Baa3
Huntington Capital Trust II SE			4,974			3,540			(1,434	)	BB+	Baa3
PNC Capital Trust			4,956			4,107			(849	)	BBB	Baa2
Total		$	14,913		$	11,464		$	(3,449	)

________________________________________

⁽¹⁾ Trust preferred securities are single-issuance. There are no known deferrals, defaults or excess subordination.

Management has a process to identify securities that could potentially have a credit impairment that is other-than-temporary. This process involves evaluating the length of time and extent to which the fair value has been less than the amortized cost basis, reviewing available information regarding the financial position of the issuer, monitoring the rating of the security, and projecting cash flows. Other factors, but not necessarily all, considered are: that the risk of loss is minimized and easier to determine due to the single-issuer, rather than pooled, nature of the securities, the financial condition of the issuers listed, and whether there have been any payment deferrals or defaults to-date. Such factors are subject to change over time.

Management also determines if it is more likely than not we will be required to sell the security before the recovery of its amortized cost basis which, in some cases, may extend to maturity. To the extent we determine that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

For all securities that are considered temporarily impaired, the Company does not intend to sell these securities (has not made a decision to sell) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may occur at maturity. The Company believes that it will collect all principal and interest due on all investments that have amortized cost in excess of fair value that are considered only temporarily impaired.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position at September 30, 2013 and 2012 are as follows:

Available For Sale	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
2013	Value		(Losses)			Value		(Losses)			Value		(Losses)
	(Dollars in Thousands)
Debt securities
Trust preferred and corporate securities	$	29,312	$	(1,433	)	$	13,477	$	(2,816	)	$	42,789	$	(4,249	)
Obligations of states and political subdivisions		1,727		(153	)		-		-			1,727		(153	)
Non-bank qualified obligations of states and political subdivisions		238,729		(16,460	)		-		-			238,729		(16,460	)
Mortgage-backed securities		357,850		(18,939	)		-		-			357,850		(18,939	)
Total debt securities	$	627,618	$	(36,985	)	$	13,477	$	(2,816	)	$	641,095	$	(39,801	)

	LESS THAN 12 MONTHS					OVER 12 MONTHS					TOTAL
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
2012	Value		(Losses)			Value		(Losses)			Value		(Losses)
	(Dollars in Thousands)
Debt securities
Trust preferred and corporate securities	$	-	$	-		$	14,396	$	(3,517	)	$	14,396	$	(3,517	)
Small business administration securities		19,914		(25	)		-		-			19,914		(25	)
Non-bank qualified obligations of states and political subdivisions		55,569		(381	)		-		-			55,569		(381	)
Mortgage-backed securities		28,731		(31	)		-		-			28,731		(31	)
Total debt securities	$	104,214	$	(437	)	$	14,396	$	(3,517	)	$	118,610	$	(3,954	)

Held To Maturity	LESS THAN 12 MONTHS					OVER 12 MONTHS				TOTAL
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
2013	Value		(Losses)			Value		(Losses)		Value		(Losses)
	(Dollars in Thousands)
Debt securities
Agency and instrumentality securities	$	9,613	$	(390	)	$	-	$	-	$	9,613	$	(390	)
Obligations of states and political subdivisions		17,253		(1,220	)		-		-		17,253		(1,220	)
Non-bank qualified obligations of states and political subdivisions		169,462		(12,085	)		-		-		169,462		(12,085	)
Mortgage-backed securities		73,101		(3,826	)		-		-		73,101		(3,826	)
Total debt securities	$	269,429	$	(17,521	)	$	-	$	-	$	269,429	$	(17,521	)


	LESS THAN 12 MONTHS					OVER 12 MONTHS				TOTAL
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
2012	Value		(Losses)			Value		(Losses)		Value		(Losses)
	(Dollars in Thousands)
Debt securities
Agency and instrumentality securities		-		-			-		-		-		-
Obligations of states and political subdivisions		-		-			-		-		-		-
Non-bank qualified obligations of states and political subdivisions		-		-			-		-		-		-
Mortgage-backed securities		-		-			-		-		-		-
Total debt securities	$	-	$	-		$	-	$	-	$	-	$	-

As of September 30, 2013, the investment portfolio included securities with current unrealized losses which have existed for longer than one year. All of these securities are considered to be acceptable credit risks. Because the declines in fair value were due to changes in market interest rates, not in estimated cash flows, no other-than-temporary impairment was recorded at September 30, 2013 and 2012.

The amortized cost and fair value of debt securities by contractual maturity are shown below. Certain securities have call features which allow the issuer to call the security prior to maturity. Expected maturities may differ from contractual maturities in mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary.

Available For Sale	AMORTIZED		FAIR
	COST		VALUE
September 30, 2013	(Dollars in Thousands)

Due in one year or less	$	-	$	-
Due after one year through five years		9,929		10,061
Due after five years through ten years		162,203		155,014
Due after ten years		147,933		134,746
		320,065		299,821
Mortgage-backed securities		596,343		581,372
Total debt securities	$	916,408	$	881,193

	AMORTIZED		FAIR
	COST		VALUE
September 30, 2012	(Dollars in Thousands)

Due in one year or less	$	100	$	101
Due after one year through five years		19,066		19,553
Due after five years through ten years		150,095		151,701
Due after ten years		265,769		263,895
		435,030		435,250
Mortgage-backed securities		667,876		681,442
Total debt securities	$	1,102,906	$	1,116,692

Held To Maturity	AMORTIZED		FAIR
	COST		VALUE
September 30, 2013	(Dollars in Thousands)

Due in one year or less	$	649	$	649
Due after one year through five years		2,234		2,203
Due after five years through ten years		50,547		47,519
Due after ten years		157,669		147,046
		211,099		197,417
Mortgage-backed securities		76,927		73,101
Total debt securities	$	288,026	$	270,518

	AMORTIZED		FAIR
	COST		VALUE
September 30, 2012	(Dollars in Thousands)

Due in one year or less	$	-	$	-
Due after one year through five years		-		-
Due after five years through ten years		-		-
Due after ten years		-		-
		-		-
Mortgage-backed securities		-		-
Total debt securities	$	-	$	-

Activities related to the sale of securities available for sale are summarized below.

	2013		2012		2011
	(Dollars in Thousands)

Proceeds from sales	$	209,172	$	678,833	$	55,791
Gross gains on sales		2,947		15,426		1,793
Gross losses on sales		401		1,671		-