Note 3. Investment Securities

The following table sets forth the amortized cost and fair values of the Company’s investment securities, all of which are reported as available for sale:

(dollar amounts in thousands)			Gross		Gross
	Amortized		Unrealized		Unrealized
March 31, 2013	Cost		Gains		Losses		Fair Value
Obligations of U.S. government agencies	$	4,781	$	57	$	(2)	$	4,836
Mortgage backed securities
U.S. government sponsored entities and agencies	155,391		983		(581)		155,793
Non-agency	23,209		732		(15)		23,926
State and municipal securities	29,923		1,169		(88)		31,004
Asset backed securities	31,987		398		(54)		32,331

Total	$	245,291	$	3,339	$	(740)	$	247,890

December 31, 2012
Obligations of U.S. government agencies	$	7,307	$	262	$	(2)	$	7,567
Mortgage backed securities
U.S. government sponsored entities and agencies	145,430		1,136		(798)		145,768
Non-agency	43,402		1,578		(185)		44,795
State and municipal securities	64,824		4,240		(96)		68,968
Asset backed securities	20,049		568		(33)		20,584

Total	$	281,012	$	7,784	$	(1,114)	$	287,682

Other than Temporary Impairment (“OTTI”)

At the end of the first quarter of 2013, as part of its repositioning of the longer duration portion of the investment portfolio, the Company sold the two PMBS securities in which OTTI losses had been recognized, thereby eliminating all securities in the portfolio for which OTTI losses had been incurred. These securities had an aggregate recorded fair value of $0.7 million ($1.0 million historical cost) at December 31, 2012. The following tables provide information related to these two securities:

	For the Three Months Ended March 31, 2013						For the Three Months Ended March 31, 2012
			OTTI Related						OTTI Related
	OTTI Related		to All Other		Total		OTTI Related		to All Other		Total
(dollars in thousands)	to Credit Loss		Factors		OTTI		to Credit Loss		Factors		OTTI
Balance, beginning of the period	$	109	$	170	$	279	$	109	$	361	$	470
Less: losses related to OTTI securities sold	(109)		(170)		(279)		-		-		-
Change in value attributable to other factors	-		-		-		-		(38)		(38)

Balance, end of the period	$	-	$	-	$	-	$	109	$	323	$	432

The following table provides a summary of investment securities in an unrealized loss position:

	Securities In A Loss Position For
(dollar amounts in thousands)		Less Than Twelve Months				Twelve Months or More				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2013		Value		Loss		Value		Loss		Value		Loss
Obligations of U.S. government agencies		$	-	$	-	$	43	$	(2)	$	43	$	(2)
Mortgage backed securities
U.S. government sponsored entities and agencies		62,409		(581)		-		-		62,409		(581)
Non-agency		2,871		(15)		-		-		2,871		(15)
State and municipal securities		5,754		(88)		-		-		5,754		(88)
Asset backed securities		9,803		(54)		-		-		9,803		(54)

Total		$	80,837	$	(738)	$	43	$	(2)	$	80,880	$	(740)

December 31, 2012
Obligations of U.S. government agencies		$	-	$	-	$	44	$	(2)	$	44	$	(2)
Mortgage backed securities
U.S. government sponsored entities and agencies		83,092		(798)		-		-		83,092		(798)
Non-agency		7,204		(15)		719		(170)		7,923		(185)
State and municipal securities		9,813		(96)		-		-		9,813		(96)
Asset backed securities		9,828		(33)		-		-		9,828		(33)

Total		$	109,937	$	(942)	$	763	$	(172)	$	110,700	$	(1,114)

As of March 31, 2013, the Company believes that unrealized losses on state and municipal securities, asset backed securities and all mortgage related securities, including U.S. government sponsored entity and agency securities, such as those issued by the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”) and the Government National Mortgage Association (“GNMA”), are not attributable to credit quality, but rather fluctuations in market prices for these types of investments. Additionally, these securities have maturity dates that range from 1 to 40 years and in the case of the agency mortgage related securities have contractual cash flows guaranteed by agencies of the U.S. Government. As of March 31, 2013, the Company does not believe unrealized losses related to any of its securities are other than temporary.

The proceeds from the sales and calls of securities and the associated gains and losses are listed below:

	For the Three Months Ended March 31,
(dollar amounts in thousands)	2013		2012
Proceeds	$	89,245	$	12,482
Gross gains	4,204		303
Gross losses	(618)		-

The income tax expense related to these net realized gains was $1.5 million and $0.1 million, for the three months ended March 31, 2013 and 2012, respectively.

The amortized cost and fair value maturities of available for sale investment securities at March 31, 2013 are shown below. The table reflects the expected lives of mortgage backed securities, based on the Company’s historical experience, because borrowers have the right to prepay obligations without prepayment penalties. Contractual maturities are reflected for all other security types. 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.

(dollar amounts in thousands)
March 31, 2013	One Year Or Less		Over 1 Through 5 Years		Over 5 Years Through 10 Years		Over 10 Years		Total
Obligations of U.S. government agencies	$	91	$	400	$	1,860	$	2,485	$	4,836
Mortgage backed securities
U.S. government sponsored entities and agencies	21,152		54,941		32,691		47,009		155,793
Non-agency	6,108		14,674		1,617		1,527		23,926
State and municipal securities	-		7,778		19,213		4,013		31,004
Asset backed securities	-		5,446		10,735		16,150		32,331
Total available for sale securities	$	27,351	$	83,239	$	66,116	$	71,184	$	247,890

Amortized cost	$	27,131	$	81,768	$	65,222	$	71,170	$	245,291

Weighted average yield	2.34%		2.63%		2.34%		2.68%		2.54%

Securities having an amortized cost and a fair value of $7.5 million and $7.7 million, respectively at March 31, 2013, and $8.7 million and $9.0 million, respectively at December 31, 2012 were pledged to secure public deposits. As of March 31, 2013 and December 31, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of total securities.

The following table summarizes earnings on both taxable and tax-exempt investment securities:

	For the Three Months
	Ended March 31,
(dollar amounts in thousands)	2013		2012
Taxable earnings on investment securities
Obligations of U.S. government agencies	$	31	$	25
Mortgage backed securities	830		1,057
State and municipal securities	5		103
Corporate debt securities	-		176
Asset backed securities	112		25
Non-taxable earnings on investment securities
State and municipal securities	455		412

Total	$	1,433	$	1,798