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Securities
 3 Months Ended
Mar. 31, 2014
Investments, Debt and Equity Securities [Abstract]  
Securities
Securities

 The amortized cost and fair value of securities are summarized in the following tables:
 
March 31, 2014
(in thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Available for Sale:
 
 
 
 
 
 
 
U.S. Government agency securities
$
33,995

 
$
—

 
$
(3,107
)
 
$
30,888

Residential mortgage-backed securities
64,662

 
—

 
(2,262
)
 
62,400

Agency collateralized mortgage obligations
470,134

 
1,587

 
(12,237
)
 
459,484

Municipal securities
27,953

 
12

 
(946
)
 
27,019

Total
$
596,744

 
$
1,599

 
$
(18,552
)
 
$
579,791

Held to Maturity:
 

 
 

 
 

 
 

U.S. Government agency securities
$
149,100

 
$
—

 
$
(12,317
)
 
$
136,783

Residential mortgage-backed securities
7,619

 
258

 
—

 
7,877

Agency collateralized mortgage obligations
115,401

 
207

 
(2,930
)
 
112,678

Corporate debt securities
5,000

 
130

 
—

 
5,130

Municipal securities
2,976

 
10

 
(80
)
 
2,906

Total
$
280,096

 
$
605

 
$
(15,327
)
 
$
265,374


 
December 31, 2013
(in thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Available for Sale:
 
 
 
 
 
 
 
U.S. Government agency securities
$
33,995

 
$
—

 
$
(4,069
)
 
$
29,926

Residential mortgage-backed securities
65,795

 
—

 
(3,295
)
 
62,500

Agency collateralized mortgage obligations
483,591

 
1,141

 
(17,668
)
 
467,064

Municipal securities
27,950

 
—

 
(1,517
)
 
26,433

Total
$
611,331

 
$
1,141

 
$
(26,549
)
 
$
585,923

Held to Maturity:


 


 


 


U.S. Government agency securities
$
149,096

 
$
—

 
$
(16,082
)
 
$
133,014

Residential mortgage-backed securities
7,849

 
197

 
—

 
8,046

Agency collateralized mortgage obligations
118,893

 
251

 
(4,465
)
 
114,679

Corporate debt securities
5,000

 
149

 
—

 
5,149

Municipal securities
2,976

 
—

 
(167
)
 
2,809

Total
$
283,814

 
$
597

 
$
(20,714
)
 
$
263,697



The amortized cost and fair value of debt securities by contractual maturity at March 31, 2014 are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations.

 
 
Available for Sale
 
Held to Maturity
(in thousands)
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$
—


$
—


$
—


$
—

Due after one year through five years
3,277


3,196


5,000


5,130

Due after five years through ten years
48,588


45,178


70,000


64,375

Due after ten years
10,083


9,533


82,076


75,314

 
61,948


57,907


157,076


144,819

Residential mortgage-backed securities
64,662


62,400


7,619


7,877

Agency collateralized mortgage obligations
470,134


459,484


115,401


112,678

Total
$
596,744


$
579,791


$
280,096


$
265,374


 
During the first quarter of 2014, the Company sold one security with a fair market value of $614,000 and realized a gain of $11,000. The security was from the held to maturity (HTM) portfolio, however, it was an amortizing security that had already returned more than 85% of its principal and could be sold without tainting the remaining HTM portfolio. The Company had no securities that were called by their respective issuers.

During the first quarter of 2013, the Company sold 11 securities with a total fair market value of $60.9 million. The Company also had $50.0 million of agency debentures that were called by their respective issuers. In total, the Company realized net securities gains of $30,000. Of the investments sold, five were from the HTM portfolio; four of which were amortizing securities that had already returned at least 85% of their respective principal and one of which was a corporate bond within three months of its maturity date. In all cases, these could be sold without tainting the remaining HTM portfolio.

The Company does not maintain a trading portfolio and there were no transfers of securities between the available for sale (AFS) and HTM portfolios. The Company uses the specific identification method to record security sales.

At March 31, 2014, securities with a carrying value of $681.7 million were pledged to secure public deposits and for other purposes as required or permitted by law.
 



The following table summarizes the Company's gains and losses on the sales or calls of debt securities and credit losses recognized for the OTTI of investments:

(in thousands)
Gross Realized Gains
 
Gross Realized Losses
 
OTTI Credit Losses
 
Net Gains
Three Months Ended:
 
 
 
 
 
 
 
March 31, 2014
$
11

 
$
—

 
$
—

 
$
11

March 31, 2013
820

 
(790
)
 
—

 
30



In determining fair market values for its portfolio holdings, the Company receives information from a third party provider which management evaluates and corroborates using amounts from one of its securities brokers. Under the current guidance, these values are considered Level 2 inputs, based upon mathematically derived matrix pricing and observed data from similar assets. They are not Level 1 direct quotes, nor do they reflect Level 3 inputs that would be derived from internal analysis or judgment. As the Company does not manage a trading portfolio and typically only sells from its AFS portfolio in order to manage interest rate risk or credit exposure, direct quotes, or street bids, are warranted on an as-needed basis.

The following table shows the fair value and gross unrealized losses associated with the Company's investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position: 
 
March 31, 2014
 
Less than 12 months
12 months or more
Total
 (in thousands)
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Available for Sale:
 
 
 
 
 
 
U.S. Government agency securities
$
8,271

$
(724
)
$
22,617

$
(2,383
)
$
30,888

$
(3,107
)
Residential mortgage-backed securities
62,400

(2,262
)
—

—

62,400

(2,262
)
Agency collateralized mortgage obligations
208,601

(7,278
)
85,231

(4,959
)
293,832

(12,237
)
Municipal securities
21,326

(946
)
—

—

21,326

(946
)
Total
$
300,598

$
(11,210
)
$
107,848

$
(7,342
)
$
408,446

$
(18,552
)
Held to Maturity:
 
 
 
 
 
 
U.S. Government agency securities
$
90,690

$
(8,410
)
$
46,093

$
(3,907
)
$
136,783

$
(12,317
)
Agency collateralized mortgage obligations
93,749

(2,930
)
—

—

93,749

(2,930
)
Municipal securities
1,795

(80
)
—

—

1,795

(80
)
Total
$
186,234

$
(11,420
)
$
46,093

$
(3,907
)
$
232,327

$
(15,327
)

 
December 31, 2013
 
Less than 12 months
12 months or more
Total
 (in thousands)
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Available for Sale:
 
 
 
 
 
 
U.S. Government agency securities
$
8,077

$
(918
)
$
21,849

$
(3,151
)
$
29,926

$
(4,069
)
Residential mortgage-backed securities
62,500

(3,295
)
—

—

62,500

(3,295
)
Agency collateralized mortgage obligations
363,993

(16,182
)
15,574

(1,486
)
379,567

(17,668
)
Municipal securities
26,433

(1,517
)
—

—

26,433

(1,517
)
Total
$
461,003

$
(21,912
)
$
37,423

$
(4,637
)
$
498,426

$
(26,549
)
Held to Maturity:
 
 
 
 
 
 
U.S. Government agency securities
$
110,435

$
(13,661
)
$
22,579

$
(2,421
)
$
133,014

$
(16,082
)
Agency collateralized mortgage obligations
98,082

(4,465
)
—

—

98,082

(4,465
)
Municipal securities
2,809

(167
)
—

—

2,809

(167
)
Total
$
211,326

$
(18,293
)
$
22,579

$
(2,421
)
$
233,905

$
(20,714
)

 
The Company's investment securities portfolio consists of U.S. Government agency debentures, U.S. Government sponsored agency mortgage-backed securities (MBSs), agency collateralized mortgage obligations (CMOs), corporate bonds and municipal bonds. The Company considers securities of the U.S. Government sponsored agencies and the U.S. Government MBS/CMOs to have little credit risk because their principal and interest payments are backed by an agency of the U.S. Government.

The unrealized losses in the Company's investment portfolio at March 31, 2014 were associated with two distinct types of securities. The first type, those backed by the U.S. Government or one of its agencies, included 11 debentures, 35 CMOs and ten MBSs. Management believes that the unrealized losses on these investments were primarily caused by the movement of interest rates from the date of purchase and notes the contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. The Company also owns 21 municipal bonds that were in an unrealized loss position as of March 31, 2014. In all cases, the bonds are general obligations of either a Pennsylvania municipality or school district and are backed by the ad valorem taxing power of the entity. In all cases, the bonds carry an investment grade rating of no lower than single-A by either Moody's or Standard and Poors. The Company, however, conducts its own periodic, independent review and believes the unrealized losses in its municipal bond portfolio are the result of movements in long-term interest rates and are not reflective of any credit deterioration. The Company does not intend to sell these debt securities prior to recovery and it is more likely than not that the Company will not have to sell these debt securities prior to recovery.

The Company did not incur any OTTI credit losses during either the first three months of 2014 or 2013.