Securities

The amortized cost and fair value of securities are summarized in the following tables:



	June 30, 2014
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale:
U.S. Government agency securities	$	33,995	$	—	$	(2,353	)	$	31,642
Residential mortgage-backed securities	63,580		55		(898		)	62,737
Agency collateralized mortgage obligations	454,808		1,996		(11,892		)	444,912
Municipal securities	27,956		63		(473		)	27,546
Total	$	580,339	$	2,114	$	(15,616	)	$	566,837
Held to Maturity:
U.S. Government agency securities	$	149,105	$	—	$	(8,362	)	$	140,743
Residential mortgage-backed securities	7,515		405		—			7,920
Agency collateralized mortgage obligations	112,405		452		(2,363		)	110,494
Corporate debt securities	5,000		116		—			5,116
Municipal securities	3,994		16		(40		)	3,970
Total	$	278,019	$	989	$	(10,765	)	$	268,243



	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 June 30, 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	3,878		3,821		5,000		5,116
Due after five years through ten years	48,682		46,266		71,018		66,702
Due after ten years	9,391		9,101		82,081		78,011
	61,951		59,188		158,099		149,829
Residential mortgage-backed securities	63,580		62,737		7,515		7,920
Agency collateralized mortgage obligations	454,808		444,912		112,405		110,494
Total	$	580,339	$	566,837	$	278,019	$	268,243

During the second quarter of 2014, the Company did not sell any securities and had no securities that were called by their respective issuers.

During the second quarter of 2013, the Company sold 10 securities with a total fair market value of $29.0 million. The Company had no agency debentures that were called by their respective issuers. In total, the Company realized net securities losses of $9,000. Of the investments sold, none were from the held to maturity (HTM) portfolio.

During the first six months 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 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 six months of 2013, the Company sold 21 securities with a total fair market value of $89.9 million. The Company also had $50.0 million of agency debentures that were called by their respective issuers. In total, the Company realized net security gains of $21,000. 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 June 30, 2014, securities with a carrying value of $667.3 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 (if any) recognized for the OTTI of investments:



(in thousands)	Gross Realized Gains		Gross Realized Losses			OTTI Credit Losses		Net Gains
Three Months Ended:
June 30, 2014	$	—	$	—		$	—	$	—
June 30, 2013	363		(372		)	—		(9		)
Six Months Ended:
June 30, 2014	$	11	$	—		$	—	$	11
June 30, 2013	1,183		(1,162		)	—		21

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:



	June 30, 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	$	—	$	—		$	31,642	$	(2,353	)	$	31,642	$	(2,353	)
Residential mortgage-backed securities	8,363		(2		)	32,423		(896		)	40,786		(898		)
Agency collateralized mortgage obligations	86,500		(859		)	205,715		(11,033		)	292,215		(11,892		)
Municipal securities	7,083		(21		)	11,446		(452		)	18,529		(473		)
Total	$	101,946	$	(882	)	$	281,226	$	(14,734	)	$	383,172	$	(15,616	)
Held to Maturity:
U.S. Government agency securities	$	—	$	—		$	140,743	$	(8,362	)	$	140,743	$	(8,362	)
Agency collateralized mortgage obligations	29,115		(646		)	16,438		(1,717		)	45,553		(2,363		)
Municipal securities	1,617		(11		)	1,236		(29		)	2,853		(40		)
Total	$	30,732	$	(657	)	$	158,417	$	(10,108	)	$	189,149	$	(10,765	)



	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 June 30, 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, 34 CMOs and six 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 19 municipal bonds that were in an unrealized loss position as of June 30, 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 or six months ended June 30, 2014 or 2013.