2. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
March 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	68,064	$	69	$	1	$	68,132
US Treasury Notes		19,818		148		-		19,966
Mortgage Backed Securities⁽¹⁾		270,820		5,977		196		276,601
Other		485		-		-		485
Total	$	359,187	$	6,194	$	197	$	365,184

	Amortized		Gross Unrealized				Fair/Book
December 31, 2014	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	78,051	$	61	$	3	$	78,109
Mortgage Backed Securities⁽¹⁾		283,636		4,969		657		287,948
Other		485		-		-		485
Total	$	362,172	$	5,030	$	660	$	366,542

	Amortized		Gross Unrealized				Fair/Book
March 31, 2014	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	18,242	$	184	$	-	$	18,426
Mortgage Backed Securities⁽¹⁾		331,434		3,674		5,378		329,730
Corporate Securities		49,045		370		63		49,352
Other		2,235		-		-		2,235
Total	$	400,956	$	4,228	$	5,441	$	399,743

⁽¹⁾All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
March 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,324	$	766	$	11	$	62,079
Other		2,139		-		-		2,139
Total	$	63,463	$	766	$	11	$	64,218

	Book		Gross Unrealized				Fair
December 31, 2014	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,716	$	782	$	10	$	62,488
Other		2,147		-		-		2,147
Total	$	63,863	$	782	$	10	$	64,635

	Book		Gross Unrealized				Fair
March 31, 2014	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	62,890	$	711	$	257	$	63,344
Mortgage Backed Securities⁽¹⁾		4		-		-		4
Other		2,761		-		-		2,761
Total	$	65,655	$	711	$	257	$	66,109

⁽¹⁾All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at March 31, 2015 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
March 31, 2015	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	67,480	$	67,483	$	2,739	$	2,740
After one year through five years		20,887		21,100		16,132		16,294
After five years through ten years		-		-		10,313		10,423
After ten years		-		-		34,279		34,761
		88,367		88,583		63,463		64,218

Investment securities not due at a single maturity date:
Mortgage-backed securities		270,820		276,601		-		-

Total	$	359,187	$	365,184	$	63,463	$	64,218

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
March 31, 2015	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	24,998	$	1	$	-	$	-	$	24,998	$	1
Mortgage Backed Securities		13,033		28		25,942		168		38,975		196
Total	$	38,031	$	29	$	25,942	$	168	$	63,973	$	197

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	1,340	$	11	$	-	$	-	$	1,340	$	11
Total	$	1,340	$	11	$	-	$	-	$	1,340	$	11

	Less Than 12 Months				12 Months or More				Total
December 31, 2014	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	66,980	$	3	$	-	$	-	$	66,980	$	3
Mortgage Backed Securities		14,487		151		33,574		506		48,061		657
Total	$	81,467	$	154	$	33,574	$	506	$	115,041	$	660

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	849	$	5	$	876	$	5	$	1,725	$	10
Total	$	849	$	5	$	876	$	5	$	1,725	$	10

	Less Than 12 Months				12 Months or More				Total
March 31, 2014	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
Mortgage Backed Securities	$	123,313	$	4,506	$	15,981	$	872		139,294	$	5,378
Corporate Securities		3,794		39		2,474		24		6,268		63
Total	$	127,107	$	4,545	$	18,455	$	896	$	145,562	$	5,441

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	9,038	$	257	$	-	$	-	$	9,038	$	257
Total	$	9,038	$	257	$	-	$	-	$	9,038	$	257

As of March 31, 2015, the Company held 275 investment securities of which six were in a loss position for less than twelve months. Three securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – At March 31, 2015, one security of government agency and government sponsored entities was in a loss position for less than 12 months. None were in a loss position for 12 months or more. The unrealized losses on the Company's investments in securities of government agency and government sponsored entities were $1,000 at March 31, 2015, $3,000 at December 31, 2014 and $0 at March 31, 2014. The unrealized loss was caused by interest rate fluctuations. Repayment of these investments is guaranteed by an agency or government sponsored entity 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. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2015 and December 31, 2014.

Mortgage Backed Securities – At March 31, 2015, two mortgage backed security investments were in a loss position for less than 12 months and three were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $196,000, $657,000, and $5.4 million at March 31, 2015, December 31, 2014, and March 31, 2014, respectively. The unrealized losses on the Company’s investment in mortgage backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity 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. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2015, December 31, 2014 and March 31, 2014, respectively.

Obligations of States and Political Subdivisions - At March 31, 2015, three obligations of states and political subdivisions were in a loss position for less than 12 months. None were in a loss position for 12 months or more. As of March 31, 2015, over ninety-seven percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the three percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $11,000, $10,000, and $257,000 at March 31, 2015, December 31, 2014 and March 31, 2014, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2015, December 31, 2014 and March 31, 2014, respectively.

Corporate Securities - The Company did not hold any corporate securities at March 31, 2015 or December 31, 2014. The unrealized losses on the Company’s investment in corporate securities at March 31, 2014 were $63,000. Changes in the prices of corporate securities are primarily influenced by: (1) changes in market interest rates; (2) changes in perceived credit risk in the general economy or in particular industries; (3) changes in the perceived credit risk of a particular company; and (4) day to day trading supply, demand and liquidity.

Proceeds from sales and calls of securities were as follows:

(in thousands)	Proceeds		Gains		Losses
Three Months Ended March 31, 2015	$	475	$	1	$	-
Three Months Ended March 31, 2014	$	2,988	$	3	$	-

Pledged Securities

As of March 31, 2015, securities carried at $196.4 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $178.8 million at December 31, 2014, and $332.0 million at March 31, 2014.

The decrease in pledged securities since March 31, 2014 was due to the Company’s use of a $165 million standby Letter of Credit (“LC”) issued by the FHLB as collateral for Public Deposits. The LC was issued December 4, 2014, and matures December 2, 2016, with a maintenance fee of 10 basis points per annum.