Note 5. Investment Securities

The following table summarizes the amortized cost, fair value, net unrealized gain and loss, and distribution of our investment securities for the dates indicated:

Investment Securities Portfolio

(Dollars in Thousands)

	As of March 31, 2014
	Amortized Cost		Fair Value		Gross Unrealized Losses			Gross Unrealized Gains		Net Unrealized Gains (Losses)
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	32	$	34	$	—		$	2	$	2
Total investment securities held-to-maturity	$	32	$	34	$	—		$	2	$	2

Available-for-Sale:
Securities of government sponsored enterprises	$	61,853	$	59,950	$	(1,904	)	$	1	$	(1,903	)
Mortgage backed securities (residential)	90,755		89,325		(2,053		)	623		(1,430		)
Collateralized mortgage obligations (residential)	126,800		127,814		(1,235		)	2,249		1,014
Corporate securities	38,296		39,242		—			946		946
Municipal securities	24,716		26,107		(20		)	1,411		1,391
Total investment securities available-for-sale	$	342,420	$	342,438	$	(5,212	)	$	5,230	$	18

	As of December 31, 2013
	Amortized Cost		Fair Value		Gross Unrealized Losses			Gross Unrealized Gains		Net Unrealized Gains (Losses)
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	35	$	37	$	—		$	2	$	2
Total investment securities held-to-maturity	$	35	$	37	$	—		$	2	$	2

Available-for-Sale:
Securities of government sponsored enterprises	$	63,843	$	60,789	$	(3,054	)	$	—	$	(3,054	)
Mortgage backed securities (residential)	93,402		90,869		(3,062		)	529		(2,533		)
Collateralized mortgage obligations (residential)	135,154		135,653		(1,666		)	2,165		499
Corporate securities	38,442		39,530		—			1,088		1,088
Municipal securities	24,700		25,596		(58		)	954		896
Total investment securities available-for-sale	$	355,541	$	352,437	$	(7,840	)	$	4,736	$	(3,104	)

There were no realized gains or losses on call or sale of securities for the first quarter of 2014 or the first quarter of 2013. Securities with a total fair value of approximately $312.7 million and $322.4 million were pledged to secure public deposits, or for other purposes required or permitted by law, at March 31, 2014 and December 31, 2013, respectively.

The following table summarizes the maturity and repricing schedule of our investment securities at their carrying values (amortized cost for held-to maturity investment securities and fair value for available-for-sale investment securities) at March 31, 2014:

Investment Maturities and Repricing Schedule
(Dollars in Thousands)

	Within One Year		After One & Within Five Years		After Five & Within Ten Years		After Ten Years		Total
Held-to-Maturity:
Collateralized mortgage obligations (residential)	$	—	$	32	$	—	$	—	$	32
Total investment securities held-to-maturity	$	—	$	32	$	—	$	—	$	32

Available-for-Sale:
Securities of government sponsored enterprises	$	1,002	$	22,765	$	36,183	$	—	$	59,950
Mortgage backed securities (residential)	5,697		3,260		355		80,013		89,325
Collateralized mortgage obligations (residential)	8,169		101,102		18,543		—		127,814
Corporate securities	31,481		7,761		—		—		39,242
Municipal securities	574		1,895		3,312		20,326		26,107
Total investment securities available-for-sale	$	46,923	$	136,783	$	58,393	$	100,339	$	342,438

The following tables summarize the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that they have been in continuous unrealized loss positions at March 31, 2014, and December 31, 2013:

	As of March 31, 2014
	Less than 12 months					12 months or longer					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in Thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-Sale:
Securities of government sponsored enterprises	$	58,948	$	(1,904	)	$	—	$	—		$	58,948	$	(1,904	)
Mortgage-backed securities (residential)	61,180		(1,997		)	4,099		(56		)	65,279		(2,053		)
Collateralized mortgage obligations (residential)	36,455		(920		)	8,845		(315		)	45,300		(1,235		)
Municipal securities	466		(20		)	—		—			466		(20		)
Total investment securities	$	157,049	$	(4,841	)	$	12,944	$	(371	)	$	169,993	$	(5,212	)

	As of December 31, 2013
	Less than 12 months					12 months or longer					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in Thousands)	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Available-for-Sale:
Securities of government sponsored enterprises	$	60,789	$	(3,054	)	$	—	$	—		$	60,789	$	(3,054	)
Mortgage-backed securities (residential)	61,983		(2,966		)	4,340		(96		)	66,323		(3,062		)
Collateralized mortgage obligations (residential)	56,520		(1,329		)	9,095		(337		)	65,615		(1,666		)
Municipal securities	1,039		(58		)						1,039		(58		)
Total investment securities	$	180,331	$	(7,407	)	$	13,435	$	(433	)	$	193,766	$	(7,840	)

Credit related declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses in the consolidated statements of operations and declines related to all other factors are reflected in other comprehensive income (loss), net of taxes. In estimating other-than-temporary impairment losses, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the Company’s intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The Company performs an evaluation of the investment portfolio in assessing individual positions that have fair values that have declined below cost. In assessing whether there is other-than-temporary impairment, the Company considers:

· Whether or not all contractual cash flows due on a security will be collected; and

· Our positive intent and ability to hold the debt security until recovery in fair value or maturity

A number of factors are considered in the analysis, including but not limited to:

· Issuer’s credit rating;

· Likelihood of the issuer’s default or bankruptcy;

· Underlying collateral of the security;

· Industry in which the issuer operates;

· Nature of the investment;

· Severity and duration of the decline in fair value; and

· Analysis of the average life and effective maturity of the security.

Management determined that any individual unrealized loss as of March 31, 2014 and December 31, 2013 did not represent an other-than-temporary impairment. The unrealized losses on our government-sponsored enterprises (“GSE”) and collateralized mortgage obligations (“CMOs”) were attributable to both changes in interest rates (U.S. Treasury curve) and a repricing of risk (spreads widening against risk-fee rate) in the market. We do not own any non-agency mortgage-backed securities (“MBSs”) or CMOs. All GSE bonds, GSE CMOs, and GSE MBSs are backed by U.S. Government Sponsored and Federal Agencies and therefore rated “Aaa/AAA.” We have no exposure to the “Subprime Market” in the form of Asset Backed Securities (“ABSs”) and Collateralized Debt Obligations (“CDOs”) that are below investment grade. At March 31, 2014, we have the intent and ability to hold these securities in an unrealized loss position until the market values recover or the securities mature.

Municipal bonds and corporate bonds are evaluated by reviewing the credit-worthiness of the issuer and market conditions. The unrealized losses on our municipal securities were primarily attributable to both changes in interest rates and a re-pricing of risk in the market. There were no unrealized losses on our corporate securities at March 31, 2014 and December 31, 2013. As of March 31, 2014, we have the intent and ability to hold the municipal securities in an unrealized loss position until the market values recover or the securities mature.