Note D—Investment Securities

The amortized cost, gross unrealized gains and losses and fair values of the Company’s investment securities classified as available-for-sale and held-to-maturity are summarized as follows (in thousands):


Available-for-sale	December 31, 2013
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
U.S. Government agency securities	$ 10,680	$ 46	$ -	$ 10,726
Federally insured student loan securities	147,717	575	(719)	147,573
Tax-exempt obligations of states and political subdivisions	378,180	2,721	(1,951)	378,950
Taxable obligations of states and political subdivisions	78,638	1,276	(746)	79,168
Residential mortgage-backed securities	323,199	1,838	(2,263)	322,774
Commercial mortgage-backed securities	118,838	1,919	(410)	120,347
Corporate and other debt securities	194,010	789	(1,220)	193,579
	$ 1,251,262	$ 9,164	$ (7,309)	$ 1,253,117


Held-to-maturity	December 31, 2013
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
Other debt securities - single issuers	$ 21,027	$ 367	$ (4,222)	$ 17,172
Other debt securities - pooled	76,178	1,680	-	77,858
	$ 97,205	$ 2,047	$ (4,222)	$ 95,030


Available-for-sale	December 31, 2012
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
U.S. Government agency securities	$ 7,255	$ 245	$ -	$ 7,500
Federally insured student loan securities	142,851	1,002	(83)	143,770
Tax-exempt obligations of states and political subdivisions	112,393	5,314	(2)	117,705
Taxable obligations of states and political subdivisions	38,291	3,118	(21)	41,388
Residential mortgage-backed securities	275,197	3,389	(779)	277,807
Commercial mortgage-backed securities	92,765	4,298	(32)	97,031
Corporate and other debt securities	32,399	769	(304)	32,864
	$ 701,151	$ 18,135	$ (1,221)	$ 718,065


Held-to-maturity	December 31, 2012
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
Other debt securities - single issuers	$ 18,980	$ 218	$ (4,241)	$ 14,957
Other debt securities - pooled	26,199	36	(184)	26,051
	$ 45,179	$ 254	$ (4,425)	$ 41,008

The amortized cost and fair value of the Company’s investment securities at December 31, 2013, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-sale		Held-to-maturity
	Amortized	Fair	Amortized	Fair
	cost	value	cost	value
Due before one year	$ 101,647	$ 101,719	$ -	$ -
Due after one year through five years	387,325	388,658	-	-
Due after five years through ten years	194,228	193,977	10,221	10,162
Due after ten years	568,062	568,763	86,984	84,868
	$ 1,251,262	$ 1,253,117	$ 97,205	$ 95,030

At December 31, 2013 and 2012, investment securities with a book value of approximately $29.1 million and $34.3 million, respectively, were pledged to secure securities sold under repurchase agreements as required or permitted by law. Gross gains on sales of securities were $2.1 million, $661,000 and $788,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Gross losses on sales of securities were $182,000, $0 and $29,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Available-for-sale securities fair values are based on a fair market value supplied by a third-party market data provider while held-to-maturity securities are based on the present value of cash flows, which discounts expected cash flows from principal and interest using yield to maturity at the measurement date. The Company periodically reviews its investment portfolio to determine whether unrealized losses are other than temporary, based on evaluations of the creditworthiness of the issuers/guarantors as well as the underlying collateral if applicable, in addition to the continuing performance of the securities. The Company recognized other-than-temporary impairment charges on one trust preferred security of $20,000 in 2013, $202,000 in 2012 and $75,000 in 2011, for securities in its held-to-maturity portfolio. The amount of the credit impairment was calculated by estimating the discounted cash flows for those securities.

Investments in Federal Home Loan and Atlantic Central Bankers Bank stock are recorded at cost and amounted to $3.2 million at December 31, 2013 and $3.6 million at December 31, 2012.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2013 (in thousands):


Available-for-sale		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	4	$ 3,300	$ -	$ -	$ -	$ 3,300	$ -
Federally insured student loan securities	9	50,498	(676)	6,202	(44)	56,700	(720)
Tax-exempt obligations of states and							-
political subdivisions	229	169,995	(1,951)	-	-	169,995	(1,951)
Taxable obligations of states and
political subdivisions	52	46,888	(737)	1,808	(9)	48,696	(746)
Residential mortgage-backed securities	38	147,717	(1,656)	55,064	(606)	202,781	(2,262)
Commercial mortgage-backed securities	26	76,668	(399)	405	(11)	77,073	(410)
Corporate and other debt securities	101	97,904	(1,024)	4,255	(196)	102,159	(1,220)
Total temporarily impaired
investment securities	459	$ 592,970	$ (6,443)	$ 67,734	$ (866)	$ 660,704	$ (7,309)


Held-to-maturity		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Single issuers	2	$ -	$ -	$ 7,887	$ (4,222)	$ 7,887	$ (4,222)
Pooled	0	-	-	-	-	-	-
Total temporarily impaired
investment securities	2	$ -	$ -	$ 7,887	$ (4,222)	$ 7,887	$ (4,222)

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2012 (in thousands):


Available-for-sale		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Federally insured student loan securities	5	$ 33,615	$ (83)	$ -	$ -	$ 33,615	$ (83)
Tax-exempt obligations of states and
political subdivisions	4	4,511	(2)	-	-	4,511	(2)
Taxable obligations of states and
political subdivisions	6	2,357	(11)	4,529	(10)	6,886	(21)
Residential mortgage-backed securities	17	107,926	(779)	-	-	107,926	(779)
Commercial mortgage-backed securities	2	5,447	(32)	-	-	5,447	(32)
Corporate and other debt securities	4	1,485	(15)	8,623	(289)	10,108	(304)
Total temporarily impaired
investment securities	38	$ 155,341	$ (922)	$ 13,152	$ (299)	$ 168,493	$ (1,221)


Held-to-maturity		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Single issuers	2	$ -	$ -	$ 7,850	$ (4,241)	$ 7,850	$ (4,241)
Pooled	1	-	-	593	(184)	593	(184)
Total temporarily impaired
investment securities	3	$ -	$ -	$ 8,443	$ (4,425)	$ 8,443	$ (4,425)

The following table provides additional information related to our single issuer trust preferred securities as of December 31, 2013:


Single issuer	Book value	Fair value	Unrealized gain/(loss)	Credit rating
Security A	$ 1,895	$ 2,000	$ 105	Not rated
Security B	3,198	2,876	(322)	Not rated
Security C	8,911	5,011	(3,900)	Not rated

Class: All of the above are trust preferred securities.

The following table provides additional information related to our pooled trust preferred securities as of December 31, 2013:

Pooled issue

Class

Book value

Fair value

Unrealized gain/(loss)

Credit rating

Excess subordination

Pool A (7 performing issuers)

Mezzanine *

$ 370

$ 671

$ 301

CAA3

* The actual deferrals and defaults as a percentage of the original collateral were 20.27%. Assumed losses resulting from expected deferrals and defaults as a percentage of remaining collateral is .75% annually with 15% recovery with a two year lag.

** There is no excess subordination in these securities.

The Company has evaluated the securities in the above tables as of December 31, 2013 and has concluded that none of these securities has impairment that is other-than-temporary. The Company evaluates whether an other than temporary impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral and (e) the payment structure of the security. If other than temporary impairment is determined, the Company estimates expected future cash flows to determine the credit loss amount with a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. Based upon this evaluation, the Company concluded that most of the securities that are in an unrealized loss position are in a loss position because of changes in interest rates after the securities were purchased. The securities that have been in an unrealized loss position for 12 months or longer include other securities whose market values are sensitive to interest rates and changes in credit quality. The Company’s unrealized loss for the debt securities, which includes three single issuer trust preferred securities and one pooled trust preferred security, is primarily related to general market conditions and the resultant lack of liquidity in the market. The severity of the impairments in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis for each investment is performed at the security level. As a result of its review, the Company concluded that other-than-temporary impairment did not exist due to the Company’s ability and intention to hold these securities to recover their amortized cost basis.