INVESTMENTS SECURITIES

3 Months Ended

Mar. 31, 2014

INVESTMENTS SECURITIES

INVESTMENTS SECURITIES

2. INVESTMENT SECURITIES

The amortized cost of investment securities and their estimated fair value as of the dates indicated were as follows (in thousands):

	As of March 31, 2014
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
Obligations of U.S. government sponsored agencies	$	19,669	$	—	$	(1,132	)	$	18,537
Obligations of state and political subdivisions		4,427		134		(18	)		4,543
Government sponsored agency mortgage-backed securities		244,364		2,862		(4,972	)		242,254
Corporate debt securities		6,000		—		(1,140	)		4,860
Equity securities		3,000		—		(51	)		2,949
Total available-for-sale	$	277,460	$	2,996	$	(7,313	)	$	273,143
Held-to-Maturity:
Government sponsored agency mortgage-backed securities	$	2	$	—	$	—		$	2

	As of December 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
Obligations of U.S. government sponsored agencies	$	19,669	$	—	$	(1,471	)	$	18,198
Obligations of state and political subdivisions		5,216		151		(50	)		5,317
Government sponsored agency mortgage-backed securities		251,923		2,528		(6,174	)		248,277
Corporate debt securities		6,000		—		(1,245	)		4,755
Equity securities		3,000		—		(68	)		2,932
Total available-for-sale	$	285,808	$	2,679	$	(9,008	)	$	279,479
Held-to-Maturity:
Government sponsored agency mortgage-backed securities	$	2	$	—	$	—		$	2

Net unrealized losses on available-for-sale securities totaling ($4,317,000) and ($6,329,000) were recorded, net of ($1,770,000) and ($2,595,000) in tax benefits, as accumulated other comprehensive loss within stockholders’ equity at March 31, 2014 and December 31, 2013, respectively. All government sponsored agency mortgage-backed securities are residential mortgages for the periods ended March 31, 2014 and December 31, 2013.

For the three months ended March 31, 2014 there were no gross realized gains on sales or calls of available for sale securities. For the three months ended March 31, 2013 there were $543,000 in gross realized gains on sales or calls of available for sale securities. For the three months ended March 31, 2014 and 2013 there were no gross realized losses on sales or calls of securities categorized as available for sale securities. For the three months ended March 31, 2014 and 2013 there were $830,000 and $17,085,000, respectively, in gross proceeds from sales or calls of available for sale securities. There were no sales or transfers of held to maturity securities for the three months ended March 31, 2014 and 2013. For the three months ended March 31, 2014 and 2013 there were no gross proceeds from maturities and calls of held to maturity securities. Expected maturities of all investment securities are consistent with those reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

At March 31, 2014 and December 31, 2013, securities having fair value amounts of approximately $265,554,000 and $272,092,000, respectively, were pledged to secure public deposits, short-term borrowings, treasury tax and loan balances and for other purposes required by law or contract.

Investment securities are evaluated for other-than-temporary impairment on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary.  Management utilizes criteria such as the magnitude and duration of the decline and the intent and ability of the Company to retain its investment in the issues for a period of time sufficient to allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary.  The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.  Once a decline in value is determined to be other-than-temporary, and management does not intend to sell the security or it is more likely than not that the Company will not be required to sell the security before recovery, only the portion of the impairment loss representing credit exposure is recognized as a charge to earnings, with the balance recognized as a charge to other comprehensive income. If management intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovering its forecasted cost, the entire impairment loss is recognized as a charge to earnings. For debt securities, the credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

The following tables show gross unrealized losses and the estimated fair value of available-for-sale investment securities, aggregated by investment category, for investment securities that are in an unrealized loss position (in thousands). Unrealized losses for held-to-maturity investment securities during the same period were not significant. 

	As of March 31, 2014
	Less than 12 Months					12 Months or Longer					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Description of Securities
Obligations of U.S. government sponsored agencies	$	18,537	$	(1,132	)	$	—	$	—		$	18,537	$	(1,132	)
Obligations of state and political subdivisions		671		(18	)		—		—			671		(18	)
Government sponsored agency mortgage-backed securities		137,062		(4,177	)		17,021		(795	)		154,083		(4,972	)
Corporate debt securities		—		—			4,860		(1,140	)		4,860		(1,140	)
Equity securities		2,949		(51	)		—		—			2,949		(51	)
Total impaired securities	$	159,219	$	(5,378	)	$	21,881	$	(1,935	)	$	181,100	$	(7,313	)

	As of December 31, 2013
	Less than 12 Months					12 Months or Longer					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Description of Securities
Obligations of U.S. government sponsored agencies	$	18,198	$	(1,471	)	$	—	$	—		$	18,198	$	(1,471	)
Obligations of state and political subdivisions		1,145		(50	)		—		—			1,145		(50	)
Government sponsored agency mortgage-backed securities		156,421		(5,163	)		17,296		(1,011	)		173,717		(6,174	)
Corporate debt securities		—		—			4,755		(1,245	)		4,755		(1,245	)
Equity securities		2,932		(68	)		—		—			2,932		(68	)
Total impaired securities	$	178,696	$	(6,752	)	$	22,051	$	(2,256	)	$	200,747	$	(9,008	)

As of March 31, 2014 and December 31, 2013, there were two corporate debt securities in a loss position for twelve months or more. There is a current active market for these securities and management believes that the unrealized losses on the Company’s investment in these corporate debt securities is due to the yield of the securities and is not attributable to changes in credit quality. The two corporate debt securities are each a $3,000,000 single-issuer trust preferred security issued by two separate large publicly-traded financial institutions. The securities are tied to the front-end of the yield curve, three-month LIBOR (a short-term interest rate) and have a spread over that rate. In addition, the payments on both of these securities have been made as agreed and are considered current. The Company does not intend to sell and does not believe it will be required to sell these securities and expects a full recovery of value. The Company did not consider these investments to be other-than-temporarily impaired at March 31, 2014 or December 31, 2013.

Management periodically evaluates each investment security for other-than-temporary impairment, relying primarily on industry analyst reports, observation of market conditions and interest rate fluctuations. Management has the ability and intent to hold securities with established maturity dates until recovery of fair value, which may be at maturity, and believes it will be able to collect all amounts due according to the contractual terms for all of the underlying investment securities; therefore, management does not consider these investments to be other-than-temporarily impaired.