Securities

(In Thousands)

The amortized cost and fair value of securities held to maturity were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2013
Obligations of other U.S. Government agencies and corporations	$	126,052	$	—	$	(6,049	)	$	120,003
Obligations of states and political subdivisions	222,288		7,216		(2,352		)	227,152
	$	348,340	$	7,216	$	(8,401	)	$	347,155
December 31, 2012
Obligations of other U.S. Government agencies and corporations	$	90,045	$	116	$	(232	)	$	89,929
Obligations of states and political subdivisions	227,721		16,860		(35		)	244,546
	$	317,766	$	16,976	$	(267	)	$	334,475

In light of the ongoing fiscal uncertainty in state and local governments, the Company analyzes its exposure to potential losses in its security portfolio on at least a quarterly basis. Management reviews the underlying credit rating and analyzes the financial condition of the respective issuers. Based on this analysis, the Company sold certain securities representing obligations of state and political subdivisions that were classified as held to maturity during 2013. The securities sold showed significant credit deterioration in that an analysis of the financial condition of the respective issuers showed the issuers were operating at net deficits with little to no financial cushion to offset future contingencies. These securities had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale during the six months ended June 30, 2013. No securities classified as held to maturity were sold during the six months ended June 30, 2012.

The amortized cost and fair value of securities available for sale were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2013
Obligations of other U.S. Government agencies and corporations	$	6,157	$	156	$	(193	)	$	6,120
Residential mortgage backed securities:
Government agency mortgage backed securities	173,460		2,442		(4,000		)	171,902
Government agency collateralized mortgage obligations	132,927		1,378		(2,949		)	131,356
Commercial mortgage backed securities:
Government agency mortgage backed securities	41,621		1,605		(473		)	42,753
Government agency collateralized mortgage obligations	5,050		28		—			5,078
Trust preferred securities	27,711		—		(11,751		)	15,960
Other debt securities	20,834		539		(93		)	21,280
Other equity securities	2,775		966		—			3,741
	$	410,535	$	7,114	$	(19,459	)	$	398,190



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2012
Obligations of other U.S. Government agencies and corporations	$	2,169	$	273	$	—		$	2,442
Residential mortgage backed securities:
Government agency mortgage backed securities	139,699		5,209		(91		)	144,817
Government agency collateralized mortgage obligations	115,647		2,273		(399		)	117,521
Commercial mortgage backed securities:
Government agency mortgage backed securities	41,981		3,077		—			45,058
Government agency collateralized mortgage obligations	5,091		316		—			5,407
Trust preferred securities	28,612		—		(13,544		)	15,068
Other debt securities	22,079		852		(1		)	22,930
Other equity securities	2,355		713		—			3,068
	$	357,633	$	12,713	$	(14,035	)	$	356,311

Gross realized gains and gross realized losses on sales of securities available for sale for the three and six months ended June 30, 2013 and 2012 were as follows:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2013		2012			2013			2012
Gross gains on sales of securities available for sale	$	—	$	946		$	—		$	1,850
Gross losses on sales of securities available for sale	—		(77		)	(115		)	(77		)
(Loss) Gain on sales of securities available for sale, net	$	—	$	869		$	(115	)	$	1,773

At June 30, 2013 and December 31, 2012, securities with a carrying value of $398,924 and $308,362, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $14,229 and $19,006 were pledged as collateral for short-term borrowings and derivative instruments at June 30, 2013 and December 31, 2012, respectively.

The amortized cost and fair value of securities at June 30, 2013 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.



	Held to Maturity				Available for Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	9,446	$	9,509	$	—	$	—
Due after one year through five years	32,811		33,950		—		—
Due after five years through ten years	167,412		163,309		6,157		6,120
Due after ten years	138,671		140,387		27,711		15,960
Residential mortgage backed securities:
Government agency mortgage backed securities	—		—		173,460		171,902
Government agency collateralized mortgage obligations	—		—		132,927		131,356
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		—		41,621		42,753
Government agency collateralized mortgage obligations	—		—		5,050		5,078
Other debt securities	—		—		20,834		21,280
Other equity securities	—		—		2,775		3,741
	$	348,340	$	347,155	$	410,535	$	398,190

The following table presents the age of gross unrealized losses and fair value by investment category as of the dates presented:



	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Held to Maturity:
June 30, 2013
Obligations of other U.S. Government agencies and corporations	$	119,503	$	(6,049	)	$	—	$	—		$	119,503	$	(6,049	)
Obligations of states and political subdivisions	45,312		(2,352		)	—		—			45,312		(2,352		)
Total	$	164,815	$	(8,401	)	$	—	$	—		164,815		$	(8,401	)
December 31, 2012
Obligations of other U.S. Government agencies and corporations	$	35,224	$	(232	)	$	—	$	—		$	35,224	$	(232	)
Obligations of states and political subdivisions	2,861		(34		)	126		(1		)	2,987		(35		)
Total	$	38,085	$	(266	)	$	126	$	(1	)	$	38,211	$	(267	)
Available for Sale:
June 30, 2013
Obligations of other U.S. Government agencies and corporations	$	3,807	$	(193	)	$	—	$	—		$	3,807	$	(193	)
Residential mortgage backed securities:
Government agency mortgage backed securities	—		—			103,728		(4,000		)	103,728		(4,000		)
Government agency collateralized mortgage obligations	87,325		(2,930		)	3,686		(19		)	91,011		(2,949		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		—			16,808		(473		)	16,808		(473		)
Government agency collateralized mortgage obligations	—		—			—		—			—		—
Trust preferred securities	—		—			15,960		(11,751		)	15,960		(11,751		)
Other debt securities	2,883		(91		)	2,140		(2		)	5,023		(93		)
Total	$	94,015	$	(3,214	)	$	142,322	$	(16,245	)	$	236,337	$	(19,459	)
December 31, 2012
Obligations of other U.S. Government agencies and corporations	$	—	$	—		$	—	$	—		$	—	$	—
Residential mortgage backed securities:
Government agency mortgage backed securities	15,431		(91		)	—		—			15,431		(91		)
Government agency collateralized mortgage obligations	44,616		(389		)	1,605		(10		)	46,221		(399		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		—			—		—			—		—
Government agency collateralized mortgage obligations	—		—			—		—			—		—
Trust preferred securities	—		—			15,068		(13,544		)	15,068		(13,544		)
Other debt securities	—		—			2,188		(1		)	2,188		(1		)
Other equity securities	—		—			—		—			—		—
Total	$	60,047	$	(480	)	$	18,861	$	(13,555	)	$	78,908	$	(14,035	)

The Company evaluates its investment portfolio for other-than-temporary-impairment (“OTTI”) on a quarterly basis. Impairment is assessed at the individual security level. The Company considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. Impairment is considered to be other-than-temporary if the Company intends to sell the investment security or if the Company does not expect to recover the entire amortized cost basis of the security before the Company is required to sell the security or before the security’s maturity.

The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $27,711 and $28,612 and a fair value of $15,960 and $15,068, at June 30, 2013 and December 31, 2012, respectively. The investments in pooled trust preferred securities consist of four securities representing interests in various tranches of trusts collateralized by debt issued by over 340 financial institutions. Management’s determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Company’s tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the investments’ amortized cost, which may be maturity. At June 30, 2013, management did not, and does not currently, believe such securities will be settled at a price less than the amortized cost of the investment, but the Company previously concluded that it was probable that there had been an adverse change in estimated cash flows for all four trust preferred securities and recognized credit related impairment losses on these securities in 2010 and 2011. No additional impairment was recognized during the three or six months ended June 30, 2013.

However, based on the qualitative factors discussed above, each of the four pooled trust preferred securities was classified as a nonaccruing asset at June 30, 2013. Investment interest is recorded on the cash-basis method until qualifying for return to accrual status.

The following table provides information regarding the Company’s investments in pooled trust preferred securities at June 30, 2013:



Name	Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Loss			Lowest Credit Rating	Issuers Currently in Deferral or Default
XIII	Pooled	B-2	$	1,179	$	1,109	$	(70	)	Ca	30	%
XXIII	Pooled	B-2	8,889		5,449		(3,440		)	B1	25	%
XXIV	Pooled	B-2	12,076		6,274		(5,802		)	Ca	35	%
XXVI	Pooled	B-2	5,567		3,128		(2,439		)	Ca	30	%
			$	27,711	$	15,960	$	(11,751	)

The following table provides a summary of the cumulative credit related losses recognized in earnings for which a portion of OTTI has been recognized in other comprehensive income:



	2013			2012
Balance at January 1	$	(3,337	)	$	(3,337	)
Additions related to credit losses for which OTTI was not previously recognized	—			—
Increases in credit loss for which OTTI was previously recognized	—			—
Balance at June 30	$	(3,337	)	$	(3,337	)