Securities

(In Thousands)

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2014
Obligations of other U.S. Government agencies and corporations	$	185,056	$	10	$	(6,764	)	$	178,302
Obligations of states and political subdivisions	297,354		10,594		(1,470		)	306,478
	$	482,410	$	10,604	$	(8,234	)	$	484,780
December 31, 2013
Obligations of other U.S. Government agencies and corporations	$	125,061	$	14	$	(8,727	)	$	116,348
Obligations of states and political subdivisions	287,014		7,897		(2,683		)	292,228
	$	412,075	$	7,911	$	(11,410	)	$	408,576

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. The Company had no sales of such securities in the first quarter ending 2014. However, the Company sold certain securities representing obligations of state and political subdivisions that were classified as held to maturity during the same

period in 2013. The securities sold showed significant credit deterioration because our analysis led us to conclude that the issuers were operating at net deficits with little to no financial cushion to offset future contingencies. The securities sold during the first quarter of 2013 had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale.

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2014
Obligations of other U.S. Government agencies and corporations	$	6,138	$	136	$	(159	)	$	6,115
Residential mortgage backed securities:
Government agency mortgage backed securities	303,024		3,254		(3,296		)	302,982
Government agency collateralized mortgage obligations	168,484		1,464		(4,028		)	165,920
Commercial mortgage backed securities:
Government agency mortgage backed securities	41,063		1,402		(406		)	42,059
Government agency collateralized mortgage obligations	4,184		72		—			4,256
Trust preferred securities	27,514		290		(8,426		)	19,378
Other debt securities	18,918		357		(177		)	19,098
Other equity securities	2,775		1,695		—			4,470
	$	572,100	$	8,670	$	(16,492	)	$	564,278



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2013
Obligations of other U.S. Government agencies and corporations	$	6,144	$	125	$	(201	)	$	6,068
Residential mortgage backed securities:
Government agency mortgage backed securities	261,659		2,747		(4,414		)	259,992
Government agency collateralized mortgage obligations	149,682		1,542		(4,679		)	146,545
Commercial mortgage backed securities:
Government agency mortgage backed securities	41,252		1,373		(584		)	42,041
Government agency collateralized mortgage obligations	5,007		59		—			5,066
Trust preferred securities	27,531		73		(9,933		)	17,671
Other debt securities	19,544		240		(230		)	19,554
Other equity securities	2,775		1,542		—			4,317
	$	513,594	$	7,701	$	(20,041	)	$	501,254

Gross realized gains and gross realized losses on sales of securities available for sale for the three months ended March 31, 2014 and 2013 were as follows:



	Three Months Ended
	March 31,
	2014		2013
Gross gains on sales of securities available for sale	$	—	$	—
Gross losses on sales of securities available for sale	—		(115		)
Loss on sales of securities available for sale, net	$	—	$	(115	)

At March 31, 2014 and December 31, 2013, securities with a carrying value of $748,738 and $604,571, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $4,991 and $7,626 were pledged as collateral for short-term borrowings and derivative instruments at March 31, 2014 and December 31, 2013, respectively.

The amortized cost and fair value of securities at March 31, 2014 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	$	69,290	$	69,391	$	—	$	—
Due after one year through five years	54,751		56,469		1,075		1,146
Due after five years through ten years	208,703		204,699		5,063		4,969
Due after ten years	149,666		154,221		27,514		19,378
Residential mortgage backed securities:
Government agency mortgage backed securities	—		—		303,024		302,982
Government agency collateralized mortgage obligations	—		—		168,484		165,920
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		—		41,063		42,059
Government agency collateralized mortgage obligations	—		—		4,184		4,256
Other debt securities	—		—		18,918		19,098
Other equity securities	—		—		2,775		4,470
	$	482,410	$	484,780	$	572,100	$	564,278

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:
March 31, 2014
Obligations of other U.S. Government agencies and corporations	26	$	126,526	$	(6,053	)	2	$	9,279	$	(711	)	28	$	135,805	$	(6,764	)
Obligations of states and political subdivisions	70	45,661		(1,205		)	6	4,087		(265		)	76	49,748		(1,470		)
Total	96	$	172,187	$	(7,258	)	8	$	13,366	$	(976	)	104	185,553		$	(8,234	)
December 31, 2013
Obligations of other U.S. Government agencies and corporations	26	$	105,747	$	(7,826	)	2	$	9,090	$	(901	)	28	$	114,837	$	(8,727	)
Obligations of states and political subdivisions	111	59,503		(2,578		)	2	933		(105		)	113	60,436		(2,683		)
Total	137	$	165,250	$	(10,404	)	4	$	10,023	$	(1,006	)	141	$	175,273	$	(11,410	)
Available for Sale:
March 31, 2014
Obligations of other U.S. Government agencies and corporations	0	$	3,841	$	(159	)	0	$	—	$	—		0	$	3,841	$	(159	)
Residential mortgage backed securities:
Government agency mortgage backed securities	33	148,117		(2,197		)	5	18,501		(1,100		)	38	166,618		(3,297		)
Government agency collateralized mortgage obligations	17	73,776		(2,025		)	8	32,315		(2,003		)	25	106,091		(4,028		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	3	10,487		(406		)	0	—		—			3	10,487		(406		)
Government agency collateralized mortgage obligations	0	—		—			0	—		—			0	—		—
Trust preferred securities	0	—		—			4	17,964		(8,426		)	4	17,964		(8,426		)
Other debt securities	1	2,713		(170		)	1	1,817		(7		)	2	4,530		(177		)
Total	54	$	238,934	$	(4,957	)	18	$	70,597	$	(11,536	)	72	$	309,531	$	(16,493	)
December 31, 2013
Obligations of other U.S. Government agencies and corporations	1	$	3,799	$	(201	)	0	$	—	$	—		1	$	3,799	$	(201	)
Residential mortgage backed securities:
Government agency mortgage backed securities	32	134,858		(3,451		)	3	13,239		(963		)	35	148,097		(4,414		)
Government agency collateralized mortgage obligations	17	68,496		(3,468		)	4	16,750		(1,211		)	21	85,246		(4,679		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	4	16,570		(584		)	0	—		—			4	16,570		(584		)
Government agency collateralized mortgage obligations	0	—		—			0	—		—			0	—		—
Trust preferred securities	0	—		—			3	16,456		(9,933		)	3	16,456		(9,933		)
Other debt securities	3	7,100		(217		)	1	1,897		(13		)	4	8,997		(230		)
Other equity securities	0	—		—			0	—		—			0	—		—
Total	57	$	230,823	$	(7,921	)	11	$	48,342	$	(12,120	)	68	$	279,165	$	(20,041	)

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 $27,514 and $27,531 and a fair value of $19,378 and $17,671, at March 31, 2014 and December 31, 2013, 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 March 31, 2014, 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 months ended March 31, 2014 or 2013.

However, based on the qualitative factors discussed above, each of the four pooled trust preferred securities was classified as a nonaccruing asset at March 31, 2014. 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 March 31, 2014:



Name	Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Lowest Credit Rating	Issuers Currently in Deferral or Default
XIII	Pooled	B-2	$	1,125	$	1,415	$	290		Caa3	28	%
XXIII	Pooled	B-2	8,746		5,495		(3,251		)	B1	20	%
XXIV	Pooled	B-2	12,076		8,175		(3,901		)	Ca	34	%
XXVI	Pooled	B-2	5,567		4,293		(1,274		)	Ca	30	%
			$	27,514	$	19,378	$	(8,136	)

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:



	2014			2013
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 March 31	$	(3,337	)	$	(3,337	)