Securities

(In Thousands, Except Number of Securities)

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



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2014
Obligations of other U.S. Government agencies and corporations	$	125,573	$	1	$	(4,336	)	$	121,238
Obligations of states and political subdivisions	309,132		14,927		(371		)	323,688
	$	434,705	$	14,928	$	(4,707	)	$	444,926
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. 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. The securities sold during the first nine months of 2013 had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale. No such securities were sold during the same period in 2014.

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
September 30, 2014
Obligations of other U.S. Government agencies and corporations	$	6,126	$	150	$	(163	)	$	6,113
Residential mortgage backed securities:
Government agency mortgage backed securities	289,008		3,718		(2,042		)	290,684
Government agency collateralized mortgage obligations	157,135		1,480		(3,643		)	154,972
Commercial mortgage backed securities:
Government agency mortgage backed securities	45,938		1,457		(308		)	47,087
Government agency collateralized mortgage obligations	5,146		180		—			5,326
Trust preferred securities	26,738		142		(7,307		)	19,573
Other debt securities	18,044		451		(106		)	18,389
Other equity securities	2,331		1,148		—			3,479
	$	550,466	$	8,726	$	(13,569	)	$	545,623



	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 and nine months ended September 30, 2014 and 2013 were as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Gross gains on sales of securities available for sale	$	375	$	—	$	375	$	—
Gross losses on sales of securities available for sale	—		—		—		(115		)
Loss on sales of securities available for sale, net	$	375	$	—	$	375	$	(115	)

At September 30, 2014 and December 31, 2013, securities with a carrying value of $636,313 and $604,571, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $15,099 and $7,626 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2014 and December 31, 2013, respectively.

The amortized cost and fair value of securities at September 30, 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	$	10,976	$	11,093	$	—	$	—
Due after one year through five years	51,890		53,654		1,067		1,141
Due after five years through ten years	232,081		232,491		5,059		4,972
Due after ten years	139,758		147,688		26,738		19,573
Residential mortgage backed securities:
Government agency mortgage backed securities	—		—		289,008		290,684
Government agency collateralized mortgage obligations	—		—		157,135		154,972
Commercial mortgage backed securities:
Government agency mortgage backed securities	—		—		45,938		47,087
Government agency collateralized mortgage obligations	—		—		5,146		5,326
Other debt securities	—		—		18,044		18,389
Other equity securities	—		—		2,331		3,479
	$	434,705	$	444,926	$	550,466	$	545,623

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:
September 30, 2014
Obligations of other U.S. Government agencies and corporations	1	$	1,486	$	(5	)	27	$	118,251	$	(4,331	)	28	$	119,737	$	(4,336	)
Obligations of states and political subdivisions	7	6,102		(29		)	28	15,697		(342		)	35	21,799		(371		)
Total	8	$	7,588	$	(34	)	55	$	133,948	$	(4,673	)	63	141,536		$	(4,707	)
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:
September 30, 2014
Obligations of other U.S. Government agencies and corporations	0	$	—	$	—		1	$	3,837	$	(163	)	1	$	3,837	$	(163	)
Residential mortgage backed securities:
Government agency mortgage backed securities	15	67,667		(195		)	18	65,621		(1,847		)	33	133,288		(2,042		)
Government agency collateralized mortgage obligations	6	29,885		(377		)	18	67,360		(3,266		)	24	97,245		(3,643		)
Commercial mortgage backed securities:
Government agency mortgage backed securities	1	5,220		(52		)	3	10,569		(256		)	4	15,789		(308		)
Government agency collateralized mortgage obligations	0	—		—			0	—		—			0	—		—
Trust preferred securities	0	—		—			2	18,315		(7,307		)	2	18,315		(7,307		)
Other debt securities	0	—		—			3	4,419		(106		)	3	4,419		(106		)
Total	22	$	102,772	$	(624	)	45	$	170,121	$	(12,945	)	67	$	272,893	$	(13,569	)
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 $26,738 and $27,531 and a fair value of $19,573 and $17,671, at September 30, 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 320 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 September 30, 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 or nine months ended September 30, 2014.

The Company's analysis of the pooled trust preferred securities during the previous quarter supported a return to accrual status for two of the four securities (XIII and XXIII.) An observed history of principal and interest payments combined with improved qualitative and quantitative factors described above justified the accrual of interest on these securities. However, one of the remaining securities (XXIV) is still in "payment in kind" status where interest payments are not expected until a future date, and, although the Company has received principal payments from the fourth security (XXVI), the Company's analysis of the qualitative and quantitative factors described above does not justify a return to accrual status at this time. As a result, pooled trust preferred securities XXIV and XXVI remain classified as nonaccruing assets at September 30, 2014, and 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 September 30, 2014:



Name	Single/ Pooled	Class/ Tranche	Amortized Cost		Fair Value		Unrealized Loss			Lowest Credit Rating	Issuers Currently in Deferral or Default
XIII	Pooled	B-2	$	1,116	$	1,258	$	142		Caa1	24	%
XXIII	Pooled	B-2	8,701		5,917		(2,784		)	Baa3	20	%
XXIV	Pooled	B-2	12,076		8,585		(3,491		)	Ca	34	%
XXVI	Pooled	B-2	4,845		3,813		(1,032		)	B3	27	%
			$	26,738	$	19,573	$	(7,165	)

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 September 30	$	(3,337	)	$	(3,337	)