NOTE D — SECURITIES

The amortized cost and fair value of securities available for sale and held for investment at September 30, 2014 and December 31, 2013 are summarized as follows:

	September 30, 2014
	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	100	$	0	$	0	$	100
Mortgage-backed securities of U.S. Government Sponsored Entities		87,148		1,433		(647)		87,934
Collateralized mortgage obligations of U.S. Government Sponsored Entities		290,647		560		(7,597)		283,610
Private mortgage backed securities		29,922		316		0		30,238
Private collateralized mortgage obligations		71,167		976		(244)		71,899
Collateralized loan obligations		122,440		12		(952)		121,500
Obligations of state and political subdivisions		5,766		494		0		6,260
	$	607,190	$	3,791	$	(9,440)	$	601,541

SECURITIES HELD FOR INVESTMENT
Collateralized mortgage obligations of
U.S. Government Sponsored Entities	$	121,163	$	39	$	(1,425)	$	119,777
Mortgage-backed securities of
U.S. Government Sponsored Entities		55,561		14		(169)		55,406
	$	176,724	$	53	$	(1,594)	$	175,183

	December 31, 2013
	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	100	$	0	$	0	$	100
Mortgage-backed securities of U.S. Government Sponsored Entities		129,468		1,456		(4,189)		126,735
Collateralized mortgage obligations of U.S. Government Sponsored Entities		383,392		776		(14,747)		369,421
Private mortgage backed securities		29,800		0		(226)		29,574
Private collateralized mortgage obligations		76,520		731		(413)		76,838
Collateralized loan obligations		32,592		0		(413)		32,179
Obligations of state and political subdivisions		6,586		193		(15)		6,764
	$	658,458	$	3,156	$	(20,003)	$	641,611

Proceeds from sales of securities during the nine month period ended September 30, 2014 were $16,444,000 with gross gains of $361,000 and no gross losses. Proceeds from sales of securities during the nine month period ended September 30, 2013 were $67,330,000 with gross gains of $792,000 and gross losses of $373,000.

On May 31, 2014 management identified $158.8 million of investment securities available for sale and transferred them to held for investment. The unrealized holding losses at the date of transfer totaled $3.0 million.

The securities that were transferred into the held for investment category from the available for sale category, the unrealized holding losses at the date of the transfer will continue to be reported in other comprehensive income, and will be amortized over the remaining life of the security as an adjustment of yield in a manner consistent with the amortization of a discount. The amortization of unrealized holding losses reported in equity will offset the effect on interest income of the amortization of the discount.

Securities with a carrying value and fair value of $92,847,000 and $91,870,000, respectively, at September 30, 2014 were pledged as collateral for United States Treasury deposits, and other public and trust deposits. Securities with a carrying value and fair value of $172,239,000 and $170,730,000, respectively, were pledged as collateral for repurchase agreements.

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 borrowers may have the right to call or repay obligations with or without call or prepayment penalties.

	Held for Investment				Available for Sale
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Due in less than one year	$	0	$	0	$	0	$	0
Due after one year through five years		0		0		541		547
Due after five years through ten years		0		0		8,083		8,093
Due after ten years		0		0		119,682		119,220
		0		0		128,306		127,860
Mortgage-backed securities of U.S. Government Sponsored Entities		55,561		55,406		87,148		87,934
Collateralized mortgage obligations of U.S. Government Sponsored Entities		121,163		119,777		290,647		283,610
Private mortgage backed securities		0		0		29,922		30,238
Private collateralized mortgage obligations		0		0		71,167		71,899
No contractual maturity		0		0		0		0
	$	176,724	$	175,183	$	607,190	$	601,541

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data where available. The tables below indicate the amount of securities with unrealized losses and period of time for which these losses were outstanding at September 30, 2014 and December 31, 2013, respectively.

	September 30, 2014
	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities of U.S. Government Sponsored Entities	$	45,308	$	(176)	$	28,272	$	(640)	$	73,580	$	(816)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		186,842		(2,085)		160,278		(6,937)		347,120		(9,022)
Private collaterlized mortgage obligations		6,763		(108)		10,758		(136)		17,521		(244)
Collateralized loan obligations		96,900		(781)		19,739		(171)		116,639		(952)
Total temporarily impaired securities	$	335,813	$	(3,150)	$	219,047	$	(7,884)	$	554,860	$	(11,034)

	December 31, 2013
	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities of U.S. Government Sponsored Entities	$	33,425	$	(2,045)	$	35,043	$	(2,144)	$	68,468	$	(4,189)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		287,312		(12,450)		45,657		(2,297)		332,969		(14,747)
Private mortage backed securities		29,573		(226)		0		0		29,573		(226)
Private collateralized mortgage obligations		47,653		(413)		0		0		47,653		(413)
Collateralized loan obligations		32,179		(413)		0		0		32,179		(413)
Obligations of state and political subdivisions		502		(14)		0		(1)		502		(15)
Total temporarily impaired securities	$	430,644	$	(15,561)	$	80,700	$	(4,442)	$	511,344	$	(20,003)

At September 30, 2014, approximately $0.2million of the unrealized losses pertain to private label securities secured by collateral originated in 2005 and prior. Their fair value is $17.5 million and is attributable to a combination of factors, including relative changes in interest rates since the time of purchase and decreased liquidity for these investment securities in general. The collateral underlying these mortgage investments are 30- and 15-year fixed and 10/1 adjustable rate mortgage loans with low loan to values, subordination and historically have had minimal foreclosures and losses. Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2014, the Company also had $9.8 million of unrealized losses on collateralized mortgage obligations and mortgage backed securities of government sponsored entities having a fair value of $420.7 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2014, the Company also had $1.0 million of unrealized losses on collateralized loan obligations having a fair value of $116.6 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase. Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

As of September 30, 2014, management does not intend to sell securities that are in unrealized loss positions and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis. Therefore, management does not consider any investment to be other-than-temporarily impaired at September 30, 2014.

Included in other assets is $15.3 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. At September 30, 2014, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $15.3 million of cost method investment securities.