NOTE D — SECURITIES

The amortized cost and fair value of securities available for sale and held for investment at September 30, 2013 and December 31, 2012 are summarized as follows:


	September 30, 2013
(Dollars in thousands)	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	101	$	0	$	0		$	101
Mortgage-backed securities of U.S. Government Sponsored Entities		136,184		1,534		(3,676	)		134,042
Collateralized mortgage obligations of U.S. Government Sponsored Entities		385,832		835		(10,144	)		376,523
Private mortgage backed securities		29,754		0		(642	)		29,112
Private collateralized mortgage obligations		70,845		903		(297	)		71,451
Collateralized loan obligations		32,560		0		(226	)		32,334
Obligations of state and political subdivisions		6,586		304		(8	)		6,882

	$	661,862	$	3,576	$	(14,993	)	$	650,445


	December 31, 2012
(Dollars in thousands)	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S. Government Sponsored Entities	$	1,700	$	7	$	0		$	1,707
Mortgage-backed securities of U.S. Government Sponsored Entities		186,404		3,320		(469	)		189,255
Collateralized mortgage obligations of U.S. Government Sponsored Entities		352,731		2,430		(902	)		354,259
Private collateralized mortgage obligations		96,258		1,203		(530	)		96,931
Obligations of state and political subdivisions		847		51		0			898

	$	637,940	$	7,011	$	(1,901	)	$	643,050

SECURITIES HELD FOR INVESTMENT
Collateralized mortgage obligations of U.S. Government Sponsored Entities	$	4,687	$	0	$	(92	)	$	4,595
Private collateralized mortgage obligations		1,278		33		0			1,311
Obligations of state and political subdivisions		6,353		737		(3	)		7,087
Other		1,500		49		0			1,549

	$	13,818	$	819	$	(95	)	$	14,542

Management changed its intent to hold the securities held for investment during the first quarter 2013 and all securities were transferred to securities available for sale to allow more flexibility in managing interest rate risk.

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. Proceeds from sales of securities during the nine month period ended September 30, 2012 were $248,509,000 with gross gains of $7,251,000 and gross losses of $214,000.

Securities with a carrying and fair value of $71,680,000 at September 30, 2013 were pledged as collateral for United States Treasury deposits, and other public and trust deposits. Securities with a carrying value and fair value of $160,751,000 were pledged as collateral for repurchase agreements.

The amortized cost and fair value of securities at September 30, 2013, 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.


	Available for Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value
Due in less than one year	$	101	$	101
Due after one year through five years		818		833
Due after five years through ten years		743		762
Due after ten years		5,025		5,287

		6,687		6,983
Mortgage-backed securities of Government Sponsored Entities		136,184		134,042
Collateralized mortgage obligations of Government Sponsored Entities		385,832		376,523
Private mortgage backed securities		29,754		29,112
Private collateralized mortgage obligations		70,845		71,451
Collateralized loan obligations		32,560		32,334
No contractual maturity		0		0

	$	661,862	$	650,445

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, 2013 and December 31, 2012, respectively.


	September 30, 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	$	67,243	$	(3,451	)	$	14,719	$	(225	)	$	81,962	$	(3,676	)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		291,428		(9,590	)		37,191		(554	)		328,619		(10,144	)
Private mortage backed securities		29,112		(642	)		0		0			29,112		(642	)
Private collaterlized mortgage obligations		42,432		(297	)		0		0			42,432		(297	)
Collateralized loan obligations		27,334		(226	)		0		0			27,334		(226	)
Obligations of state and political subdivisions		510		(6	)		125		(2	)		635		(8	)

Total temporarily impaired securities	$	458,059	$	(14,212	)	$	52,035	$	(781	)	$	510,094	$	(14,993	)


	December 31, 2012
	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	$	54,289	$	(469	)	$	0	$	0		$	54,289	$	(469	)
Collateralized mortgage obligations of U.S. Government Sponsored Entities		150,057		(901	)		4,593		(93	)		154,650		(994	)
Private collateralized mortgage obligations		29,969		(441	)		9,221		(89	)		39,190		(530	)
Obligations of state and political subdivisions		0		0			125		(3	)		125		(3	)

Total temporarily impaired securities	$	234,315	$	(1,811	)	$	13,939	$	(185	)	$	248,254	$	(1,996	)

At September 30, 2013, approximately $0.9 million of the unrealized losses pertain to private label securities secured by collateral originated in 2005 and prior. Their fair value at September 30, 2013 is $71.5 million and is attributable to a combination of factors, including relative changes in interest rates since the time of purchase and decreased liquidity for investment securities in general. The collateral underlying these mortgage investments are 30- and 15-year fixed and 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, 2013, the Company also had $13.8 million of unrealized losses on mortgage backed securities of government sponsored entities having a fair value of $410.6 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase and higher prepayments compressing prices as a result of the Federal Reserve’s actions to maintain low interest rates. 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.

As of September 30, 2013, management does not intend to sell securities that are in significant 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, 2013.

Included in other assets is $11.3 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. At September 30, 2013, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the fair value of the $11.3 million of cost method investment securities.