3.	INVESTMENT SECURITIES

The portfolio of securities consisted of the following (in thousands):

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,455	$	1	$	191	$	11,265
Obligations of state and political subdivisions		57,925		2,296		243		59,978
GSE mortgage-backed securities		146,129		2,029		2,193		145,965
Collateralized mortgage obligations: residential		73,569		212		2,894		70,887
Collateralized mortgage obligations: commercial		27,082		416		152		27,346
Other asset-backed securities		25,204		351		66		25,489
Collateralized debt obligation		464		271		-		735
	$	341,828	$	5,576	$	5,739	$	341,665

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	13,422	$	2	$	-	$	13,424
Obligations of state and political subdivisions		83,093		4,328		-		87,421
GSE mortgage-backed securities		172,932		5,887		-		178,819
Collateralized mortgage obligations: residential		101,381		652		47		101,986
Collateralized mortgage obligations: commercial		28,528		1,233		-		29,761
Other asset-backed securities		12,245		497		-		12,742
Collateralized debt obligation		464		-		-		464
	$	412,065	$	12,599	$	47	$	424,617

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	47,377	$	38	$	2,586	$	44,829
GSE mortgage-backed securities		78,272		148		1,079		77,341
Collateralized mortgage obligations: residential		14,189		-		979		13,210
Collateralized mortgage obligations: commercial		15,685		103		-		15,788
	$	155,523	$	289	$	4,644	$	151,168

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	42,900	$	7	$	7	$	42,900
GSE mortgage-backed securities		89,383		2,819		-		92,202
Collateralized mortgage obligations: residential		5,009		-		-		5,009
Collateralized mortgage obligations: commercial		16,232		581		-		16,813
	$	153,524	$	3,407	$	7	$	156,924

With the exception of 3 private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $59,000 and $96,000 at December 31, 2013 and 2012, respectively, all of the Company’s CMOs are government-sponsored enterprise securities.

The amortized cost and fair value of debt securities at December 31, 2013 by contractual maturity are shown below (in thousands). Except for mortgage backed securities, collateralized mortgage obligations, other assets backed securities, and collateralized debt obligations, expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	12,070	$	12,228
Due after one year through five years		35,119		36,194
Due after five years through ten years		17,001		17,851
Due after ten years		5,190		4,970
Mortgage-backed securities and collateralized mortgage obligations:
Residential		219,698		216,852
Commercial		27,082		27,346
Other asset-backed securities		25,204		25,489
Collateralized debt obligation		464		735
	$	341,828	$	341,665

	Amortized Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	100	$	100
Due after one year through five years		2,198		2,182
Due after five years through ten years		7,273		7,072
Due after ten years		37,806		35,475
Mortgage-backed securities and collateralized mortgage obligations:
Residential		92,461		90,551
Commercial		15,685		15,788
	$	155,523	$	151,168

Details concerning investment securities with unrealized losses are as follows (in thousands):

	December 31, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,463	$	191	$	-	$	-	$	10,463	$	191
Obligations of state and political subdivisions		4,256		243		-		-		4,256		243
GSE mortgage-backed securities		68,028		2,193		-		-		68,028		2,193
Collateralized mortgage obligations: residential		56,975		2,563		4,371		331		61,346		2,894
Collateralized mortgage obligations: commercial		4,282		152		-		-		4,282		152
Other asset-backed securities		13,099		66		-		-		13,099		66
	$	157,103	$	5,408	$	4,371	$	331	$	161,474	$	5,739

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
Collateralized mortgage obligations: residential	$	10,085	$	45	$	96	$	2	$	10,181	$	47

	December 31, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	42,246	$	2,569	$	685	$	17	$	42,931	$	2,586
GSE mortgage-backed securities		31,042		1,079		-		-		31,042		1,079
Collateralized mortgage obligations: residential		13,210		979		-		-		13,210		979
	$	86,498	$	4,627	$	685	$	17	$	87,183	$	4,644

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,128	$	7	$	-	$	-	$	1,128	$	7

Management evaluates whether unrealized losses on securities represent impairment that is other than temporary on a quarterly basis. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities. If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors. In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

As of December 31, 2013, 108 securities had unrealized losses totaling 4.01% of the individual securities’ amortized cost basis and 2.09% of the Company’s total amortized cost basis. Five of the 108 securities had been in an unrealized loss position for over twelve months at December 31, 2013. These five securities had an amortized cost basis and unrealized loss of $5.4 million and $348,000, respectively. The unrealized losses on debt securities at December 31, 2013 and 2012 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased. Management identified no impairment related to credit quality. At December 31, 2013 and 2012, management had both the intent and ability to hold impaired securities, and no impairment was evaluated as other than temporary. As a result, no impairment losses were recognized on debt securities during the years ended December 31, 2013, 2012, or 2011.

During the year ended December 31, 2013, the Company sold 35 securities classified as available-for-sale at a net gain of $234,000. Of the 35 securities sold, 31 securities were sold with gains totaling $247,000 and four securities were sold at a loss of $13,000. During the year ended December 31, 2012, the Company sold six securities classified as available-for-sale at a net gain of $204,000. Of the six securities sold, five securities were sold with gains totaling $235,000 and one security was sold at a loss of $31,000.

Securities with an aggregate carrying value of approximately $259.9 million and $226.2 million at December 31, 2013 and 2012, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.