Note 2: Investment Securities

A summary of the amortized cost and fair values of investment securities follows:



	Amortized		Gross Unrealized				Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
At December 31, 2013
Held to Maturity:
Obligations of state and political subdivisions	$	11,720	$	395	$	-	$	12,115
Total	$	11,720	$	395	$	-	$	12,115

Available for Sale:
Federal agency securities	$	123,332	$	330	$	(2,889)	$	120,773
Obligations of state and political subdivisions		33,685		36		(1,085)		32,636
Residential mortgage-backed securities		183,512		1,747		(2,089)		183,170
Asset-backed securities		9,578		-		(96)		9,482
Equity securities		35,316		1,267		(165)		36,418
Total	$	385,423	$	3,380	$	(6,324)	$	382,479

At December 31, 2012
Held to Maturity:
Obligations of state and political subdivisions	$	12,797	$	862	$	-	$	13,659
Total	$	12,797	$	862	$	-	$	13,659

Available for Sale:
Federal agency securities	$	114,159	$	1,474	$	(19)	$	115,614
Obligations of state and political subdivisions		34,754		887		(83)		35,558
Residential mortgage-backed securities		200,310		3,668		(303)		203,675
Asset-backed securities		7,794		-		(123)		7,671
Equity securities		1,300		497		-		1,797
Total	$	358,317	$	6,526	$	(528)	$	364,315

Residential mortgage-backed securities consist of agency securities underwritten and guaranteed by Government National Mortgage Association (“Ginnie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), and Federal National Mortgage Association (“Fannie Mae”).

Securities with limited marketability, such as Federal Reserve Bank stock, Federal Home Loan Bank stock, and certain other investments, are carried at cost and included in other assets on our Consolidated Statement of Financial Condition. Total investments carried at cost were $8.1 million and $8.5 million at December 31, 2013 and 2012, respectively. There are no identified events or changes in circumstances that may have a significant adverse effect on the investments carried at cost.

A comparison of the amortized cost and approximate fair value of our investment securities by maturity date at December 31, 2013 follows:



	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
One year or less	$	20,806	$	21,151	$	1,941	$	1,957
More than one year through five years		167,476		168,675		2,227		2,282
More than five years through ten years		151,933		147,705		4,151		4,265
More than ten years		45,208		44,948		3,401		3,611
Total	$	385,423	$	382,479	$	11,720	$	12,115

The foregoing analysis assumes that our residential mortgage-backed securities mature during the period in which they are estimated to prepay. No other prepayment or repricing assumptions have been applied to our investment securities for this analysis.

Gain or loss on sale or call of investments is based upon the specific identification method. The 2013 sales of investment securities netted to zero gain. Sales of securities are as follows:


(Dollars in thousands)		2013		2012		2011
Proceeds from sales	$	2,744	$	6,588	$	-
Gross realized gains		(0)		45		-
Gross realized losses		(0)		(10)		-

The following table shows securities with gross unrealized losses and their fair values by the length of time that the individual securities had been in a continuous unrealized loss position at December 31, 2013 and 2012. Securities whose market values exceed cost are excluded from this table.



				Continuous Unrealized
		Amortized cost of		Loss Existing for:				Fair value of
	Number of	securities with		Less Than		More Than		securities with
(Dollars in thousands)	Securities	unrealized losses		12 Months		12 Months		unrealized losses
At December 31, 2013
Available for Sale:
Federal agency securities	24	$	87,921	$	(2,885)	$	(4)	$	85,032
Obligations of state and political subdivisions	20		31,579		(887)		(198)		30,494
Residential mortgage-backed securities	53		104,667		(2,015)		(74)		102,578
Asset-backed securities	3		9,578		(96)		-		9,482
Other Securities	8		27,728		(165)		-		27,563
Total	108	$	261,473	$	(6,048)	$	(276)	$	255,149

At December 31, 2012
Available for Sale:
Federal agency securities	5	$	9,887	$	(19)	$	-	$	9,868
Obligations of state and political subdivisions	9		10,457		(83)		-		10,374
Residential mortgage-backed securities	23		46,787		(288)		(15)		46,484
Asset-backed securities	4		7,794		(123)		-		7,671
Total	41	$	74,925	$	(513)	$	(15)	$	74,397

We evaluate all securities on an individual basis for other-than-temporary impairment on at least a quarterly basis. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of us to retain our investment in the issuer for a period of time sufficient to allow for an anticipated recovery in fair value.

Management has the ability and intent to hold the securities classified as held to maturity in the table above until they mature, at which time we expect to receive full value for the securities. Furthermore, as of December 31, 2013, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is not more likely than not that we will have to sell any such securities before a recovery of cost. The declines in fair value were attributable to increases in market interest rates over the yields available at the time the underlying securities were purchased or increases in spreads over market interest rates. Management does not believe any of the securities are impaired due to credit quality. Accordingly, as of December 31, 2013, management believes the impairment of these investments is not deemed to be other-than-temporary.

As required by law, available for sale investment securities are pledged to secure public and trust deposits, sweep agreements, and borrowings from the FHLB. Securities with an amortized cost of $292.6 million and $284.2 million were pledged to meet such requirements at December 31, 2013 and 2012, respectively. Any amount over-pledged can be released at any time.