NOTE 2: INVESTMENT SECURITIES

A summary of the amortized cost and fair values of investment securities at March 31, 2014 and December 31, 2013 follows:



	Amortized		Gross Unrealized				Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
At March 31, 2014
Held to Maturity:
Obligations of state and political subdivisions	$	10,700	$	552	$	-	$	11,252
Total	$	10,700	$	552	$	-	$	11,252

Available for Sale:
Federal agency securities	$	118,883	$	249	$	(1,737)	$	117,395
Obligations of state and political subdivisions		33,574		130		(510)		33,194
Residential mortgage-backed securities		180,769		1,793		(1,761)		180,801
Asset-backed securities		9,586		9		(48)		9,547
Other securities		34,025		1,370		(45)		35,350
Total	$	376,837	$	3,551	$	(4,101)	$	376,287

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
Other securities		35,316		1,267		(165)		36,418
Total	$	385,423	$	3,380	$	(6,324)	$	382,479

Residential mortgage-backed securities consist of agency securities underwritten and guaranteed by Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. Other securities consist of corporate stock and other corporate securities.

Securities with limited marketability, such as Federal Reserve Bank stock, Federal Home Loan Bank (“FHLB”) stock, and certain other investments, are carried at cost and included in other assets on the unaudited consolidated statement of financial condition. Total investments carried at cost were $7.3 million at March 31, 2014 and $8.1 million at December 31, 2013. 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 March 31, 2014 follows:



	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
One year or less	$	17,535	$	17,788	$	940	$	952
More than one year through five years		162,898		164,583		2,224		2,282
More than five years through ten years		149,080		146,581		4,144		4,286
More than ten years		47,324		47,335		3,392		3,732
Total	$	376,837	$	376,287	$	10,700	$	11,252

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 of investments is based upon the specific identification method. There were no sales of securities available for sale for the three months ended March 31, 2014 and March 31, 2013.

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 March 31, 2014 and December 31, 2013. 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 March 31, 2014
Available for Sale:
Federal agency securities	24	$	91,922	$	(1,702)	$	(35)	$	90,185
Obligations of state and political subdivisions	14		18,821		(366)		(144)		18,311
Residential mortgage-backed securities	49		94,772		(1,604)		(157)		93,011
Asset-backed securities	3		7,830		(48)		-		7,782
Other Securities	3		14,723		(45)		-		14,678
Total	93	$	228,068	$	(3,765)	$	(336)	$	223,967

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

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 our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for an anticipated recovery in fair value.

We have the ability and intent to hold the securities classified as held to maturity until they mature, at which time we expect to receive full value for the securities. Furthermore, as of March 31, 2014, 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 likely that we will have to sell any such securities before a recovery of cost. The declines in fair value were attributable to recent 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 March 31, 2014, 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 $251.3 million and $292.6 million were pledged to meet such requirements at March 31, 2014 and December 31, 2013, respectively. Any amount over-pledged can be released at any time.