2.	Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at March 31, 2013 and December 31, 2012 are summarized as follows:


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2013
Securities available for sale:
Agency mortgage-backed securities	$	21,258	$	393	$	22	$	21,629
Agency CMO		22,275		238		4		22,509
Other debt securities:
Agency notes and bonds		34,118		252		4		34,366
Municipal obligations		32,425		1,537		221		33,741

Subtotal - debt securities		110,076		2,420		251		112,245

Mutual funds		4,325		28		12		4,341

Total securities available for sale	$	114,401	$	2,448	$	263	$	116,586

Securities held to maturity:
Agency mortgage-backed securities	$	11	$	0	$	0	$	11

Total securities held to maturity	$	11	$	0	$	0	$	11

December 31, 2012
Securities available for sale:
Agency mortgage-backed securities	$	22,762	$	456	$	12	$	23,206
Agency CMO		22,458		225		23		22,660
Other debt securities:
Agency notes and bonds		38,273		290		10		38,553
Municipal obligations		32,605		1,800		88		34,317

Subtotal - debt securities		116,098		2,771		133		118,736

Mutual funds		4,213		40		16		4,237

Total securities available for sale	$	120,311	$	2,811	$	149	$	122,973

Securities held to maturity:
Agency mortgage-backed securities	$	12	$	0	$	0	$	12

Total securities held to maturity	$	12	$	0	$	0	$	12

Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (CMO) include securities issued by the Government National Mortgage Association (GNMA), a U.S. government agency, and the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Bank (FHLB), which are government-sponsored enterprises.

The amortized cost and fair value of debt securities as of March 31, 2013, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.


	Securities Available for Sale				Securities Held to Maturity
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	55	$	55	$	0	$	0
Due after one year through five years		8,144		8,249		0		0
Due after five years through ten years		19,152		19,634
Due after ten years		39,192		40,169		0		0

		66,543		68,107		0		0
Mortgage-backed securities and CMO		43,533		44,138		11		11

	$	110,076	$	112,245	$	11	$	11

Information pertaining to investment securities available for sale with gross unrealized losses at March 31, 2013, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows:


(Dollars in thousands)	Number of Investment Positions		Fair Value		Gross Unrealized Losses
Continuous loss position less than twelve months:
Agency notes and bonds		2	$	1,967	$	4
Agency CMO		4		4,217		4
Agency mortgage-backed securities		4		4,813		22
Muncipal obligations		21		9,250		221

Total less than twelve months		31		20,247		251

Continuous loss position more than twelve months:
Mutual fund		1		389		12

Total more than twelve months		1		389		12

Total securities available for sale		32	$	20,636	$	263

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recover in fair value.

At March 31, 2013, the 31 U.S. government agency debt securities, including agency notes and bonds, mortgage-backed securities and CMO, and municipal obligations in a loss position had depreciated approximately 1.2% from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by first mortgage loans and municipal project revenues. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

During the three months ended March 31, 2013, the Company realized gross gains on sales of available for sale municipal securities of $21,000. The Company did not sell any available for sale securities during the three months ended March 31, 2012.