Note 3 - Investment Securities

The amortized cost and estimated fair values of investments in debt and equity securities are summarized in the following tables:


	September 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Securities Available for Sale
Obligations of U.S. government corporations and agencies	$	75,877	$	4,095	$	(112	)	$	79,860
Obligations of states and political subdivisions		3,129		61		—			3,190
Corporate debt securities		1,887		25		—			1,912

Total securities available for sale	$	80,893	$	4,181	$	(112	)	$	84,962

Securities Held to Maturity
Obligations of U.S. government corporations and agencies	$	430,899	$	5,337	$	(1,930	)	$	434,306
Obligations of states and political subdivisions		12,610		22		(134	)		12,498

Total securities held to maturity	$	443,509	$	5,359	$	(2,064	)	$	446,804


	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Securities Available for Sale
Obligations of U.S. government corporations and agencies	$	93,055	$	4,445	$	(357	)	$	97,143
Obligations of states and political subdivisions		5,513		77		(1	)		5,589
Corporate debt securities		1,877		38		—			1,915

Total securities available for sale	$	100,445	$	4,560	$	(358	)	$	104,647

Securities Held to Maturity
Obligations of U.S. government corporations and agencies	$	227,864	$	298	$	(5,540	)	$	222,622
Obligations of states and political subdivisions		12,640		—		(1,455	)		11,185

Total securities held to maturity	$	240,504	$	298	$	(6,995	)	$	233,807

No investment securities were sold during the nine months ended September 30, 2014 or the year ended December 31, 2013. Investment securities with an aggregate carrying value of $81,828,000 and $62,064,000 at September 30, 2014 and December 31, 2013, respectively, were pledged as collateral for specific borrowings, lines of credit and local agency deposits.

The amortized cost and estimated fair value of debt securities at September 30, 2014 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2014, obligations of U.S. government corporations and agencies with a cost basis totaling $506,776,000 consist almost entirely of mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages.

For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At September 30, 2014, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 5.7 years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.


Investment Securities	Available for Sale				Held to Maturity
(In thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year	$	2,012	$	2,044		—		—
Due after one year through five years		1,193		1,244		—		—
Due after five years through ten years		33,218		34,556		—		—
Due after ten years		44,470		47,118	$	443,509	$	446,804

Totals	$	80,893	$	84,962	$	443,509	$	446,804

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:


	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
September 30, 2014
Securities available for sale:
Obligations of U.S. government corporations and agencies	$	2,631	$	(16	)	$	6,956	$	(96	)	$	9,587	$	(112	)
Obligations of states and political subdivisions		—		—			—		—			—		—
Corporate debt securities		—		—			—		—			—		—

Total securities available for sale	$	2,631	$	(16	)	$	6,956	$	(96	)	$	9,587	$	(112	)

Securities held to maturity:
Obligations of U.S. government corporations and agencies	$	46,073	$	(134	)	$	56,245	$	(1,796	)	$	102,318	$	(1,930	)
Obligations of states and political subdivisions		788		(22	)		7,357		(112	)		8,145		(134	)

Total securities held to maturity	$	46,861	$	(156	)	$	63,602	$	(1,908	)	$	110,463	$	(2,064	)


	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
December 31, 2013
Securities available for sale:
Obligations of U.S. government corporations and agencies	$	10,287	$	(357	)		—		—		$	10,287	$	(357	)
Obligations of states and political subdivisions		199		(1	)		—		—			199		(1	)
Corporate debt securities		—		—			—		—			—		—

Total securities available for sale	$	10,486	$	(358	)		—		—		$	10,486	$	(358	)

Securities held to maturity:
Obligations of U.S. government corporations and agencies	$	188,218	$	(5,540	)		—		—		$	188,218	$	(5,540	)
Obligations of states and political subdivisions		11,185		(1,455	)		—		—			11,185		(1,455	)

Total securities held to maturity	$	199,403	$	(6,995	)		—		—		$	199,403	$	(6,995	)

Obligations of U.S. government corporations and agencies: Unrealized losses on investments in obligations of U.S. government corporations and agencies are caused by interest rate increases. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At September 30, 2014, 13 debt securities representing obligations of U.S. government corporations and agencies had unrealized losses with aggregate depreciation of 1.79% from the Company’s amortized cost basis.

Obligations of states and political subdivisions: The unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At September 30, 2014, 10 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 1.62% from the Company’s amortized cost basis.

Corporate debt securities: At September 30, 2014, no corporate debt securities had unrealized losses.