Note 4 – Securities

The fair value of securities is as follows:


December 31, 2013	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	43,808	$	133	$	(807	)	$	43,134
State and municipal		176,670		4,405		(3,177	)		177,898
Federal agency collateralized mortgage obligations		116,047		1,242		(2,583	)		114,706
Federal agency mortgage-backed pools		170,006		3,172		(2,284	)		170,894
Private labeled mortgage-backed pools		1,188		38		—			1,226
Corporate notes		708		25		—			733

Total available for sale investment securities	$	508,427	$	9,015	$	(8,851	)	$	508,591

Held to maturity, State and Municipal	$	9,910	$	—	$	—		$	9,910

December 31, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	51,458	$	351	$	(30	)	$	51,779
State and municipal		162,147		10,842		(84	)		172,905
Federal agency collateralized mortgage obligations		95,337		1,533		(39	)		96,831
Federal agency mortgage-backed pools		152,372		6,847		(15	)		159,204
Private labeled mortgage-backed pools		1,960		71		—			2,031
Corporate notes		32		19		—			51

Total available for sale investment securities	$	463,306	$	19,663	$	(168	)	$	482,801

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. While these securities are held in the available for sale portfolio, Horizon intends, and has the ability, to hold them until the earlier of a recovery in fair value or maturity.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. At December 31, 2013, no individual investment security had an unrealized loss that was determined to be other-than-temporary.

The unrealized losses on the Company’s investments in United States Department of the Treasury (“U.S. Treasury”) and federal agencies, securities of state and municipal governmental agencies, and federal agency mortgage-backed pools were caused by interest rate volatility and not a decline in credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company expects to recover the amortized cost basis over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at December 31, 2013.

The amortized cost and fair value of securities available for sale and held to maturity at December 31, 2013 and December 31, 2012, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	December 31, 2013				December 31, 2012
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Available for sale
Within one year	$	3,643	$	3,663	$	4,358	$	4,368
One to five years		49,198		49,627		49,415		50,673
Five to ten years		106,225		107,424		98,551		104,258
After ten years		62,120		61,051		61,313		65,436

		221,186		221,765		213,637		224,735
Federal agency collateralized mortgage obligations		116,047		114,706		95,337		96,831
Federal agency mortgage-backed pools		170,006		170,894		152,372		159,204
Private labeled mortgage-backed pools		1,188		1,226		1,960		2,031

Total available for sale investment securities	$	508,427	$	508,591	$	463,306	$	482,801

Held to maturity
Within one year	$	9,910	$	9,910	$	—	$	—
One to five years		—		—		—		—

Total held to maturity investment securities	$	9,910	$	9,910	$	—	$	—

The following table shows investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


	Less than 12 Months					12 Months or More					Total
December 31, 2013	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury and federal agencies	$	32,099	$	(807	)	$	—	$	—		$	32,099	$	(807	)
State and municipal		57,078		(2,993	)		3,206		(184	)		60,284		(3,177	)
Federal agency collateralized mortgage obligations		64,445		(2,121	)		8,601		(462	)		73,046		(2,583	)
Federal agency mortgage-backed pools		87,919		(2,284	)		—		—			87,919		(2,284	)

Total temporarily impaired securities	$	241,541	$	(8,205	)	$	11,807	$	(646	)	$	253,348	$	(8,851	)


	Less than 12 Months					12 Months or More					Total
December 31, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury and federal agencies	$	13,064	$	(30	)	$	—	$	—		$	13,064	$	(30	)
State and municipal		11,928		(84	)		—		—			11,928		(84	)
Federal agency collateralized mortgage obligations		12,719		(39	)		—		—			12,719		(39	)
Federal agency mortgage-backed pools		4,126		(15	)		—		—			4,126		(15	)

Total temporarily impaired securities	$	41,837	$	(168	)	$	—	$	—		$	41,837	$	(168	)

U.S. Treasury, federal agencies and state and municipal

The unrealized losses on the Company’s investments in U.S. Treasury, federal agency and state and political subdivisions were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2013.

Federal agency mortgage-backed pools collateralized mortgage obligations

The unrealized losses on the Company’s investment in collateralized mortgage obligations securities were caused by interest rate increases. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2013.

Information regarding security proceeds, gross gains and gross losses are presented below.


	Years ended December 31
	2013			2012		2011
Sales of securities available for sale
Proceeds	$	23,853		$	14,989	$	77,379
Gross gains		382			2		1,777
Gross losses		(8	)		—		—

The tax effect of the proceeds from the sale of securities available for sale was $131, $1 and $622 for the years ended December 31, 2013, 2012 and 2011, respectively.

The Company pledges securities to secure retail and corporate repurchase agreements to the Federal Reserve for borrowing availability and as settlements for the fair value of swap agreements. At December 31, 2013, the Company had pledged $168.7 million of fair value or $167.3 million of amortized cost, in securities as collateral for $140.2 million in repurchase agreements, $92.7 million of fair value or $90.2 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with no current outstanding borrowings and $12.8 million of fair value or $12.4 million of amortized cost, in securities as collateral for $2.8 million in settlements on the fair value of swap agreements.