Securities

The amortized cost, gross unrealized gains and losses and fair values of securities at March 31, 2014 and December 31, 2013 follows:



	March 31, 2014
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	71,683	$	—	$	(4,242	)	$	67,441
Mortgage backed securities: residential	94,222		1,360		(1,063		)	94,519
Collateralized mortgage obligations	22,163		247		(271		)	22,139
State and political subdivisions	32,503		1,273		(365		)	33,411
Total Securities	$	220,571	$	2,880	$	(5,941	)	$	217,510

	At December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	71,851	$	—	$	(6,463	)	$	65,388
Mortgage backed securities: residential	94,313		1,362		(1,245		)	94,430
Collateralized mortgage obligations	18,650		255		(250		)	18,655
State and political subdivisions	32,521		1,137		(693		)	32,965
Preferred securities	4,684		—		—			4,684
Total Securities	$	222,019	$	2,754	$	(8,651	)	$	216,122

U.S. Government agencies and corporations include callable and bullet agency issues and agency-backed mortgage backed securities. Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based upon payment patterns of the underlying collateral.

The amortized cost and fair value of available for sale debt securities by contractual maturity date at March 31, 2014 is provided in the following table. Mortgage backed securities and collaterlized mortgage obligations are not due at a single maturity date and are therefore shown separately.



	At March 31, 2014
	Amortized Cost		Fair Value
	(Dollars in thousands)
Securities available for sale:
Due in one year or less	$	22,033	$	21,144
Due from one year to five years	46,819		45,340
Due from five years to ten years	29,740		28,680
Due after ten years	5,594		5,687
Mortgage backed securities and collateralized mortgage obligations	116,385		116,659
	$	220,571	$	217,510

The following table shows the proceeds from sales of available-for-sale securities for the three months ended March 31, 2014 and 2013. The gross realized gains and losses on those sales that have been included in earnings. Gains or losses on the sales of available-for-sale securities are recognized upon sale and are determined using the specific identification method.



	March 31,
	2014		2013
	(Dollars in thousands)
Gross realized gains	$	—	$	178
Gross realized losses	—		—
Net Securities Gains	$	—	$	178
Proceeds from the sale of available for sale securities	$	—	$	2,280

The carrying value of securities pledged to secure trust deposits, public deposits, lines of credit, and for other purposes required by law amounted to $193,354 and $154,479 at March 31, 2014 and December 31, 2013, respectively.

The following is a summary of securities that had unrealized losses at March 31, 2014 and December 31, 2013. The information is presented for securities that have been in an unrealized loss position for less than 12 months and for more than 12 months. At March 31, 2014, the Corporation held 50 securities with unrealized losses totaling $5,941. At December 31, 2013, there were 53 securities with unrealized losses totaling $8,651. Securities may temporarily be valued at less than amortized cost if the current levels of interest rates, as compared to the coupons on the securities held by the Corporation, are higher or if impairment is not due to credit deterioration. The Corporation has the intent and the ability to hold these securities until their value recovers, which may be until maturity.



	At March 31, 2014
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	58,282	$	(3,405	)	$	9,159	$	(837	)	$	67,441	(4,242		)
Mortgage backed securities: residential	29,332		(454		)	24,875		(609		)	54,207		(1,063		)
Collateralized mortgage obligations	6,741		(86		)	4,287		(185		)	11,028		(271		)
State and political subdivisions	7,526		(316		)	488		(49		)	8,014		(365		)
Total	$	101,881	$	(4,261	)	$	38,809	$	(1,680	)	$	140,690	$	(5,941	)

	At December 31, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	65,388	$	(6,463	)	$	—	$	—		$	65,388	$	(6,463	)
Mortgage backed securities: residential	28,603		(566		)	31,051		(679		)	59,654		(1,245		)
Collateralized mortgage obligations	5,079		(59		)	4,411		(191		)	9,490		(250		)
State and political subdivisions	9,188		(602		)	447		(91		)	9,635		(693		)
Total	$	108,258	$	(7,690	)	$	35,909	$	(961	)	$	144,167	$	(8,651	)

On a quarterly basis, the Corporation performs a comprehensive security-level impairment assessment on all securities in an unrealized loss position to determine if other-than-temporary impairment ("OTTI") exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. For debt securities, an OTTI loss must be recognized for a debt security in an unrealized loss position if the Corporation intends to sell the security or it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the individual security. If the Corporation does not expect to sell the security, the Corporation must evaluate the expected cash flows to be received to determine if a credit loss has occurred. If a credit loss is present, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in other comprehensive income.

Equity securities are also evaluated to determine whether the unrealized loss is expected to be recoverable based on whether evidence exists to support a realizable value equal to or greater than the amortized cost basis. If it is probable that the Corporation will not recover the amortized cost basis, taking into consideration the estimated recovery period and its ability to hold the equity security until recovery, OTTI is recognized. The Corporation held no equity securities as of March 31, 2014.

The security-level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. The assessments are based on the nature of the securities, the financial condition of the issuer, the extent and duration of the securities, the extent and duration of the loss and the intent and whether management intends to sell or it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis, which may be maturity. For those securities for which the assessment shows the Corporation will recover the entire cost basis, management does not intend to sell these securities and it is not more likely than not that the Corporation will be required to sell them before the anticipated recovery of the amortized cost basis, the gross unrealized losses are recognized in other comprehensive income, net of tax.

Management does not believe that the investment securities that were in an unrealized loss position as of March 31, 2014 represent an other-than-temporary impairment. Total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Corporation does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Corporation will be required to sell the investment securities before recovery of their amortized cost bases, which may be at maturity.