2. Investment Securities

The portfolio of investment securities consisted of the following (in thousands):

	March 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,328	$	1	$	163	$	11,166
Obligations of state and political subdivisions		52,097		2,079		116		54,060
GSE mortgage-backed securities		141,719		2,597		1,371		142,945
Collateralized mortgage obligations: residential		71,137		360		2,147		69,350
Collateralized mortgage obligations: commercial		27,005		374		148		27,231
Other asset-backed securities		24,955		432		24		25,363
Collateralized debt obligation		464		909		-		1,373
	$	328,705	$	6,752	$	3,969	$	331,488

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,455	$	1	$	191	$	11,265
Obligations of state and political subdivisions		57,925		2,296		243		59,978
GSE mortgage-backed securities		146,129		2,029		2,193		145,965
Collateralized mortgage obligations: residential		73,569		212		2,894		70,887
Collateralized mortgage obligations: commercial		27,082		416		152		27,346
Other asset-backed securities		25,204		351		66		25,489
Collateralized debt obligation		464		271		-		735
	$	341,828	$	5,576	$	5,739	$	341,665

	March 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	46,999	$	18	$	1,492	$	45,525
GSE mortgage-backed securities		75,634		590		706		75,518
Collateralized mortgage obligations: residential		13,897		-		671		13,226
Collateralized mortgage obligations: commercial		15,632		73		-		15,705
	$	152,162	$	681	$	2,869	$	149,974

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	47,377	$	38	$	2,586	$	44,829
GSE mortgage-backed securities		78,272		148		1,079		77,341
Collateralized mortgage obligations: residential		14,189		-		979		13,210
Collateralized mortgage obligations: commercial		15,685		103		-		15,788
	$	155,523	$	289	$	4,644	$	151,168

With the exception of three private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $57,000 at March 31, 2014, all of the Company’s CMOs are government-sponsored enterprise (“GSE”) securities.

The amortized cost and fair value of debt securities at March 31, 2014 by contractual maturity are shown in the following table (in thousands) with the exception of other asset-backed securities, mortgage-backed securities, CMOs, and the collateralized debt obligation. Expected maturities may differ from contractual maturities for mortgage-backed securities and CMOs because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	8,965	$	9,094
Due after one year through five years		34,408		35,389
Due after five years through ten years		14,871		15,649
Due after ten years		5,181		5,094
Other asset-backed securities		24,955		25,363
Mortgage-backed securities and collateralized mortgage obligations:
Residential		212,856		212,295
Commercial		27,005		27,231
Collateralized debt obligation		464		1,373
	$	328,705	$	331,488

	Amortized Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	107	$	107
Due after one year through five years		2,411		2,408
Due after five years through ten years		6,928		6,768
Due after ten years		37,553		36,242
Mortgage-backed securities and collateralized mortgage obligations:
Residential		89,531		88,744
Commercial		15,632		15,705
	$	152,162	$	149,974

Details concerning investment securities with unrealized losses are as follows (in thousands):

	March 31, 2014
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,413	$	163	$	-	$	-	$	10,413	$	163
Obligations of state and political subdivisions		3,850		109		481		7		4,331		116
GSE mortgage-backed securities		56,625		1,360		10,702		11		67,327		1,371
Collateralized mortgage obligations: residential		39,722		1,471		13,169		676		52,891		2,147
Collateralized mortgage obligations: commercial		4,266		148		-		-		4,266		148
Other asset-backed securities		5,864		24		-		-		5,864		24
	$	120,740	$	3,275	$	24,352	$	694	$	145,092	$	3,969

	December 31, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,463	$	191	$	-	$	-	$	10,463	$	191
Obligations of state and political subdivisions		4,256		243		-		-		4,256		243
GSE mortgage-backed securities		68,028		2,193		-		-		68,028		2,193
Collateralized mortgage obligations: residential		56,975		2,563		4,371		331		61,346		2,894
Collateralized mortgage obligations: commercial		4,282		152		-		-		4,282		152
Other asset-backed securities		13,099		66		-		-		13,099		66
	$	157,103	$	5,408	$	4,371	$	331	$	161,474	$	5,739

	March 31, 2014
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	19,478	$	622	$	21,648	$	870	$	41,126	$	1,492
GSE mortgage-backed securities		30,385		706		-		-		30,385		706
Collateralized mortgage obligations: residential		8,924		400		4,302		271		13,226		671
	$	58,787	$	1,728	$	25,950	$	1,141	$	84,737	$	2,869

	December 31, 2013
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	42,246	$	2,569	$	685	$	17	$	42,931	$	2,586
GSE mortgage-backed securities		31,042		1,079		-		-		31,042		1,079
Collateralized mortgage obligations: residential		13,210		979		-		-		13,210		979
	$	86,498	$	4,627	$	685	$	17	$	87,183	$	4,644

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities. If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors. In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

As of March 31, 2014, 101 securities had unrealized losses totaling 2.89% of the individual securities’ amortized cost basis and 1.42% of the Company’s total amortized cost basis. 31 of the 101 securities had been in an unrealized loss position for over twelve months at March 31, 2014. These 31 securities had an amortized cost basis and unrealized loss of $52.1 million and $1.8 million, respectively. The unrealized losses on debt securities at March 31, 2014 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased. Management identified no impairment related to credit quality. At March 31, 2014, management had the intent and ability to hold impaired securities and no impairment was evaluated as other than temporary. As a result, no other than temporary impairment losses were recognized during the three months ended March 31, 2014.

During the three months ended March 31, 2014, the Company did not sell any securities. During the three months ended March 31, 2013, the Company sold 21 securities classified as available-for-sale at a net gain of approximately $204,000. Of the 21 securities sold, 18 securities were sold with gains totaling approximately $217,000 and three securities were sold at a loss of approximately $13,000.

Securities with an aggregate carrying value of approximately $270.5 million and $259.9 million at March 31, 2014 and December 31, 2013, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.