4. SECURITIES

The following table summarizes the amortized cost and fair value of the available for sale and held to maturity investment securities portfolio at March 31, 2013 and December 31, 2012 and the corresponding amounts of unrealized gains and losses therein:

March 31, 2013

Gross

Estimated

Amortized

Unrealized

Fair

(In thousands)

Cost

Gains

Losses

Value

Available for sale:

U.S. GSE securities

136,604

168

(381

)

136,391

State and municipal obligations

49,212

901

(20

)

50,093

U.S. GSE residential mortgage-backed securities

22,561

1,023

)

23,577

U.S. GSE residential collateralized mortgage obligations

215,179

2,351

(593

)

216,937

U.S. GSE commercial mortgage-backed securities

3,118

—

)

3,111

U.S. GSE commercial collateralized mortgage obligations

5,128

214

—

5,342

Non Agency commercial mortgage-backed securities

4,490

—

(132

)

4,358

Other Asset backed securities

15,638

103

(86

)

15,655

Total available for sale

451,930

4,760

(1,226

)

455,464

Held to maturity:

State and municipal obligations

96,143

2,085

(11

)

98,217

U.S. GSE residential mortgage-backed securities

9,055

—

(33

)

9,022

U.S. GSE residential collateralized mortgage obligations

53,028

691

(469

)

53,250

U.S. GSE commercial mortgage-backed securities

10,275

273

—

10,548

U.S. GSE commercial collateralized mortgage obligations

4,976

268

—

5,244

Corporate Bonds

22,837

205

(216

)

22,826

Total held to maturity

196,314

3,522

(729

)

199,107

Total securities

648,244

8,282

(1,955

)

654,571

	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	178,421	$	377	$	(346	)	$	178,452
State and municipal obligations	58,867		1,132		(36		)	59,963
U.S. GSE residential mortgage-backed securities	19,462		1,135		—			20,597
U.S. GSE residential collateralized mortgage obligations	224,226		2,762		(542		)	226,446
U.S. GSE commercial mortgage-backed securities	3,132		6		—			3,138
U.S. GSE commercial collateralized mortgage obligations	9,079		278		—			9,357
Non Agency commercial mortgage-backed securities	4,754		235		—			4,989
Other Asset backed securities	26,588		65		(525		)	26,128
Total available for sale	524,529		5,990		(1,449		)	529,070

Held to maturity:
U.S. GSE securities	4,992		24		—			5,016
State and municipal obligations	98,752		2,241		(31		)	100,962
U.S. GSE residential mortgage-backed securities	9,483		26		—			9,509
U.S. GSE residential collateralized mortgage obligations	59,388		704		(404		)	59,688
U.S. GSE commercial mortgage-backed securities	10,324		350		—			10,674
U.S. GSE commercial collateralized mortgage obligations	4,975		254		—			5,229
Corporate Bonds	22,821		134		(331		)	22,624
Total held to maturity	210,735		3,733		(766		)	213,702
Total securities	$	735,264	$	9,723	$	(2,215	)	$	742,772

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at March 31, 2013. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2013
	Amortized		Fair
(In thousands)	Cost		Value
Maturity
Available for sale:
Within one year	$	11,391	$	11,412
One to five years	36,845		37,744
Five to ten years	153,264		153,603
Beyond ten years	250,430		252,705
Total	$	451,930	$	455,464

Held to maturity:
Within one year	$	47,991	$	48,012
One to five years	47,841		48,216
Five to ten years	19,075		19,994
Beyond ten years	81,407		82,885
Total	$	196,314	$	199,107

Securities with unrealized losses at March 31, 2013 and December 31, 2012, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 months				Greater than 12 months
March 31, 2013			Unrealized				Unrealized
(In thousands)	Fair Value		losses		Fair Value		losses
Available for sale:
U.S. GSE securities	$	85,313	$	381	$	—	$	—
State and municipal obligations	8,717		15		1,817		5
U.S. GSE residential mortgage-backed securities	3,259		7		—		—
U.S. GSE residential collateralized mortgage obligations	67,922		514		5,190		79
U.S. GSE commercial mortgage-backed securities	3,111		7		—		—
Non Agency commercial mortgage-backed securities	4,358		132		—		—
Other Asset backed securities	2,910		86		—		—
Total available for sale	175,590		1,142		7,007		84

Held to maturity:
State and municipal obligations	17,239		11		—		—
U.S. GSE residential mortgage-backed securities	9,022		33		—		—
U.S. GSE residential collateralized mortgage obligations	33,718		469		—		—
Corporate Bonds	—		—		10,784		216
Total held to maturity	$	59,979	$	513	$	10,784	$	216

	Less than 12 months				Greater than 12 months
December 31, 2012			Unrealized				Unrealized
(In thousands)	Fair Value		losses		Fair Value		losses
Available for sale:
U.S. GSE securities	$	79,692	$	346	$	—	$	—
State and municipal obligations	13,878		36		226		—
U.S. GSE residential mortgage-backed securities	90		—		—		—
U.S. GSE residential collateralized mortgage obligations	65,961		542		—		—
Other Asset backed securities	18,109		525		—		—
Total available for sale	177,730		1,449		226		—

Held to maturity:
State and municipal obligations	28,939		31		—		—
U.S. GSE residential collateralized mortgage obligations	41,563		404		—		—
Corporate Bonds	—		—		17,669		331
Total held to maturity	$	70,502	$	435	$	17,669	$	331

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320, Accounting for Certain Investments in Debt and Equity Securities. In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (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, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

At March 31, 2013, the majority of unrealized losses on both the available for sale and held to maturity securities are related to the Company’s U.S. GSE residential collateralized mortgage obligations. The decrease in fair value of the U.S. GSE residential collateralized mortgage obligations is attributable to changes in interest rates and not credit quality. The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2013.

Proceeds from sales of securities available for sale were $46.6 million and $3.3 million for the three months ended March 31, 2013 and 2012, respectively. Net gains of $0.3 million were realized on these sales during the three months ended March 31, 2013 and 2012, respectively. Proceeds from calls of securities were $31.7 million and $42.3 million for the three months ended March 31, 2013 and 2012, respectively.

Securities having a fair value of approximately $332.9 million and $333.0 million at March 31, 2013 and December 31, 2012, respectively, were pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings. The Bank did not hold any trading securities during the three months ended March 31, 2013 or the year ended December 31, 2012.

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of New York. Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the Federal Reserve Bank (“FRB”) system and required to own FRB stock. FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Bank owned approximately $3.0 million in FHLB, ACBB and FRB stock at March 31, 2013 and December 31, 2012. These amounts were reported as restricted securities in the consolidated balance sheets.