SECURITIES

The amortized cost basis and fair values of securities are as follows:

			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Securities available-for-sale:
March 31, 2014:
Government-sponsored collateralized mortgage obligations	$	102,756	$	230	$	(2,649)	$	100,337
Government-sponsored mortgage-backed residential		77,417		13		(2,902)		74,528
Corporate bonds		30,251		310		(173)		30,388
Asset backed-collateralized loan obligations		20,739		3		(453)		20,289
State and municipal		10,868		336		(3)		11,201
Commercial mortgage backed		4,092		-		(9)		4,083

Total	$	246,123	$	892	$	(6,189)	$	240,826

Securities available-for-sale:
December 31, 2013:
Government-sponsored collateralized mortgage obligations	$	104,390	$	86	$	(3,660)	$	100,816
Government-sponsored mortgage-backed residential		78,204		4		(3,884)		74,324
Corporate bonds		43,818		208		(328)		43,698
Asset backed-collateralized loan obligations		35,113		-		(635)		34,478
State and municipal		11,670		264		(11)		11,923
Commercial mortgage backed		4,097		-		(54)		4,043

Total	$	277,292	$	562	$	(8,572)	$	269,282

The amortized cost and fair value of securities at March 31, 2014, by contractual maturity, are shown below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Available for Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value

Due in one year or less	$	3,055	$	3,055
Due after one year through five years		26,910		27,118
Due after five years through ten years		4,733		4,700
Due after ten years		6,421		6,716
Investment securities with no single maturity date:
Government-sponsored collateralized mortgage obligations		102,756		100,337
Government-sponsored mortgage-backed residential		77,417		74,528
Asset backed-collateralized loan obligations		20,739		20,289
Commercial mortgage backed		4,092		4,083
	$	246,123	$	240,826

The following schedule shows the proceeds from sales of available-for-sale securities and the gross realized gains and losses on those sales:

	Three Months Ended
	March 31,
	2014		2013
	(Dollars in thousands)

Proceeds from sales	$	36,126	$	75,536
Gross realized gains		148		509
Gross realized losses		211		282

Investment securities pledged to secure public deposits and Federal Home Loan Bank (FHLB) advances had an amortized cost of $175.4 million and fair value of $170.4 million at March 31, 2014 and a $193.0 million amortized cost and fair value of $185.8 million at December 31, 2013.

Securities with unrealized losses at March 31, 2014 and December 31, 2013 aggregated by major security type and length of time in a continuous unrealized loss position are as follows:

	Less than 12 Months				12 Months or More					Total
March 31, 2014		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities		Value		Loss		Value		Loss		Value		Loss

Government-sponsored collateralized mortgage obligations	$	51,722	$	(1,007)	$	23,848	$	(1,642)	$	75,570	$	(2,649)
Government-sponsored mortgage-backed residential		47,853		(1,599)		25,559		(1,303)		73,412		(2,902)
Corporate bonds		6,824		(93)		2,924		(80)		9,748		(173)
Asset backed-collateralized loan obligations		19,439		(453)		-		-		19,439		(453)
State and municipal		826		(3)		-		-		826		(3)
Commercial mortgage backed		4,083		(9)		-		-		4,083		(9)

Total temporarily impaired	$	130,747	$	(3,164)	$	52,331	$	(3,025)	$	183,078	$	(6,189)

	Less than 12 Months				12 Months or More				Total
December 31, 2013	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss

Government-sponsored collateralized mortgage obligations	$	59,168	$	(2,119)	$	20,560	$	(1,541)	$	79,728	$	(3,660)
Government-sponsored mortgage-backed residential		59,971		(2,864)		13,215		(1,020)		73,186		(3,884)
Corporate bonds		17,578		(328)		-		-		17,578		(328)
Asset backed-collateralized loan obligations		34,478		(635)		-		-		34,478		(635)
State and municipal		1,865		(11)		-		-		1,865		(11)
Commercial mortgage backed		4,043		(54)		-		-		4,043		(54)

Total temporarily impaired	$	177,103	$	(6,011)	$	33,775	$	(2,561)	$	210,878	$	(8,572)

We evaluate investment securities with significant declines in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation, to determine whether they should be considered other-than-temporarily impaired under current accounting guidance, which generally provides that if a security is in an unrealized loss position, whether due to general market conditions or industry or issuer-specific factors, the holder of the securities must assess whether the impairment is other-than-temporary.

In conducting this assessment, the Bank evaluates a number of factors including, but not limited to:

The length of time and the extent to which fair value has been less than the amortized cost basis;

The Bank’s intent to hold until maturity or sell the debt security prior to maturity;

An analysis of whether it is more likely than not that the Bank will be required to sell the debt security before its anticipated recovery;

Adverse conditions specifically related to the security, an industry, or a geographic area;

The historical and implied volatility of the fair value of the security;

The payment structure of the security and the likelihood of the issuer being able to make payments;

Failure of the issuer to make scheduled interest or principal payments;

Any rating changes by a rating agency; and

Recoveries or additional decline in fair value subsequent to the balance sheet date.

Accounting guidance requires entities to split other than temporary impairment charges between credit losses (i.e., the loss based on the entity’s estimate of the decrease in cash flows, including those that result from expected voluntary prepayments), which are charged to earnings, and the remainder of the impairment charge (non-credit component) to accumulated other comprehensive income. This requirement pertains to both debt securities held to maturity and debt securities available for sale.

The unrealized losses on our investment securities were a result of changes in interest rates for fixed-rate securities where the interest rate received is less than the current rate available for new offerings of similar securities. Mortgage backed securities held in our investment portfolio were issued by U.S. government-sponsored entities and agencies, primarily Freddie Mac (“FHLMC”) and Fannie Mae (“FNMA”), institutions that the government has affirmed its commitment to support. Because the decline in market value on our investment securities is attributable to changes in interest rates and not credit quality, and because we do not intend to sell and it is more likely than not that we will not be required to sell these investments until recovery of fair value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at March 31, 2014.

At March 31, 2014, we own five collateralized loan obligation (“CLO”) securities subject to the Volcker Rule, with an amortized cost of $20.7 million and an unrealized loss of $453,000. Absent changes to the Volcker Rule, we would be required to dispose of these securities before July 2015. We believe the unrealized loss reflected results not from credit risk but from interest rate changes and to the uncertainty created by the Volcker Rule. In the first quarter of 2014, we sold four of our CLOs to confirm their marketability and evaluate our assessment about their market values. These four securities had an unrealized loss of $233,000 at December 31, 2013. We recorded a loss of $91,000 on these sales. We do not currently intend to sell additional CLOs.