Securities

Amortized costs and fair values of securities available for sale at September 30, 2013 are summarized as follows:



	September 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
Available for Sale
U.S. government agencies	$	21,360	$	349	$	(244	)	$	21,465
Obligations of states and political subdivisions	77,788		1,483		(3,167		)	76,104
Mortgage-backed securities:
Agency	158,204		3,864		(1,013		)	161,055
Non-agency	18,113		151		(141		)	18,123
Other asset backed securities	35,728		659		(150		)	36,237
Corporate preferred stock	68		5		—			73
Corporate securities	15,695		32		(406		)	15,321
Total	$	326,956	$	6,543	$	(5,121	)	$	328,378

Amortized costs and fair values of securities available for sale at December 31, 2012 are summarized as follows:



	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
Available for Sale
U.S. government agencies	$	15,391	$	459	$	(28	)	$	15,822
Obligations of states and political subdivisions	74,485		3,920		(105		)	78,300
Mortgage-backed securities:
Agency	161,564		5,659		(280		)	166,943
Non-agency	15,310		287		(18		)	15,579
Other asset backed securities	33,648		1,079		(85		)	34,642
Corporate preferred stock	68		—		(6		)	62
Corporate securities	8,730		12		(633		)	8,109
Total	$	309,196	$	11,416	$	(1,155	)	$	319,457

The amortized cost and fair value of securities available for sale as of September 30, 2013, by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed, other asset-backed, and corporate securities because the mortgages, loans, and securities underlying the securities may be called or repaid without any penalties. Therefore, these securities are not included in the maturity categories in the following maturity summary.



	September 30, 2013
	Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	2,520	$	2,555
Due after one year through five years	38,469		39,035
Due after one year through ten years	29,434		28,617
Due after ten years	44,420		42,683
Mortgage-backed securities	176,317		179,178
Other asset backed securities	35,728		36,237
Corporate preferred stock	68		73
Total	$	326,956	$	328,378

Proceeds from the sale of securities during the nine months ended September 30, 2013 were $12.7 million and net gains of $397,000 were realized on those sales. The tax expense applicable to the net realized gains amounted to $135,000. Additionally, no loss on securities with other than temporary impairment was recognized during the nine months ended September 30, 2013.

The carrying value of securities pledged to qualify for fiduciary powers, to secure public monies and for other purposes as required by law amounted to $104.5 million at September 30, 2013.

At September 30, 2013, investments in an unrealized loss position that were temporarily impaired are as follows:



	September 30, 2013
						(In thousands)
	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government agencies	$	11,019	$	(244	)	$	82	$	—		$	11,101	$	(244	)
Obligations of states and
political subdivisions	29,161		(3,129		)	847		(38		)	30,008		(3,167		)
Mortgage backed securities:
Agency	37,619		(878		)	5,256		(135		)	42,875		(1,013		)
Non-agency	3,938		(81		)	1,354		(60		)	5,292		(141		)
Other asset backed securities	1,592		(42		)	2,284		(108		)	3,876		(150		)
Corporate securities	5,656		(167		)	4,261		(239		)	9,917		(406		)
Total	$	88,985	$	(4,541	)	$	14,084	$	(580	)	$	103,069	$	(5,121	)

At December 31, 2012, investments in an unrealized loss position that were temporarily impaired are as follows:



	December 31, 2012
						(In thousands)
	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government agencies	$	3,850	$	(28	)	$	16	$	—		$	3,866	$	(28	)
Obligations of states and
political subdivisions	6,966		(105		)	—		—			6,966		(105		)
Mortgage backed securities:
Agency	24,344		(234		)	1,241		(46		)	25,585		(280		)
Non-agency	3,295		(18		)	—		—			3,295		(18		)
Other asset backed securities	2,791		(57		)	1,418		(28		)	4,209		(85		)
Corporate preferred stock	—		—			33		(6		)	33		(6		)
Corporate securities	—		—			6,867		(633		)	6,867		(633		)
Total	$	41,246	$	(442	)	$	9,575	$	(713	)	$	50,821	$	(1,155	)

A total of 117 securities were identified by the Company as temporarily impaired at September 30, 2013. Of the 117 securities, 116 were investment grade and 1 was speculative grade. Agency, non-agency mortgage-backed securities, municipal and corporate debt securities make up the majority of temporarily impaired securities at September 30, 2013. The speculative grade security was a municipal bond. During the nine months ended September 30, 2013, the municipal bond sector, which is included in the Company's obligations of states and political subdivisions category of securities, and securities of U.S. government agencies and corporations experienced falling securities prices as improvement in select U.S. economic indicators and statements made by certain Federal Reserve officials raised concerns that the Federal Reserve would reduce its efforts to stimulate economic recovery through its bond-buying program known as "quantitative easing." Interest rates rose during this period, causing corresponding unrealized losses on the Company's portfolio of securities of U.S. government agencies and corporations and obligations of states and political subdivisions. Although the Company has the ability to hold these securities until the temporary loss is recovered, decisions by management may necessitate a sale before the loss is fully recovered. No such sales are anticipated or required as of September 30, 2013. Investment decisions reflect the strategic asset/liability objectives of the Company.

Trust preferred securities

As of September 30, 2013, the Company held no trust preferred securities in its investment portfolio.

The Company previously held trust preferred securities that were identified as other-than-temporarily impaired. These securities were sold during the second quarter of 2012 with a recognized net loss of approximately $142,000. Additionally, these securities incurred cumulative other-than-temporary credit losses recognized in prior period earnings of approximately $2.4 million through December 31, 2011.

The Company also previously owned one trust preferred security that was not considered other-than-temporarily impaired while held in its investment portfolio. This security was sold during the third quarter of 2012 with a recognized net loss of approximately $149,000. No credit losses were recognized by the Company for this security.

Other-than-temporary impairment losses

At September 30, 2013, the Company concluded that no adverse changes in cash flows occurred during the quarter and did not consider any portfolio securities to be other-than-temporarily impaired. Based on this analysis and because the Company does not intend to sell securities prior to maturity and it is more likely than not that the Company will not be required to sell any securities before recovery of amortized cost basis, which may be at maturity, the Company does not consider the investments in these assets to be other than temporarily impaired at September 30, 2013. However, there is a risk that the Company’s continuing reviews could result in recognition of other-than-temporary impairment charges in the future. During the nine months ended September 30, 2013 and the nine months ended September 30, 2012, no credit related impairment losses were recognized by the Company.