Securities

Amortized costs and fair values of securities available for sale as of December 31, 2013 and 2012, are summarized as follows:



	December 31, 2013
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	21,367	$	304	$	(332	)	$	21,339
Obligations of states and political subdivisions	68,904		1,083		(2,749		)	67,238
Mortgage-backed securities:
Agency	166,095		3,539		(1,624		)	168,010
Non-agency	22,029		116		(211		)	21,934
Other asset backed securities	33,883		710		(175		)	34,418
Corporate preferred stock	69		5		—			74
Corporate securities	15,680		58		(328		)	15,410
Total	$	328,027	$	5,815	$	(5,419	)	$	328,423



	December 31, 2012
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
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 December 31, 2013, by contractual maturity are shown below. Maturities may differ from contractual maturities in corporate and mortgage-backed securities because the securities and mortgages 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.



	December 31, 2013
(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	3,893	$	3,965
Due after one year through five years	32,395		32,896
Due after five years through ten years	31,430		30,541
Due after ten years	38,233		36,585
Mortgage-backed securities	188,124		189,944
Other asset backed securities	33,883		34,418
Corporate preferred stock	69		74
Total	$	328,027	$	328,423

Proceeds from sales of securities during 2013, 2012, and 2011 were $24.2 million, $41.0 million, and $37.6 million, respectively. Gross gains of $732,000, $743,000, and $476,000, and gross losses of $314,000, $298,000, and $16,000, were realized on those sales, respectively. There were no losses recognized for impaired securities in 2013 and 2012. During 2011, $25,000 in losses were recognized for impaired securities. The tax expense applicable to these net realized gains, losses, and impairment charges amounted to $142,000, $151,000, and $148,000, respectively.

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 $102.3 million and $142.2 million at December 31, 2013 and 2012, respectively.

At December 31, 2013 and 2012, investments in an unrealized loss position that are temporarily impaired are as follows:



(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2013	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government agencies	$	10,218	$	(273	)	$	1,416	$	(59	)	$	11,634	$	(332	)
Obligations of states and political subdivisions	24,568		(2,539		)	1,798		(210		)	26,366		(2,749		)
Mortgage-backed securities:
Agency	50,048		(1,264		)	8,228		(360		)	58,276		(1,624		)
Non-agency	14,505		(152		)	1,351		(59		)	15,856		(211		)
Other asset backed securities	1,585		(39		)	2,187		(136		)	3,772		(175		)
Corporate preferred stock	—		—			—		—			—		—
Corporate securities	6,247		(274		)	4,446		(54		)	10,693		(328		)
Total	$	107,171	$	(4,541	)	$	19,426	$	(878	)	$	126,597	$	(5,419	)



(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
2012	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 132 securities have been identified by the Company as temporarily impaired at December 31, 2013. Of the 132 securities, 131 are investment grade and one is speculative grade. Mortgage-backed securities and municipal securities make up the majority of temporarily impaired securities at December 31, 2013. Market prices change daily and are affected by conditions beyond the control of the Company. 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 were anticipated or required as of December 31, 2013. Investment decisions reflect the strategic asset/liability objectives of the Company. The investment portfolio is analyzed frequently by the Company and managed to provide an overall positive impact to the Company’s income statement and balance sheet.

Trust preferred securities

As of December 31, 2013 and 2012 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 held one trust preferred security that was not considered other-than-temporarily impaired while held in its investment portfolio. The security was sold during the third quarter of 2012 with a recognized net loss of approximately $149,000. No credit losses were recognized on this security while held.

Other-than-temporary impairment losses

At December 31, 2013, the Company evaluated the investment portfolio for possible other-than-temporary impairment losses and concluded that no adverse change in cash flows occurred 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 the Company will not be required to sell any securities before recovery of amortized cost basis, which may be at maturity. For debt securities related to corporate securities, the Company determined that there was no other adverse change in the cash flows as viewed by a market participant; therefore, the Company does not consider the investments in these assets to be other-than-temporarily impaired at December 31, 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. For the years ended December 31, 2013 and December 31, 2012, no credit related impairment losses were recognized by the Company.

The Company’s investment in FHLB stock totaled $5.1 million at December 31, 2013. FHLB stock is generally viewed as a long-term investment and as a restricted security which is carried at cost because there is no market for the stock other than the FHLB or member institutions. Therefore, when evaluating FHLB stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Company does not consider this investment to be other-than-temporarily impaired at December 31, 2013, and no impairment has been recognized. FHLB stock is shown in restricted securities on the consolidated balance sheets and is not part of the available for sale portfolio.