Securities

Amortized costs and fair values of securities available for sale are summarized as follows:



	June 30, 2014
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale
U.S. government agencies	$	27,512	$	222	$	(181	)	$	27,553
Obligations of states and political subdivisions	60,126		1,960		(892		)	61,194
Mortgage-backed securities:
Agency	172,315		4,933		(866		)	176,382
Non-agency	21,177		197		(74		)	21,300
Other asset backed securities	25,248		512		(42		)	25,718
Corporate preferred stock	68		18		—			86
Corporate securities	17,594		171		(331		)	17,434
Total	$	324,040	$	8,013	$	(2,386	)	$	329,667



	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

The amortized cost and fair value of securities available for sale as of June 30, 2014, 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.



	June 30, 2014
(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	4,927	$	5,004
Due after one year through five years	33,682		34,928
Due after five years through ten years	43,231		43,176
Due after ten years	23,392		23,073
Mortgage-backed securities	193,492		197,682
Other asset backed securities	25,248		25,718
Corporate preferred stock	68		86
Total	$	324,040	$	329,667

Proceeds from sales of securities during the six months ended June 30, 2014, were $38.9 million. Gross gains of $525,000 and gross losses of $396,000 were realized on those sales, respectively. The tax expense applicable to these net realized gains amounted to $44,000.

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 $174.9 million at June 30, 2014.

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
June 30, 2014	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government agencies	$	11,181	$	(118	)	$	1,344	$	(63	)	$	12,525	$	(181	)
Obligations of states and political subdivisions	—		—			10,352		(892		)	10,352		(892		)
Mortgage-backed securities:
Agency	22,333		(293		)	17,172		(573		)	39,505		(866		)
Non-agency	6,797		(59		)	1,120		(15		)	7,917		(74		)
Other asset backed securities	2,399		(5		)	2,121		(37		)	4,520		(42		)
Corporate preferred stock	—		—			—		—			—		—
Corporate securities	9,863		(275		)	909		(56		)	10,772		(331		)
Total	$	52,573	$	(750	)	$	33,018	$	(1,636	)	$	85,591	$	(2,386	)



(Dollars in thousands)	Less than Twelve Months					Twelve Months or Greater					Total
December 31, 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	)

A total of 91 securities have been identified by the Company as temporarily impaired at June 30, 2014. Of the 91 securities, 90 are investment grade and one is speculative grade. Mortgage-backed securities and municipal securities make up the majority of the gross unrealized losses for temporarily impaired securities at June 30, 2014. 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 June 30, 2014. 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 consolidated income statement and balance sheet.

Other-than-temporary impairment losses

At June 30, 2014, 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 June 30, 2014. 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 six months ended June 30, 2014 and the year ended December 31, 2013, no credit related impairment losses were recognized by the Company.

The Company’s investment in FHLB stock totaled $4.7 million at June 30, 2014. 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 June 30, 2014, 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.