(3.) INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities are summarized below (in thousands).


		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
December 31, 2014
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	160,334	$	1,116	$	975	$	160,475
Mortgage-backed securities:
Federal National Mortgage Association		184,857		2,344		1,264		185,937
Federal Home Loan Mortgage Corporation		29,478		799		7		30,270
Government National Mortgage Association		48,800		2,022		-		50,822
Collateralized mortgage obligations:
Federal National Mortgage Association		76,247		489		944		75,792
Federal Home Loan Mortgage Corporation		89,623		199		2,585		87,237
Government National Mortgage Association		29,954		598		40		30,512
Privately issued		-		1,218		-		1,218
Total collateralized mortgage obligations		195,824		2,504		3,569		194,759
Total mortgage-backed securities		458,959		7,669		4,840		461,788
Asset-backed securities		-		231		-		231
Total available for sale securities	$	619,293	$	9,016	$	5,815	$	622,494
Securities held to maturity:
State and political subdivisions		277,273		4,231		120		281,384
Mortgage-backed securities:
Federal National Mortgage Association		3,279		24		-		3,303
Government National Mortgage Association		13,886		122		-		14,008
Total held to maturity securities	$	294,438	$	4,377	$	120	$	298,695


December 31, 2013
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	135,840	$	1,414	$	2,802	$	134,452
Mortgage-backed securities:
Federal National Mortgage Association		173,507		1,511		4,810		170,208
Federal Home Loan Mortgage Corporation		36,737		562		205		37,094
Government National Mortgage Association		61,832		2,152		142		63,842
Collateralized mortgage obligations:
Federal National Mortgage Association		63,838		261		3,195		60,904
Federal Home Loan Mortgage Corporation		102,660		169		5,856		96,973
Government National Mortgage Association		43,734		913		586		44,061
Privately issued		-		1,467		-		1,467
Total collateralized mortgage obligations		210,232		2,810		9,637		203,405
Total mortgage-backed securities		482,308		7,035		14,794		474,549
Asset-backed securities		18		381		-		399
Total available for sale securities	$	618,166	$	8,830	$	17,596	$	609,400
Securities held to maturity:
State and political subdivisions	$	249,785	$	1,340	$	468	$	250,657

Investment securities with a total fair value of $768.6 million and $763.1 million at December 31, 2014 and 2013, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

During the year ended December 31, 2014, the Company transferred $12.8 million of available for sale mortgage backed securities to the held to maturity category, reflecting the Company's intent to hold those securities to maturity. Transfers of investment securities into the held to maturity category from the available for sale category are made at fair value at the date of transfer. The related $51 thousand of unrealized holding losses that were included in the transfer are retained in accumulated other comprehensive income and in the carrying value of the held to maturity securities. This amount will be amortized as an adjustment to interest income over the remaining life of the securities. This will offset the impact of amortization of the net premium created in the transfer. There were no gains or losses recognized as a result of this transfer.

Interest and dividends on securities for the years ended December 31 are summarized as follows (in thousands):


		2014		2013		2012
Taxable interest and dividends	$	13,304	$	12,541	$	12,202
Tax-exempt interest and dividends		5,298		4,922		4,242
Total interest and dividends on securities	$	18,602	$	17,463	$	16,444

Sales and calls of securities available for sale for the years ended December 31 were as follows (in thousands):


		2014		2013		2012
Proceeds from sales	$	81,600	$	1,327	$	2,823
Gross realized gains		2,043		1,226		2,651
Gross realized losses		2		-		-

The scheduled maturities of securities available for sale and securities held to maturity at December 31, 2014 are shown below. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations (in thousands).


		Amortized		Fair
		Cost		Value
Debt securities available for sale:
Due in one year or less	$	22,102	$	22,104
Due from one to five years		136,917		136,720
Due after five years through ten years		214,050		217,119
Due after ten years		246,224		246,551
	$	619,293	$	622,494
Debt securities held to maturity:
Due in one year or less	$	23,659	$	23,734
Due from one to five years		136,752		138,499
Due after five years through ten years		116,862		119,151
Due after ten years		17,165		17,311
	$	294,438	$	298,695

Unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31 are summarized as follows (in thousands):


		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
December 31, 2014
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	34,995	$	77	$	41,070	$	898	$	76,065	$	975
Mortgage-backed securities:
Federal National Mortgage Association		2,242		8		62,592		1,256		64,834		1,264
Federal Home Loan Mortgage Corporation		3,387		7		-		-		3,387		7
Collateralized mortgage obligations:
Federal National Mortgage Association		11,228		24		25,644		920		36,872		944
Federal Home Loan Mortgage Corporation		-		-		76,126		2,585		76,126		2,585
Government National Mortgage Association		-		-		2,510		40		2,510		40
Total collateralized mortgage obligations		11,228		24		104,280		3,545		115,508		3,569
Total mortgage-backed securities		16,857		39		166,872		4,801		183,729		4,840
Total available for sale securities		51,852		116		207,942		5,699		259,794		5,815
Securities held to maturity:
State and political subdivisions		18,036		120		-		-		18,036		120
Total temporarily impaired securities	$	69,888	$	236	$	207,942	$	5,699	$	277,830	$	5,935

December 31, 2013
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	86,177	$	2,788	$	2,717	$	14	$	88,894	$	2,802
Mortgage-backed securities:
Federal National Mortgage Association		103,778		3,491		20,689		1,319		124,467		4,810
Federal Home Loan Mortgage Corporation		14,166		205		-		-		14,166		205
Government National Mortgage Association		14,226		142		-		-		14,226		142
Collateralized mortgage obligations:
Federal National Mortgage Association		35,632		2,586		11,760		609		47,392		3,195
Federal Home Loan Mortgage Corporation		72,655		4,980		15,762		876		88,417		5,856
Government National Mortgage Association		8,396		586		-		-		8,396		586
Total collateralized mortgage obligations		116,683		8,152		27,522		1,485		144,205		9,637
Total mortgage-backed securities		248,853		11,990		48,211		2,804		297,064		14,794
Total available for sale securities		335,030		14,778		50,928		2,818		385,958		17,596
Securities held to maturity:
State and political subdivisions		72,269		468		-		-		72,269		468
Total temporarily impaired securities	$	407,299	$	15,246	$	50,928	$	2,818	$	458,227	$	18,064

The total number of security positions in the investment portfolio in an unrealized loss position at December 31, 2014 was 122 compared to 331 at December 31, 2013. At December 31, 2014, the Company had positions in 51 investment securities with a fair value of $207.9 million and a total unrealized loss of $5.7 million that have been in a continuous unrealized loss position for more than 12 months. There were a total of 71 securities positions in the Company's investment portfolio, with a fair value of $69.9 million and a total unrealized loss of $236 thousand at December 31, 2014, that have been in a continuous unrealized loss position for less than 12 months. At December 31, 2013, the Company had positions in 14 investment securities with a fair value of $50.9 million and a total unrealized loss of $2.8 million that have been in a continuous unrealized loss position for more than 12 months. There were a total of 317 securities positions in the Company's investment portfolio, with a fair value of $407.3 million and a total unrealized loss of $15.2 million at December 31, 2013, that have been in a continuous unrealized loss position for less than 12 months. The unrealized loss on investment securities was predominantly caused by changes in market interest rates subsequent to purchase. The fair value of most of the investment securities in the Company's portfolio fluctuates as market interest rates change.

The Company reviews investment securities on an ongoing basis for the presence of other than temporary impairment ("OTTI") with formal reviews performed quarterly. When evaluating debt securities for OTTI, 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 intention to sell the debt security or whether it is more likely than not that it will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information available to management.

No impairment was recorded during the years ended December 31, 2014 and 2013. During the year ended December 31, 2012, the Company recognized an OTTI charge of $91 thousand related to privately issued whole loan CMOs that were determined to be impaired due to credit quality.

Based on management's review and evaluation of the Company's debt securities as of December 31, 2014, the debt securities with unrealized losses were not considered to be OTTI. As of December 31, 2014, the Company does not have the intent to sell any of the securities in a loss position and believes that it is not likely that it will be required to sell any such securities before the anticipated recovery of amortized cost. Accordingly, as of December 31, 2014, management has concluded that unrealized losses on its investment securities are temporary and no further impairment loss has been realized in the Company's consolidated statements of income.