Note 5: Securities Available For Sale

The following tables summarize the securities available for sale portfolio as of March 31, 2014, and December 31, 2013:


March 31, 2014			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
Available for Sale:	Cost		Gains		Losses		Fair Value

Mortgage-backed securities:
US Government-sponsored enterprises	$	282,743	$	4,450	$	5,672	$	281,521
US Government agency		83,545		1,064		1,520		83,089
Private label		4,629		891		11		5,509
Obligations of states and political
subdivisions thereof		96,814		1,799		3,905		94,708
Total	$	467,731	$	8,204	$	11,108	$	464,827


December 31, 2013			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
Available for Sale:	Cost		Gains		Losses		Fair Value

Mortgage-backed securities:
US Government-sponsored enterprises	$	277,838	$	4,386	$	8,592	$	273,632
US Government agency		83,153		833		2,457		81,529
Private label		5,423		825		78		6,170
Obligations of states and political
subdivisions thereof		95,221		1,121		7,503		88,839
Total	$	461,635	$	7,165	$	18,630	$	450,170

Securities Maturity Distribution: The following table summarizes the maturity distribution of the amortized cost and estimated fair value of securities available for sale as of March 31, 2014. Actual maturities may differ from the final maturities noted below because issuers may have the right to prepay or call certain securities. In the case of mortgage-backed securities, actual maturities may also differ from expected maturities due to the amortizing nature of the underlying mortgage collateral, and the fact that borrowers have the right to prepay.


	Amortized		Estimated
Securities Available for Sale	Cost		Fair Value

Due one year or less	$	--	$	--
Due after one year through five years		3,905		3,999
Due after five years through ten years		19,310		19,943
Due after ten years		444,516		440,885
Total	$	467,731	$	464,827

Securities Impairment: As a part of the Company's ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired ("OTTI"). For the three months ended March 31, 2014 and 2013, the Company did not have any OTTI losses recognized in earnings (before taxes).

Upon initial impairment of a security, total OTTI losses represent the excess of the amortized cost over the fair value. For subsequent impairments of the same security, total OTTI losses represent additional credit losses and or declines in fair value subsequent to the previously recorded OTTI losses, if applicable. Unrealized OTTI losses recognized in accumulated other comprehensive income ("OCI") represent the non-credit component of OTTI losses on debt securities. Net impairment losses recognized in earnings represent the credit component of OTTI losses on debt securities.

As of March 31, 2014, the Company held twelve private label MBS (debt securities) with a total amortized cost (i.e. carrying value) of $2,064 for which OTTI losses have previously been recognized in pre-tax earnings (dating back to the fourth quarter of 2008). For eleven of these securities, the Company previously recognized credit losses in excess of the unrealized losses in accumulated OCI, creating an unrealized gain of $535, net of tax, as included in accumulated OCI as of March 31, 2014. For the remaining security, the total OTTI losses included in accumulated OCI amounted to $2, net of tax, as of March 31, 2014. As of March 31, 2014, the total net unrealized gains included in accumulated OCI for securities held where OTTI has been historically recognized in pre-tax earnings amounted to $533, net of tax, compared with net unrealized gains of $488, net of tax, at December 31, 2013.

The OTTI losses previously recognized in earnings represented management's best estimate of credit losses inherent in the securities based on discounted, bond-specific future cash flow projections using assumptions about cash flows associated with the pools of mortgage loans underlying each security. In estimating those cash flows the Company takes a variety of factors into consideration including, but not limited to, loan level credit characteristics, current delinquency and non-performing loan rates, current levels of subordination and credit support, recent default rates and future constant default rate estimates, original and current loan to collateral value ratios, recent collateral loss severities and future collateral loss severity estimates, recent and historical conditional prepayment rates and future conditional prepayment rate assumptions, and other estimates of future collateral performance.

Despite elevated levels of delinquencies, defaults and losses in the underlying residential mortgage loan collateral, given credit enhancements resulting from the structures of the individual securities, the Company currently expects that as of March 31, 2014 it will recover the amortized cost basis of its private label mortgage-backed securities as depicted in the table below and has therefore concluded that such securities were not other-than-temporarily impaired as of that date. Nevertheless, given recent market conditions, it is possible that adverse changes in repayment performance and fair value could occur in future periods that could impact the Company's current best estimates.

The following table displays the beginning balance of OTTI related to historical credit losses on debt securities held by the Company at the beginning of the current reporting period, as well as changes in credit losses recognized in pre-tax earnings for the three months ending March 31, 2014, and 2013.


	2014		2013

Estimated credit losses as of prior year-end,	$	3,923	$	4,365
Additions for credit losses for securities on which
OTTI has been previously recognized		--		--
Additions for credit losses for securities on which
OTTI has not been previously recognized		--		--
Reductions for securities paid off during the period		510		691
Estimated credit losses as of March 31,	$	3,413	$	3,674

As of March 31, 2014, based on a review of the remaining securities in the securities portfolio, the Company concluded that it expects to recover its amortized cost basis for such securities. This conclusion was based on the issuers' continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that they will continue to do so through the maturity of the security, the expectation that the Company will receive the entire amount of future contractual cash flows, as well as the evaluation of the fundamentals of the issuers' financial condition and other objective evidence. Accordingly, the Company concluded that the declines in the values of those securities were temporary and that any additional other-than-temporary impairment charges were not appropriate at March 31, 2014. As of that date, the Company did not intend to sell nor anticipated that it would more-likely-than-not be required to sell any of its impaired securities, that is, where fair value is less than the cost basis of the security.

The following table summarizes the fair value of securities with continuous unrealized losses for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer as of March 31, 2014 and December 31, 2013. All securities referenced are debt securities.


	Less than 12 months					12 months or longer					Total
	Estimated					Estimated					Estimated
March 31, 2014	Fair		Number of	Unrealized		Fair		Number of	Unrealized		Fair		Number of	Unrealized
	Value		Investments	Losses		Value		Investments	Losses		Value		Investments	Losses
Description of Securities:

Mortgage-backed securities:
US Government-sponsored
enterprises	$	95,348	115	$	2,544	$	42,445	45	$	3,128	$	137,793	160	$	5,672
US Government agency		30,921	43		1,035		11,100	13		485		42,021	56		1,520
Private label		444	4		9		45	2		2		489	6		11
Obligations of states and
political subdivisions thereof		47,251	105		2,034		15,581	42		1,871		62,832	147		3,905
Total	$	173,964	267	$	5,622	$	69,171	102	$	5,486	$	243,135	369	$	11,108


	Less than 12 months					12 months or longer					Total
	Estimated					Estimated					Estimated
December 31, 2013	Fair		Number of	Unrealized		Fair		Number of	Unrealized		Fair		Number of	Unrealized
	Value		Investments	Losses		Value		Investments	Losses		Value		Investments	Losses
Description of Securities:

Mortgage-backed securities:
US Government-sponsored
enterprises	$	111,169	140	$	4,801	$	40,563	40	$	3,791	$	151,732	180	$	8,592
US Government agency		36,356	47		1,982		9,156	12		475		45,512	59		2,457
Private label		826	12		61		449	7		17		1,275	19		78
Obligations of states and
political subdivisions thereof		61,174	135		5,601		8,464	30		1,902		69,638	165		7,503
Total	$	209,525	334	$	12,445	$	58,632	89	$	6,185	$	268,157	423	$	18,630

For securities with unrealized losses, the following information was considered in determining that the impairments were not other-than-temporary:

Mortgage-backed securities issued by U.S. Government-sponsored enterprises: As of March 31, 2014, the total unrealized losses on these securities amounted to $5,672, compared with $8,592 at December 31, 2013. All of these securities were credit rated "AA+" by the major credit rating agencies. Company management believes these securities have minimal credit risk, as these Government-sponsored enterprises play a vital role in the nation's financial markets.
Management's analysis indicates that the unrealized losses at March 31, 2014 were attributed to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be other-than- temporarily impaired at March 31, 2014.
Mortgage-backed securities issued by U.S. Government agencies: As of March 31, 2014, the total unrealized losses on these securities amounted to $1,520, compared with $2,457 at December 31, 2013. All of these securities were credit rated "AA+" by the major credit rating agencies. Management's analysis indicates that these securities bear little or no credit risk because they are backed by the full faith and credit of the United States. The Company attributes the unrealized losses at March 31, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be other-than-temporarily impaired at March 31, 2014.
Private label mortgage-backed securities: As of March 31, 2014, the total unrealized losses on the Bank's private label mortgage-backed securities amounted to $11, compared with $78 at December 31, 2013. The Company attributes the unrealized losses at March 31, 2014 to the current illiquid market for non-agency mortgage-backed securities, a still recovering housing market, risk-related market pricing discounts for non-agency mortgage-backed securities and credit rating downgrades on certain private label mortgage-backed securities owned by the Company. Based upon the foregoing considerations and the expectation that the Company will receive all of the future contractual cash flows related to amortized cost on these securities, the Company does not consider there to be any additional other-than-temporary impairment with respect to these securities at March 31, 2014.
Obligations of states of the U.S. and political subdivisions thereof: As of March 31, 2014, the total unrealized losses on the Bank's municipal securities amounted to $3,905, compared with $7,503 at December 31, 2013. The Bank's municipal securities primarily consist of general obligation bonds and to a lesser extent, revenue bonds. General obligation bonds carry less risk, as they are supported by the full faith, credit and taxing authority of the issuing government and in the cases of school districts, are additionally supported by state aid. Revenue bonds are generally backed by municipal revenue streams generated through user fees or lease payments associated with specific municipal projects that have been financed.
Municipal bonds are frequently supported with insurance, which guarantees that in the event the issuer experiences financial problems, the insurer will step in and assume payment of both principal and interest. Historically, insurance support has strengthened an issuer's underlying credit rating to AAA or AA status. Starting in 2008 and continuing through 2014, many of the insurance companies providing municipal bond insurance experienced financial difficulties and, accordingly, were downgraded by at least one of the major credit rating agencies. Consequently, a portion of the Bank's municipal bond portfolio was downgraded by at least one of the major credit rating agencies. Notwithstanding the credit rating downgrades, at March 31, 2014, the Bank's municipal bond portfolio did not contain any below investment grade securities as reported by major credit rating agencies. In addition, at March 31, 2014, all municipal bond issuers were current on contractually obligated interest and principal payments.
The Company attributes the unrealized losses at March 31, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased and, to a lesser extent, changes in credit ratings on certain securities. The Company also attributes the unrealized losses to ongoing media attention and market concerns about the prolonged recovery from the national economic recession and the impact it might have on the future financial stability of municipalities throughout the country. Accordingly, the Company does not consider these municipal securities to be other-than-temporarily impaired at March 31, 2014.

At March 31, 2014, the Company had no intent to sell nor believed it is more-likely-than-not that it would be required to sell any of its impaired securities as identified and discussed immediately above, and therefore did not consider these securities to be other-than-temporarily impaired as of that date.

Securities Gains and Losses: The following table summarizes realized gains and losses and other-than-temporary impairment losses on securities available for sale for the three months ended March 31, 2014 and 2013.


	Proceeds from Sale of Securities Available for Sale		Realized Gains		Realized Losses		Other Than Temporary Impairment Losses	Net
Three months ended March 31,
2014	$	10,313	$	397	$	---	$---	$	397
2013	$	5,038	$	273	$	8	$---	$	265