Investments

A summary of investment securities available-for-sale is as follows:

	As of March 31, 2014
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated
(Dollars in thousands)	cost		gains		losses		fair value

U. S. treasury securities	$	500	$	-	$	-	$	500
U. S. federal agency obligations		19,209		10		(451)		18,768
Municipal obligations, tax exempt		90,726		1,813		(330)		92,209
Municipal obligations, taxable		53,746		384		(535)		53,595
Mortgage-backed securities		128,239		723		(1,664)		127,298
Common stocks		602		497		-		1,099
Certificates of deposit		8,423		-		-		8,423
Total	$	301,445	$	3,427	$	(2,980)	$	301,892

	As of December 31, 2013
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated
(Dollars in thousands)		cost	gains		losses		fair value

U. S. treasury securities	$	500	$	-	$	-	$	500
U. S. federal agency obligations		20,167		10		(534)		19,643
Municipal obligations, tax exempt		90,700		1,712		(619)		91,793
Municipal obligations, taxable		53,244		270		(1,042)		52,472
Mortgage-backed securities		127,384		700		(2,491)		125,593
Common stocks		602		501		-		1,103
Certificates of deposit		9,142		-		-		9,142
Total	$	301,739	$	3,193	$	(4,686)	$	300,246

Certain of the Company’s investment securities have unrealized losses, or are temporarily impaired. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which are temporarily impaired are shown below, along with the length of the impairment period.

			As of March 31, 2014
(Dollars in thousands)			Less than 12 months				12 months or longer				Total
	No. of		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	securities		value		losses		value		losses		value		losses
U. S. federal agency obligations		18	$	13,899	$	(302)	$	4,098	$	(149)	$	17,997	$	(451)
Municipal obligations, tax exempt		73		18,931		(244)		3,475		(86)		22,406		(330)
Municipal obligations, taxable		67		26,089		(434)		3,359		(101)		29,448		(535)
Mortgage-backed securities		53		74,662		(1,628)		2,380		(36)		77,042		(1,664)
Total		211	$	133,581	$	(2,608)	$	13,312	$	(372)	$	146,893	$	(2,980)

			As of December 31, 2013
(Dollars in thousands)			Less than 12 months				12 months or longer				Total
	No. of		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	securities		value		losses		value		losses		value		losses
U. S. federal agency obligations		18	$	16,028	$	(436)	$	2,149	$	(98)	$	18,177	$	(534)
Municipal obligations, tax exempt		91		24,496		(518)		3,151		(101)		27,647		(619)
Municipal obligations, taxable		88		35,299		(1,030)		1,080		(12)		36,379		(1,042)
Mortgage-backed securities		70		89,140		(2,491)		-		-		89,140		(2,491)
Total		267	$	164,963	$	(4,475)	$	6,380	$	(211)	$	171,343	$	(4,686)

The Company performs quarterly reviews of the investment portfolio to determine if investment securities have any declines in fair value which might be considered other-than-temporary. The initial review begins with all securities in an unrealized loss position. The Company’s assessment of other-than-temporary impairment is based on the specific facts and circumstances impacting each individual security. The Company reviews and considers all available information, including expected cash flows, the structure of the security, the credit quality of the underlying assets and the current and anticipated market conditions. Any credit-related impairment on debt securities is realized through a charge to earnings. If an equity security is determined to be other-than-temporarily impaired, the entire impairment is realized through a charge to earnings.

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of the Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it is more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believes that the U.S. federal agency obligations identified in the tables above are temporarily impaired.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligation securities issued by various municipalities. The Company does not intend to sell and it is more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of its cost. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believes that the municipal obligations identified in the tables above are temporarily impaired.

The Company’s mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association. The receipt of principal, at par, and interest on mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its mortgage-backed securities do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it is more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believes that the mortgage-backed securities identified in the tables above are temporarily impaired.

It is reasonably possible that the fair values of the Company’s investment securities could decline in the future if the overall economy and/or the financial condition of some of the issuers of these securities deteriorates and/or if the liquidity in markets for these securities declines. As a result, there is a risk that additional other-than-temporary impairments may occur in the future and any such amounts could be material to the Company’s consolidated financial statements. The fair value of the Company’s investment securities may continue to decline from further increases in market interest rates, as the market prices of these investments generally move inversely to market interest rates.

Maturities of investment securities at March 31, 2014 were as follows:

(Dollars in thousands)	Amortized		Estimated
	cost		fair value
Due in less than one year	$	14,757	$	14,863
Due after one year but within five years		174,204		174,544
Due after five years but within ten years		80,231		80,206
Due after ten years		31,651		31,180
Common stocks		602		1,099
Total	$	301,445	$	301,892

The preceding table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for mortgage-backed securities, where actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

Other investment securities primarily consist of restricted investments in FHLB and Federal Reserve Bank (“FRB”) stock. The carrying value of the FHLB stock was $2.6 million at March 31, 2014 and $3.2 million at December 31, 2013. The carrying value of the FRB stock was $1.9 million at March 31, 2014 and December 31, 2013. These securities are not readily marketable and are required for regulatory purposes and borrowing availability. Since there is no available market value, these securities are carried at cost. Redemption of these investments at par value is at the option of the FHLB or FRB. Also included in other investment securities are other miscellaneous investments in the common stock of various correspondent banks which are held for borrowing purposes and totaled $111,000 at March 31, 2014 and December 31, 2013. The Company assessed the ultimate recoverability of these investments and believes that no impairment has occurred.