2.	Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at September 30, 2013 and December 31, 2012 are summarized as follows:


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2013
Securities available for sale:
Agency mortgage-backed securities	$	18,377	$	205	$	235	$	18,347
Agency CMO		21,714		115		307		21,522
Other debt securities:
Agency notes and bonds		34,754		82		557		34,279
Municipal obligations		35,757		874		943		35,688

Subtotal - debt securities		110,602		1,276		2,042		109,836

Mutual funds		2,477		0		24		2,453

Total securities available for sale	$	113,079	$	1,276	$	2,066	$	112,289

Securities held to maturity:
Agency mortgage-backed securities	$	10	$	0	$	0	$	10

Total securities held to maturity	$	10	$	0	$	0	$	10

December 31, 2012
Securities available for sale:
Agency mortgage-backed securities	$	22,762	$	456	$	12	$	23,206
Agency CMO		22,458		225		23		22,660
Other debt securities:
Agency notes and bonds		38,273		290		10		38,553
Municipal obligations		32,605		1,800		88		34,317

Subtotal - debt securities		116,098		2,771		133		118,736

Mutual funds		4,213		40		16		4,237

Total securities available for sale	$	120,311	$	2,811	$	149	$	122,973

Securities held to maturity:
Agency mortgage-backed securities	$	12	$	0	$	0	$	12

Total securities held to maturity	$	12	$	0	$	0	$	12

Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (CMO) include securities issued by the Government National Mortgage Association (GNMA), a U.S. government agency, and the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Bank (FHLB), which are government-sponsored enterprises.

The amortized cost and fair value of debt securities as of September 30, 2013, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.


	Securities Available for Sale				Securities Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
(In thousands)
Due in one year or less	$	0	$	0	$	0	$	0
Due after one year through five years		9,310		9,305		0		0
Due after five years through ten years		30,540		30,485
Due after ten years		30,661		30,177		0		0

		70,511		69,967		0		0
Mortgage-backed securities and
CMO		40,091		39,869		10		10

	$	110,602	$	109,836	$	10	$	10

Information pertaining to investment securities available for sale with gross unrealized losses at September 30, 2013, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows:


	Number of				Gross
	Investment		Fair		Unrealized
	Positions		Value		Losses
(Dollars in thousands)
Continuous loss position less than twelve months:
Agency notes and bonds		20	$	22,248	$	557
Agency CMO		11		10,542		291
Agency mortgage-backed securities		17		14,413		235
Muncipal obligations		31		13,405		918
Mutual fund		1		1,544		9

Total less than twelve months		80		62,152		2,010

Continuous loss position more than twelve months:
Muncipal obligations		2		589		25
Agency CMO		1		775		16
Mutual fund		1		393		15

Total more than twelve months		4		1,757		56

Total securities available for sale		84	$	63,909	$	2,066

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (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, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recover in fair value.

At September 30, 2013, the 82 U.S. government agency debt securities, including agency notes and bonds, mortgage-backed securities and CMO, and municipal obligations in a loss position had depreciated approximately 3.2% from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by first mortgage loans and municipal project revenues. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

During the nine months ended September 30, 2013, the Company realized gross gains on sales of available for sale municipal securities and U.S. government agency debt securities of $21,000 and $8,000, respectively. The Company realized gross gains on sales of available for sale U.S. government agency debt securities of $8,000 during the three months ended September 30, 2013. During the three and nine months ended September 30, 2012, the Company realized gross gains on sales of available for sale U.S. government agency mortgage-backed securities and agency bonds of $35,000 and $2,000, respectively, and gross losses on sales of available for sale agency CMOs of $8,000.