(3)	INVESTMENT SECURITIES

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


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2013:
Securities available for sale:
Agency mortgage-backed securities	$	18,408	$	205	$	244	$	18,369
Agency CMO		20,486		96		341		20,241
Other debt securities:
Agency notes and bonds		31,594		49		729		30,914
Municipal obligations		36,200		778		938		36,040

Subtotal – debt securities		106,688		1,128		2,252		105,564

Mutual funds		3,238		0		40		3,198

Total securities available for sale	$	109,926	$	1,128	$	2,292	$	108,762

Securities held to maturity:
Agency mortgage-backed securities	$	9	$	0	$	0	$	9

Total securities held to maturity	$	9	$	0	$	0	$	9

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

The amortized cost and fair value of debt securities as of December 31, 2013, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO 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		9,006		9,024		0		0
Due after five years through ten years		30,698		30,525		0		0
Due after ten years		28,090		27,405		0		0

		67,794		66,954		0		0
Mortgage-backed securities and CMO		38,894		38,610		9		9

	$	106,688	$	105,564	$	9	$	9

At December 31, 2013, certain investment securities were pledged under retail repurchase agreements and to secure FHLB advances. (See Notes 9 and 10)

Information pertaining to investment securities available for sale with gross unrealized losses at December 31, 2013, aggregated by investment category and the length of time that individual investment securities have been in a continuous loss position, follows. At December 31, 2013, the Company did not have any securities held to maturity with an unrealized loss.


(Dollars in thousands)	Number of Investment Positions		Fair Value		Gross Unrealized Losses
Continuous loss position less than twelve months:
Agency mortgage-backed securities		15	$	12,975	$	161
Agency CMO		14		12,577		307
Agency notes and bonds		21		21,952		729
Municipal obligations		30		12,487		746
Mutual fund		1		1,537		27

Total less than twelve months		81		61,528		1,970

Continuous loss position more than twelve months:
Agency mortgage-backed securities		2		1,788		83
Agency CMO		1		720		34
Municipal obligations		5		2,353		192
Mutual fund		1		400		13

Total more than twelve months		9		5,261		322

Total securities available for sale		90	$	66,789	$	2,292

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 recovery in fair value.

At December 31, 2013, the municipal obligations and U.S. government agency debt securities, including agency mortgage-backed securities, agency CMOs, and agency notes and bonds, in a loss position had depreciated approximately 3.5% from the amortized cost basis. All of the U.S. government agency securities and municipal securities are issued by U.S. government agencies, government-sponsored enterprises, or municipal governments, and 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 U.S. government agency debt securities and municipal securities in an unrealized loss position until maturity, no declines are deemed to be other-than-temporary.

While management does not anticipate further credit-related impairment losses at December 31, 2013, additional deterioration in market and economic conditions may have an adverse impact on the credit quality in the future.

During the year ended December 31, 2013, the Company realized gross gains on sales of available for sale municipal obligations and U.S. government agency mortgage-backed securities of $22,000 and $7,000, respectively. During the year ended December 31, 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 privately-issued CMOs and agency CMOs of $18,000 and $8,000, respectively.

In December 2013, the Company acquired 100,000 shares of common stock in another financial institution, representing approximately 7% of the outstanding common stock of the entity, for a total investment of $540,000. The investment is accounted for using the cost method of accounting and is included in other assets in the consolidated balance sheet.