6. Investment Securities

The cost basis and fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale (AFS):


	March 31, 2014
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	6,927	$	42	$	(90	)	$	6,879
US Agency mortgage-backed securities		115,789		3,099		(861	)		118,027
Corporate bonds		11,993		49		(202	)		11,840
Total	$	134,709	$	3,190	$	(1,153	)	$	136,746

Investment securities held to maturity (HTM):


	March 31, 2014
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency mortgage-backed securities	$	12,341	$	309	$	(343	)	$	12,307
Taxable municipal		1,672		24		(75	)		1,621
Corporate bonds and other securities		3,995		-		(53	)		3,942
Total	$	18,008	$	333	$	(471	)	$	17,870

Investment securities available for sale (AFS):


	December 31, 2013
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	6,926	$	35	$	(126	)	$	6,835
US Agency mortgage-backed securities		121,480		3,129		(1,227	)		123,382
Corporate bonds		11,992		21		(252	)		11,761
Total	$	140,398	$	3,185	$	(1,605	)	$	141,978

Investment securities held to maturity (HTM):


	December 31, 2013
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency mortgage-backed securities	$	12,671	$	289	$	(477	)	$	12,483
Taxable municipal		1,521		-		(120	)		1,401
Corporate bonds and other securities		3,995		-		(91	)		3,904
Total	$	18,187	$	289	$	(688	)	$	17,788

Maintaining investment quality is a primary objective of the Company's investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody's Investor's Service or Standard & Poor's rating of "A." At March 31, 2014, 88.4% of the portfolio was rated "AAA" as compared to 89.0% at December 31, 2013. 2.0% of the portfolio was either rated below "A" or unrated at March 31, 2014. The Company has no exposure to subprime mortgage loans in the investment portfolio. At March 31, 2014, the Company's consolidated investment securities portfolio had an effective duration of approximately 3.23 years.

Total proceeds from the sale of AFS securities for the first three months of 2014 were $2.8 million resulting in $62,000 of gross investment security gains and $5,000 of gross security losses. Total proceeds from the sale of AFS securities for the first three months of 2013 were $1.2 million resulting in $71,000 of gross investment security gains.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits, and certain Federal Home Loan Bank borrowings was $113,957,000 at March 31, 2014 and $110,780,000 at December 31, 2013.

The following tables present information concerning investments with unrealized losses as of March 31, 2014 and December 31, 2013 (in thousands):

Investment securities available for sale:


	March 31, 2014
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	2,910	$	(40	)	$	950	$	(50	)	$	3,860	$	(90	)
US Agency mortgage-backed securities		33,850		(861	)		-		-			33,850		(861	)
Corporate bonds		3,932		(68	)		3,864		(134	)		7,796		(202	)
Total	$	40,692	$	(969	)	$	4,814	$	(184	)	$	45,506	$	(1,153	)

Investment securities held to maturity:


	March 31, 2014
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency mortgage-backed securities	$	5,535	$	(233	)	$	1,641	$	(110	)	$	7,176	$	(343	)
Taxable municipal		1,088		(75	)		-		-			1,088		(75	)
Corporate bonds and other securities		2,952		(43	)		990		(10	)		3,942		(53	)
Total	$	9,575	$	(351	)	$	2,631	$	(120	)	$	12,206	$	(471	)

Investment securities available for sale:


	December 31, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	3,812	$	(64	)	$	938	$	(62	)	$	4,750	$	(126	)
US Agency mortgage-backed securities		43,402		(1,224	)		669		(3	)		44,071		(1,227	)
Corporate bonds		6,777		(215	)		1,963		(37	)		8,740		(252	)
Total	$	53,991	$	(1,503	)	$	3,570	$	(102	)	$	57,561	$	(1,605	)

Investment securities held to maturity:


	December 31, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency mortgage-backed securities	$	8,761	$	(477	)	$	-	$	-		$	8,761	$	(477	)
Corporate bonds and other securities		3,801		(205	)		994		(6	)		4,795		(211	)
Total	$	12,562	$	(682	)	$	994	$	(6	)	$	13,556	$	(688	)

The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are 50 positions that are considered temporarily impaired at March 31, 2014. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.

Contractual maturities of securities at March 31, 2014 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Investment securities available for sale:


	March 31, 2014
Cost Basis	US Agency		US Agency Mortgage-Backed Securities		Corporate Bonds		Total Investment Securities Available For Sale
After 1 year but within 5 years	$	5,927	$	1,875	$	6,995	$	14,797
After 5 years but within 10 years		1,000		10,320		4,998		16,318
After 10 years but within 15 years		-		61,560		-		61,560
Over 15 years		-		42,034		-		42,034
Total	$	6,927	$	115,789	$	11,993	$	134,709


	March 31, 2014
Fair Value	US Agency		US Agency Mortgage-Backed Securities		Corporate Bonds		Total Investment Securities Available For Sale
After 1 year but within 5 years	$	5,928	$	1,990	$	6,998	$	14,916
After 5 years but within 10 years		951		10,593		4,842		16,386
After 10 years but within 15 years		-		62,271		-		62,271
Over 15 years		-		43,173		-		43,173
Total	$	6,879	$	118,027	$	11,840	$	136,746

Investment securities held to maturity:


	March 31, 2014
Cost Basis	US Agency Mortgage-Backed Securities		Corporate Bonds and Other Securities		Total Investment Securities Held To Maturity
Within 1 year	$	-	$	-	$	-
After 1 year but within 5 years		-		3,000		3,000
After 5 years but within 10 years		1,751		151		1,902
After 10 years but within 15 years		-		1,011		1,011
Over 15 years		10,590		1,505		12,095
Total	$	12,341	$	5,667	$	18,008


	March 31, 2014
Fair Value	US Agency Mortgage-Backed Securities		Corporate Bonds and Other Securities		Total Investment Securities Held To Maturity
Within 1 year	$	-	$	-	$	-
After 1 year but within 5 years		-		2,960		2,960
After 5 years but within 10 years		1,641		144		1,785
After 10 years but within 15 years		-		943		943
Over 15 years		10,666		1,516		12,182
Total	$	12,307	$	5,563	$	17,870