6. Investment Securities

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

Investment securities available for sale (AFS):

	September 30, 2014
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency	$	6,930	$	33	$	(58	)	$	6,905
US Agency mortgage-backed securities		108,296		3,055		(666	)		110,685
Corporate bonds		13,494		57		(168	)		13,383
Total	$	128,720	$	3,145	$	(892	)	$	130,973

Investment securities held to maturity (HTM):

	September 30, 2014
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
US Agency mortgage-backed securities	$	12,788	$	340	$	(169	)	$	12,959
Taxable municipal		2,715		56		(54	)		2,717
Corporate bonds and other securities		3,995		—		(45	)		3,950
Total	$	19,498	$	396	$	(268	)	$	19,626

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 September 30, 2014, 86.4% 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 September 30, 2014. The Company has no exposure to subprime mortgage loans in the investment portfolio. At September 30, 2014, the Company's consolidated investment securities portfolio had an effective duration of approximately 3.12 years.

Total proceeds from the sale of AFS securities for the first nine months of 2014 were $5.2 million resulting in $182,000 of gross investment security gains and $5,000 of gross security losses. Total proceeds from the sale of AFS securities for the first nine months of 2013 were $2.3 million resulting in $137,000 of gross investment security gains. There were no sales of AFS securities in the third quarter of 2014. Sales of AFS securities in the third quarter of 2013 were $1.1 million resulting in $66,000 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 $119,411,000 at September 30, 2014 and $110,780,000 at December 31, 2013.

The following tables present information concerning investments with unrealized losses as of September 30, 2014 and December 31, 2013 (in thousands):

Total investment securities:

	September 30, 2014
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Agency	$	50	$	(1	)	$	3,843	$	(57	)	$	3,893	$	(58	)
US Agency mortgage-backed securities		16,415		(68	)		26,320		(767	)		42,735		(835	)
Taxable municipal		984		(11	)		968		(43	)		1,952		(54	)
Corporate bonds and other securities		2,933		(62	)		8,847		(151	)		11,780		(213	)
Total	$	20,382	$	(142	)	$	39,978	$	(1,018	)	$	60,360	$	(1,160	)

Total investment securities

	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		52,163		(1,701	)		669		(3	)		52,832		(1,704	)
Taxable municipal		891		(120	)		—		—			891		(120	)
Corporate bonds and other securities		9,687		(300	)		2,957		(43	)		12,644		(343	)
Total	$	66,553	$	(2,185	)	$	4,564	$	(108	)	$	71,117	$	(2,293	)

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 53 positions that are considered temporarily impaired at September 30, 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 September 30, 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.

Total investment securities:

	September 30, 2014
	Available for sale				Held to maturity
	Cost Basis		Fair Value		Cost Basis		Fair Value
Within 1 year	$	1,000	$	1,018	$	2,000	$	1,990
After 1 year but within 5 years		13,827		13,944		1,000		979
After 5 years but within 10 years		17,881		18,026		3,325		3,246
After 10 years but within 15 years		60,072		61,067		1,011		968
Over 15 years		35,940		36,918		12,162		12,443
Total	$	128,720	$	130,973	$	19,498	$	19,626