3.	INVESTMENT SECURITIES

The cost basis and fair values of investment securities are summarized as follows:

Investment securities available for sale:

AT DECEMBER 31, 2014

COST
BASIS

GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
LOSSES

FAIR
VALUE

(IN THOUSANDS)

U.S. Agency

5,931

(46

)

5,906

Corporate bonds

15,497

(122

)

15,436

U.S. Agency mortgage-backed securities

102,888

3,197

(317

)

105,768

Total

124,316

3,279

(485

)

127,110

Investment securities held to maturity:

AT DECEMBER 31, 2014

COST
BASIS

GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
LOSSES

FAIR
VALUE

(IN THOUSANDS)

U.S. Agency mortgage-backed securities

12,481

395

(50

)

12,826

Taxable municipal

3,364

(24

)

3,414

Corporate bonds and other securities

3,995

(28

)

3,973

Total

19,840

475

(102

)

20,213

Investment securities available for sale:
	AT DECEMBER 31, 2013
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE

	(IN THOUSANDS)
U.S. Agency	$	6,926	$	35	$	(126	)	$	6,835
Corporate bonds		11,992		21		(252	)		11,761
U.S. Agency mortgage-backed securities		121,480		3,129		(1,227	)		123,382
Total	$	140,398	$	3,185	$	(1,605	)	$	141,978

Investment securities held to maturity:
	AT DECEMBER 31, 2013
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE

	(IN THOUSANDS)
U.S. 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 Investors Service or Standard & Poor's rating of A. At December 31, 2014, 84.1% of the portfolio was rated AAA as compared to 89.0% at December 31, 2013. 3.8% of the portfolio was rated below A or unrated on December 31, 2014. The Company and its subsidiaries, collectively, did not hold securities of any single issuer, excluding U.S. Treasury and U.S. Agencies, that exceeded 10% of shareholders' equity at December 31, 2014.

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 $104,780,000 at December 31, 2014 and $110,780,000 at December 31, 2013.

The Company realized $182,000 of gross investment security gains and $5,000 of gross investment security losses in 2014 and $289,000 of gross investment security gains and $85,000 of investment security losses in 2013, and $12,000 of gross investment gains and no investment security losses in 2012. On a net basis, the realized gain for 2014 was $117,000 after factoring in tax expense of $60,000 and the realized gain for 2013 was $135,000 after factoring in tax expense of $69,000, and the realized gain for 2012 was $8,000 after factoring in tax expense of $4,000. Proceeds from sales of investment securities available for sale were $5.2 million for 2014, $11.2 million for 2013, and $4.2 million during 2012.

The following table sets forth the contractual maturity distribution of the investment securities, cost basis and fair market values, and the weighted average yield for each type and range of maturity as of December 31, 2014. Yields are not presented on a tax-equivalent basis, but are based upon the cost basis and are weighted for the scheduled maturity. The Company's consolidated investment securities portfolio had an effective duration of approximately 2.95 years. The weighted average expected maturity for available for sale securities at December 31, 2014 for U.S. Agency, U.S. Agency Mortgage-Backed and Corporate Bond securities was 2.95, 4.25 and 4.85 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2014 for U.S. Agency Mortgage-Backed and Corporate Bonds/Taxable Municipals and other securities were 6.37 and 5.78 years.

Investment securities available for sale:

AT DECEMBER 31, 2014

U.S.
AGENCY

U.S. AGENCY
MORTGAGE-
BACKED SECURITIES

CORPORATE
BONDS

TOTAL
INVESTMENT
SECURITIES
AVAILABLE
FOR SALE

(IN THOUSANDS, EXCEPT YIELDS)

COST BASIS

Within 1 year

1,000

2.00

—

1,000

2.00

After 1 year but within 5 years

4,931

1.38

1,696

4.46

7,999

1.75

14,626

1.96

After 5 years but within 10 years

—

10,340

2.74

7,498

2.05

17,838

2.46

After 10 years but within 15 years

—

56,783

2.66

—

56,783

2.66

Over 15 years

—

34,069

2.56

—

34,069

2.56

Total

5,931

1.48

102,888

2.66

15,497

1.90

124,316

2.52

FAIR VALUE

Within 1 year

1,013

—

1,013

After 1 year but within 5 years

4,893

1,791

7,991

14,675

After 5 years but within 10 years

—

10,671

7,445

18,116

After 10 years but within15 years

—

58,141

—

58,141

Over 15 years

—

35,165

—

35,165

Total

5,906

105,768

15,436

127,110

Investment securities held to maturity:

AT DECEMBER 31, 2014

U.S. AGENCY
MORTGAGE-
BACKED
SECURITIES

CORPORATE
BONDS
AND
OTHER

TOTAL
INVESTMENT
SECURITIES
HELD TO
MATURITY

(IN THOUSANDS, EXCEPT YIELDS)

COST BASIS

Within 1 year

—

2,000

1.35

2,000

1.35

After 1 year but within 5 years

—

1,000

1.67

1,000

1.67

After 5 years but within 10 years

2,959

2.40

851

3.63

3,810

2.67

After 10 years but within15 years

—

1,162

3.27

1,162

3.27

Over 15 years

9,522

3.45

2,346

4.49

11,868

3.66

Total

12,481

3.20

7,359

2.96

19,840

3.11

FAIR VALUE

Within 1 year

—

1,991

After 1 year but within 5 years

—

981

After 5 years but within 10 years

2,931

868

3,799

After 10 years but within15 years

—

1,140

Over 15 years

9,895

2,407

12,302

Total

12,826

7,387

20,213

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

Total investment securities:

LESS THAN 12 MONTHS

12 MONTHS OR LONGER

TOTAL

FAIR
VALUE

UNREALIZED
LOSSES

FAIR
VALUE

UNREALIZED
LOSSES

FAIR
VALUE

UNREALIZED
LOSSES

U.S. Agency

996

)

2,858

(42

)

3,854

(46

)

U.S. Agency mortgage-backed securities

2,826

(13

)

20,408

(354

)

23,234

(367

)

Taxable municipal

150

)

988

(23

)

1,138

(24

)

Corporate bonds and other securities

2,960

(43

)

8,891

(107

)

11,851

(150

)

Total

6,932

(61

)

33,145

(526

)

40,077

(587

)

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

Total investment securities:	LESS THAN 12 MONTHS					12 MONTHS OR LONGER					TOTAL
Total investment securities:	FAIR VALUE		UNREALIZED LOSSES			FAIR VALUE		UNREALIZED LOSSES			FAIR VALUE		UNREALIZED LOSSES
U.S. Agency	$	3,812	$	(64	)	$	938	$	(62	)	$	4,750	$	(126	)
U.S. 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 38 positions that are considered temporarily impaired at December 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 or mature.