2.	Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at March 31, 2014 and December 31, 2013 are summarized as follows:

 

						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
(In thousands)		Cost				Gains				Losses				Value
March 31, 2014
Securities available for sale:
Agency mortgage-backed securities		$	21,792			$	204			$	179			$	21,817
Agency CMO			19,231				120				264				19,087
Other debt securities:
Agency notes and bonds			29,959				42				499				29,502
Municipal obligations			35,670				929				553				36,046
Subtotal—debt securities			106,652				1,295				1,495				106,452
Mutual funds			2,172				0				31				2,141
Total securities available for sale		$	108,824			$	1,295			$	1,526			$	108,593
Securities held to maturity:
Agency mortgage-backed securities		$	8			$	0			$	0			$	8
Total securities held to maturity		$	8			$	0			$	0			$	8
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

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 March 31, 2014, 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			10,447				10,456				0				0
Due after five years through ten years			28,126				28,199
Due after ten years			27,056				26,893				0				0
			65,629				65,548				0				0
Mortgage-backed securities and CMO			41,023				40,904				8				8
		$	106,652			$	106,452			$	8			$	8

Information pertaining to investment securities available for sale with gross unrealized losses at March 31, 2014, 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			$	22,047			$	499
Agency CMO			11				9,909				185
Agency mortgage-backed securities			20				15,956				113
Muncipal obligations			16				6,220				153
Mutual fund			1				1,558				17
Total less than twelve months			68				55,690				967
Continuous loss position more than twelve months:
Muncipal obligations			12				6,208				400
Agency CMO			2				1,742				79
Agency mortgage-backed securities			2				1,747				66
Mutual fund			1				402				14
Total more than twelve months			17				10,099				559
Total securities available for sale			85			$	65,789			$	1,526

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 March 31, 2014, the 83 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 2.3% 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 three months ended March 31, 2013, the Company realized gross gains on sales of available for sale municipal securities of $21,000. The Company did not sell any securities during the three months ended March 31, 2014.

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.