Note 3 – Investments

Prior to the final determination of Basel III, investments were recorded as held-to-maturity due to the uncertainty of the capital treatment of available-for-sale investments. Upon the issuance of the final ruling, the Company opted out of the Other Comprehensive Income treatment of available-for-sale investments permitted under Basel III. Due to the change in capital treatment under the final ruling of Basel III, the Company’s purpose of recording investments as held-to-maturity changed; therefore, during the period ended March 31, 2016, the Company reclassified $52.4 million, with unrealized holding gains of $1.8 million, of the remaining held-to-maturity investments into available-for-sale investments.

There were no investment securities held-to-maturity at June 30, 2016.

Amortized cost and fair values of investment securities held-to-maturity at December 31, 2015, including gross unrealized gains and losses, are summarized as follows:


	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gain		Loss		Value
Municipal securities	$	52,859	$	1,699	$	(88)	$	54,470
Total investment securities held–to-maturity	$	52,859	$	1,699	$	(88)	$	54,470

Amortized cost and fair values of investment securities available-for-sale at June 30, 2016 are summarized as follows:


	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gain		Loss		Value
U.S. Agency securities	$	24,004	$	147	$	(83)	$	24,068
U.S. Sponsored Mortgage-backed securities		45,021		152		(250)		44,923
Municipal securities		60,942		2,717		(5)		63,654
Total debt securities		129,967		3,016		(338)		132,645
Equity and other securities		6,040		159		—		6,199
Total investment securities available-for-sale	$	136,007	$	3,175	$	(338)	$	138,844

Amortized cost and fair values of investment securities available-for-sale at December 31, 2015 are summarized as follows:


	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gain		Loss		Value
U.S. Agency securities	$	29,532	$	—	$	(181)	$	29,351
U.S. Sponsored Mortgage-backed securities		34,246		1		(533)		33,714
Municipal securities		1,775		23		—		1,798
Total debt securities		65,553		24		(714)		64,863
Equity and other securities		5,309		95		(11)		5,393
Total investment securities available-for-sale	$	70,862	$	119	$	(725)	$	70,256

The following tables summarize amortized cost and fair values of debt securities by maturity at June 30, 2016:



	Available for sale
	Amortized		Fair
	Cost		Value
Within one year	$	1,497	$	1,502
After one year, but within five		15,050		15,315
After five years, but within ten		10,441		10,771
After ten years		102,979		105,057
Total	$	129,967	$	132,645

Investment securities with a carrying value of $75.8 million at June 30, 2016, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve discount window.

The Company's investment portfolio includes securities that are in an unrealized loss position as of June 30, 2016, the details of which are included in the following table. Although these securities, if sold at June 30, 2016 would result in a pretax loss of $338 thousand the Company has no intent to sell the applicable securities at such fair values, and maintains the Company has the ability to hold these securities until all principal has been recovered. It is not more likely than not the Company would sell any securities at a loss for liquidity purposes. Declines in the fair values of these securities can be traced to general market conditions which reflect the prospect for the economy as a whole. When determining other-than-temporary impairment on securities, the Company considers such factors as adverse conditions specifically related to a certain security or to specific conditions in an industry or geographic area, the time frame securities have been in an unrealized loss position, the Company’s ability to hold the security for a period of time sufficient to allow for anticipated recovery in value, whether or not the security has been downgraded by a rating agency, and whether or not the financial condition of the security issuer has severely deteriorated. As of June 30, 2016, the Company considers all securities with unrealized loss positions to be temporarily impaired, and consequently, does not believe the Company will sustain any material realized losses as a result of the current temporary decline in market value.

The following table discloses investments in an unrealized loss position at June 30, 2016:


Description and number of positions	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Agency securities (9)	$	10,382	$	(83)	$	—	$	—
U.S. Sponsored Mortgage-backed securities (13)		1,214		(1)		19,431		(249)
Municipal securities (1)		426		(5)		—		—
Equity and other securities (0)		—		—		—		—
	$	12,022	$	(89)	$	19,431	$	(249)

The following table discloses investments in an unrealized loss position at December 31, 2015:


Description and number of positions	Less than 12 months				12 months or more
(in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. Agency securities (9)	$	28,351	$	(181)	$	—	$	—
U.S. Sponsored Mortgage-backed securities (19)		20,647		(233)		11,862		(300)
Municipal securities (22)		3,827		(32)		5,559		(56)
Equity and other securities (1)		2,489		(11)		—		—
	$	55,314	$	(457)	$	17,421	$	(356)

For the three month period ended June 30, 2016 and 2015, the Company sold investments available-for-sale of $18.3 million and $0, respectively, resulting in gross gains of $224 thousand and $0, respectively, and gross losses of $2 thousand and $0, respectively.

For the six month period ended June 30, 2016 and 2015, the Company sold investments available-for-sale of $39.5 million and $11.4 million, respectively, resulting in gross gains of $605 thousand and $121 thousand, respectively, and gross losses of $2 thousand and $0, respectively.

The Company sold no held-to-maturity investments during the three month period ended June 30, 2016 and sold investments held-to maturity of $421 thousand, resulting in gross gains of $5 thousand and no gross losses, during the three month period ended June 30, 2015. The held-to-maturity investment was sold due to a credit downgrade.