NOTE 3 – INVESTMENT SECURITIES

The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government sponsored mortgage-backed securities and agencies, state, county and municipal securities and corporate debt securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2015, December 31, 2014 and June 30, 2014 are presented below:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
June 30, 2015:
U. S. government agencies	$	14,956	$	—	$	(210	)	$	14,746
State, county and municipal securities		165,070		3,305		(1,003	)		167,372
Corporate debt securities		12,710		184		(58	)		12,836
Mortgage-backed securities		665,274		4,948		(3,022	)		667,200

Total securities	$	858,010	$	8,437	$	(4,293	)	$	862,154

December 31, 2014:
U. S. government agencies	$	14,953	$	—	$	(275	)	$	14,678
State, county and municipal securities		137,873		3,935		(433	)		141,375
Corporate debt securities		10,812		228		—			11,040
Mortgage-backed securities		369,581		6,534		(1,403	)		374,712

Total securities	$	533,219	$	10,697	$	(2,111	)	$	541,805

June 30, 2014:
U. S. government agencies	$	14,950	$	—	$	(505	)	$	14,445
State, county and municipal securities		143,507		3,136		(863	)		145,780
Corporate debt securities		10,805		284		(131	)		10,958
Mortgage-backed securities		361,194		5,435		(2,182	)		364,447

Total securities	$	530,456	$	8,855	$	(3,681	)	$	535,630

The amortized cost and fair value of available-for-sale securities at June 30, 2015 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.


	Amortized Cost		Fair Value
	(Dollars in Thousands)
Due in one year or less	$	7,960	$	7,999
Due from one year to five years		47,037		48,246
Due from five to ten years		66,573		67,686
Due after ten years		71,166		71,023
Mortgage-backed securities		665,274		667,200

	$	858,010	$	862,154

Securities with a carrying value of approximately $323.9 million serve as collateral to secure public deposits and for other purposes required or permitted by law at June 30, 2015, compared with $286.6 million and $228.3 million at December 31, 2014 and June 30, 2014, respectively.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at June 30, 2015, December 31, 2014 and June 30, 2014.


	Less Than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
June 30, 2015:
U. S. government agencies	$	9,818	$	(138	)	$	4,928	$	(72	)	$	14,746	$	(210	)
State, county and municipal securities		50,294		(680	)		10,404		(323	)		60,698		(1,003	)
Corporate debt securities		7,149		(58	)		—		—			7,149		(58	)
Mortgage-backed securities		238,174		(2,046	)		30,672		(976	)		268,846		(3,022	)

Total temporarily impaired securities	$	305,435	$	(2,922	)	$	46,004	$	(1,371	)	$	351,439	$	(4,293	)

December 31, 2014:
U. S. government agencies	$	—	$	—		$	14,678	$	(275	)	$	14,678	$	(275	)
State, county and municipal securities		15,038		(70	)		19,665		(363	)		34,703		(433	)
Corporate debt securities		—		—			—		—			—		—
Mortgage-backed securities		36,760		(221	)		46,812		(1,182	)		83,572		(1,403	)

Total temporarily impaired securities	$	51,798	$	(291	)	$	81,155	$	(1,820	)	$	132,953	$	(2,111	)

June 30, 2014:
U. S. government agencies	$	—	$	—		$	14,445	$	(505	)	$	14,445	$	(505	)
State, county and municipal securities		4,088		(35	)		29,203		(828	)		33,291		(863	)
Corporate debt securities		—		—			4,945		(131	)		4,945		(131	)
Mortgage-backed securities		25,107		(65	)		51,039		(2,117	)		76,146		(2,182	)

Total temporarily impaired securities	$	29,195	$	(100	)	$	99,632	$	(3,581	)	$	128,827	$	(3,681	)

As of June 30, 2015, the Company’s security portfolio consisted of 443 securities, 163 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed and state, county and municipal securities, as discussed below.

At June 30, 2015, the Company held 114 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2015.

At June 30, 2015, the Company held 40 state, county and municipal securities, three U.S. government-sponsored agency security, and six corporate security that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2015.

During the first six months of 2015 and 2014, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities, except for one security that began deferring interest during the fourth quarter of 2010. The Company’s investments in subordinated debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at June 30, 2015, December 31, 2014 or June 30, 2014.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at June 30, 2015, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at June 30, 2015, these investments are not considered impaired on an other-than-temporary basis.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the six months ended June 30, 2015, year ended December 31, 2014 and six months ended June 30, 2014:


	June 30, 2015			December 31, 2014			June 30, 2014
	(Dollars in Thousands)
Gross gains on sales of securities	$	41		$	141		$	8
Gross losses on sales of securities		(19	)		(3	)		(2	)

Net realized gains on sales of securities available for sale	$	22		$	138		$	6

Sales proceeds	$	30,113		$	94,051		$	69,768