(4) Investment Securities

(a) Securities available for sale

The amortized cost and fair value of the securities available for sale are as follows:

(dollars in thousands)	June 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	152,216		87		221		152,082
State and political subdivisions		1,939		30		-		1,969
Mortgage backed securities and collateralized mortgage obligations - residential		434,780		550		6,125		429,205
Small Business Administration- guaranteed participation securities		98,059		-		2,736		95,323
Mortgage backed securities and collateralized mortgage obligations - commercial		10,560		-		161		10,399
Other		650		-		-		650
Total debt securities		698,204		667		9,243		689,628
Equity securities		35		-		-		35
Total securities available for sale	$	698,239		667		9,243		689,663

(dollars in thousands)	December 31, 2014

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	78,420		2		622		77,800
State and political subdivisions		2,232		39		-		2,271
Mortgage backed securities and collateralized mortgage obligations - residential		486,107		1,108		3,655		483,560
Corporate bonds		1,500		-		-		1,500
Small Business Administration - guaranteed participation securities		103,273		-		2,777		100,496
Mortgage backed securities and collateralized mortgage obligations - commercial		10,696		-		249		10,447
Other		650		-		-		650
Total debt securities		682,878		1,149		7,303		676,724
Equity securities		35		-		-		35
Total securities available for sale	$	682,913		1,149		7,303		676,759

The following table distributes the debt securities included in the available for sale portfolio as of June 30, 2015, based on the securities’ final maturity (mortgage backed securities and collateralized mortgage obligations are stated using an estimated average life):

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	2,546		2,542
Due in one year through five years		497,021		493,286
Due after five years through ten years		198,619		193,782
Due after ten years		18		18
	$	698,204		689,628

Actual maturities may differ from the above because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

Gross unrealized losses on securities available for sale and the related fair values aggregated by the length of time that individual securities have been in an unrealized loss position, were as follows:

(dollars in thousands)	June 30, 2015
	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss
U.S. government sponsored enterprises	$	31,493		51		56,351		170		87,844		221
Mortgage backed securities and collateralized mortgage obligations - residential		183,404		2,307		188,924		3,818		372,328		6,125
Small Business Administration - guaranteed participation securities		7,973		164		87,350		2,572		95,323		2,736
Mortgage backed securities and collateralized mortgage obligations - commercial		-		-		10,399		161		10,399		161

Total	$	222,870		2,522		343,024		6,721		565,894		9,243

(dollars in thousands)	December 31, 2014
	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss
U.S. government sponsored enterprises	$	12,840		81		54,959		541		67,799		622
Mortgage backed securities and collateralized mortgage obligations - residential		65,549		492		325,476		3,163		391,025		3,655
Small Business Administration - guaranteed participation securities		-		-		100,496		2,777		100,496		2,777
Mortgage backed securities and collateralized mortgage obligations - commercial		-		-		10,447		249		10,447		249

Total	$	78,389		573		491,378		6,730		569,767		7,303

The proceeds from sales and calls of securities available for sale, gross realized gains and gross realized losses from sales and calls during the three and six months ended June 30, 2015 and 2014 are as follows:

(dollars in thousands)	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014

Proceeds from sales	$	-		-	$	22,945		-
Proceeds from calls		28,891		39,301		58,571		180,623
Gross realized gains		-		-		249		6
Gross realized losses		-		-		-		-

There were no net gains on sales of securities available for sale for the three months ended June 30, 2015 and 2014. Income tax expense recognized on net gains on sales of securities available for sale were approximately $100 thousand and $2 thousand for the six months ended June 30, 2015 and 2014, respectively.

(b) Held to maturity securities

The amortized cost and fair value of the held to maturity securities are as follows:

(dollars in thousands)	June 30, 2015
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	53,576		3,225		-		56,801
Corporate bonds		9,967		921		-		10,888
Total held to maturity	$	63,543		4,146		-		67,689

(dollars in thousands)	December 31, 2014
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations - residential	$	60,986		3,334		-		64,320
Corporate bonds		9,960		1,062		-		11,022
Total held to maturity	$	70,946		4,396		-		75,342

The following table distributes the debt securities included in the held to maturity portfolio as of June 30, 2015, based on the securities’ final maturity (mortgage backed securities and collateralized mortgage obligations are stated using an estimated average life):

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	-		-
Due in one year through five years		63,543		67,689
Due in five years through ten years		-		-
	$	63,543		67,689

Actual maturities may differ from the above because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

There were no held to maturity securities in an unrecognized loss position as of June 30, 2015 or December 31, 2014.

There were no sales or transfers of held to maturity securities during the three and six months ended June 30, 2015 and 2014.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio by type and applying the appropriate OTTI model. Investment securities classified as available for sale or held to maturity are generally evaluated for OTTI under ASC 320 “Investments – Debt and Equity Securities.”

In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (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, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI on debt securities shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of June 30, 2015, the Company’s security portfolio included certain securities which were in an unrealized loss position, and are discussed below.

U.S. government sponsored enterprises

In the case of unrealized losses on U.S. government sponsored enterprises, 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.

Mortgage backed securities and collateralized mortgage obligations - residential

All of the mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government sponsored entities and agencies, primarily Ginnie Mae, Fannie Mae and Freddie Mac, which are institutions the government has affirmed its commitment to support. 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.

Small Business Administration (SBA) - guaranteed participation securities

All of the SBA securities held by the Company were issued and guaranteed by U.S. Small Business Administration. 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.

Mortgage backed securities and collateralized mortgage obligations – commercial

All of the mortgage backed securities and collateralized mortgage obligations held by the Company were issued by U.S. government-sponsored entities and agencies, are current as to the payment of interest and principal and the Company expects to collect the full amount of the principal and interest payments. 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.

As a result of the above analysis, during the three and six months ended June 30, 2015, the Company did not recognize any other-than-temporary impairment losses for credit or any other reason.