(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)	September 30, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	116,285		46		4		116,327
State and political subdivisions		953		17		-		970
Corporate bonds		41,127		-		102		41,025
Mortgage backed securities and collateralized mortgage obligations - residential		396,647		4,072		144		400,575
Small Business Administration-guaranteed participation securities		84,268		531		112		84,687
Mortgage backed securities and collateralized mortgage obligations - commercial		10,214		19		-		10,233
Other		650		-		-		650
Total debt securities		650,144		4,685		362		654,467
Equity securities		35		-		-		35
Total securities available for sale	$	650,179		4,685		362		654,502

(dollars in thousands)	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	86,899		19		181		86,737
State and political subdivisions		1,270		20		-		1,290
Mortgage backed securities and collateralized mortgage obligations - residential		416,625		430		5,326		411,729
Small Business Administration-guaranteed participation securities		92,620		-		2,204		90,416
Mortgage backed securities and collateralized mortgage obligations - commercial		10,422		-		242		10,180
Other		650		-		-		650
Total debt securities		608,486		469		7,953		601,002
Equity securities		35		-		-		35
Total securities available for sale	$	608,521		469		7,953		601,037

The following table distributes the debt securities included in the available for sale portfolio as of September 30, 2016, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately:

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	1,406		1,408
Due in one year through five years		142,461		142,415
Due after five years through ten years		15,139		15,140
Due after ten years		9		9
Mortgage backed securities and collateralized mortgage obligations - residential		396,647		400,575
Small Business Administration-guaranteed participation securities		84,268		84,687
Mortgage backed securities and collateralized mortgage obligations - commercial		10,214		10,233
	$	650,144		654,467

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)		September 30, 2016
		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	$	14,996		4		-		-		14,996		4
Mortgage backed securities and collateralized mortgage obligations - residential		29,252		116		5,138		28		34,390		144
Corporate bonds		41,025		102		-		-		41,025		102
Small Business Administration -guaranteed participation securities		-		-		15,332		112		15,332		112
Total	$	85,273		222		20,470		140		105,743		362

(dollars in thousands)		December 31, 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	$	41,786		113		9,932		68		51,718		181
Mortgage backed securities and collateralized mortgage obligations - residential		187,605		2,147		167,549		3,179		355,153		5,326
Small Business Administration-guaranteed participation securities		7,529		111		82,888		2,093		90,417		2,204
Mortgage backed securities and collateralized mortgage obligations - commercial		5,553		130		4,627		112		10,180		242
Total	$	242,473		2,501		264,996		5,452		507,468		7,953

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 months and nine months ended September 30, 2016 and 2015 are as follows:

(dollars in thousands)	Three months ended September 30,
	2016		2015

Proceeds from sales	$	-		-
Proceeds from calls		70,762		106,555
Gross realized gains		-		-
Gross realized losses		-		-

(dollars in thousands)	Nine months ended September 30,
	2016		2015

Proceeds from sales	$	44,829		22,945
Proceeds from calls		160,483		162,214
Gross realized gains		668		249
Gross realized losses		-		-

For the nine months ended September 30, 2016, income tax expense recognized on net gains on sales of securities available for sale was approximately $267 thousand. For the nine months ended September 30, 2015, income tax expense recognized on net gains on sales of securities available for sale was approximately $100 thousand. There were no sales of securities available for sale during the three months ended September 30, 2016 and 2015.

(b) Held to maturity securities

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

(dollars in thousands)	September 30, 2016
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	38,044		2,547		-		40,591
Corporate bonds		9,986		414		-		10,400
Total held to maturity	$	48,030		2,961		-		50,991

(dollars in thousands)	December 31, 2015
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Mortgage backed securities and collateralized mortgage obligations - residential	$	46,490		2,308		-		48,798
Corporate bonds		9,975		666		-		10,641
Total held to maturity	$	56,465		2,974		-		59,439

The following table distributes the debt securities included in the held to maturity portfolio as of September 30, 2016, based on the securities’ final maturity. Actual maturities may differ because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty. Securities not due at a single maturity date are presented separately:

(dollars in thousands)	Amortized Cost		Fair Value
Due in one year through five years	$	9,986		10,400
Mortgage backed securities and collateralized mortgage obligations - residential		38,044		40,591
	$	48,030		50,991

There were no held to maturity securities in an unrecognized loss position as of September 30, 2016 or December 31, 2015.

There were no sales or transfers of held to maturity securities during the three months and nine months ended September 30, 2016 and 2015.

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 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 any 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 September 30, 2016, the Company’s security portfolio included certain securities which were in an unrealized loss position. The declines in fair value are 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 September 30, 2016.