(4) Investment Securities

(a) Securities available for sale

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

	September 30, 2018
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	154,866		-		4,813		150,053
State and political subdivisions		174		6		-		180
Mortgage backed securities and collateralized mortgage obligations		282,286		47		13,240		269,093
Corporate bonds		30,090		-		113		29,977
Small Business Administration - guaranteed participation securities		61,431		-		3,537		57,894
Other		685		-		-		685

Total securities available for sale	$	529,532		53		21,703		507,882

	December 31, 2017
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	139,890		27		2,066		137,851
State and political subdivisions		515		10		-		525
Mortgage backed securities and collateralized mortgage obligations		330,424		84		4,825		325,683
Corporate bonds		40,270		-		108		40,162
Small Business Administration - guaranteed participation securities		68,921		-		1,862		67,059
Other		685		-		-		685

Total securities available for sale	$	580,705		121		8,861		571,965

The following table distributes the debt securities included in the available for sale portfolio as of September 30, 2018, 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:

	Amortized		Fair
(dollars in thousands)	Cost		Value

Due in one year or less	$	10,687		10,649
Due in one year through five years		170,059		165,213
Due after five years through ten years		5,069		5,033
Mortgage backed securities and collateralized mortgage obligations		282,286		269,093
Small Business Administration - guaranteed participation securities		61,431		57,894
	$	529,532		507,882

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:

	September 30, 2018
	Less than 12 months				12 months or more				Total
			Gross				Gross				Gross
	Fair		Unreal.		Fair		Unreal.		Fair		Unreal.
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	58,593		1,381		91,460		3,432		150,053		4,813
Mortgage backed securities and collateralized mortgage obligations - residental		8,061		266		259,715		12,974		267,776		13,240
Corporate bonds		14,986		75		9,992		38		24,978		113
Small Business Administration - guaranteed participation securities		-		-		57,894		3,537		57,894		3,537

Total	$	81,640		1,722		419,061		19,981		500,701		21,703

	December 31, 2017
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss		Fair Value		Gross Unreal. Loss

U.S. government sponsored enterprises	$	29,734		266		98,090		1,800		127,824		2,066
Mortgage backed securities and collateralized mortgage obligations - residental		48,080		371		266,394		4,344		314,474		4,715
Corporate bonds		-		-		40,162		108		40,162		108
Small Business Administration - guaranteed participation securities		-		-		67,059		1,862		67,059		1,862
Mortgage backed securities and collateralized mortgage obligations - commercial		-		-		9,700		110		9,700		110

Total	$	77,814		637		481,405		8,224		559,219		8,861

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 nine months ended September 30, 2018 and 2017 are as follows:

	Three months ended September 30,
(dollars in thousands)	2018		2017

Proceeds from sales		-		-
Proceeds from calls		15,444		35,554
Gross realized gains		-		-
Gross realized losses		-		-

	Nine months ended September 30,
(dollars in thousands)	2018		2017

Proceeds from sales	$	-		-
Proceeds from calls		64,925		109,123
Gross realized gains		-		-
Gross realized losses		-		-

There were no sales of securities available for sale during the three and nine months ended September 30, 2018 and 2017.

(b) Held to maturity securities

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

	September 30, 2018
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations	$	23,462		601		214		23,849

Total held to maturity	$	23,462		601		214		23,849

	December 31, 2017
(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value

Mortgage backed securities and collateralized mortgage obligations	$	27,551		1,150		-		28,701

Total held to maturity	$	27,551		1,150		-		28,701

The following table distributes the debt securities included in the held to maturity portfolio as of September 30, 2018, 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		Fair
	Cost		Value
Mortgage backed securities and collateralized mortgage obligations	$	23,462		23,849

Total held to maturity	$	23,462		23,849

Gross unrecognized losses on securities held to maturity and the related fair values aggregated by the length of time that individual securities have been in an unrecognized loss position, were as follows:

	September 30, 2018
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Gross Unrec. Loss		Fair Value		Gross Unrec. Loss		Fair Value		Gross Unrec. Loss

Mortgage backed securities and collateralized mortgage obligations	$	12,599		214		-		-		12,599		214

Total	$	12,599		214		-		-		12,599		214

There were no sales or transfers of held to maturity securities during the three and nine months ended September 30, 2018 and 2017.

There were no held to maturity securities in an unrecognized loss position as of December 31, 2017.

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 FASB ASC Topic 320, Investments – Debt and Equity Securities (“ASC 320”).

In determining OTTI under the 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, 2018, the Company’s security portfolio included certain debt securities which were in a loss position. Almost all of the securities in a loss position are issuances from U.S. government sponsored entities. Corporate bonds held by the Company are investment grade quality, and management has reviewed the financial condition of the issuer. 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, 2018.