NOTE 3: INVESTMENT SECURITIES

Investments in securities are classified as available for sale or held to maturity as of June 30, 2015 and December 31, 2014. The amortized cost and fair values of the securities classified as available for sale and held to maturity as of June 30, 2015 are as follows:


		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
(In thousands)	Cost	Gains	Losses	Value
Available for Sale:
U.S. Treasury Obligations	$ 25,055	$ 193	$ -	$ 25,248
Federal Home Loan Bank ("FHLB") Obligations	33,982	109	14	34,077
Residential Real Estate Mortgage-backed Securities ("Agency MBSs")	107,187	2,131	427	108,891
Agency Commercial Mortgage Backed Securities ("Agency CMBSs")	23,992	8	349	23,651
Agency Collateralized Mortgage Obligations ("Agency CMOs")	67,127	381	190	67,318
Asset Backed Securities ("ABSs")	337	34	-	371
Total Available for Sale	$ 257,680	$ 2,856	$ 980	$ 259,556
		Gross	Gross
	Amortized	Unrecognized	Unrecognized	Fair
(In thousands)	Cost	Gains	Losses	Value
Held to Maturity:
U.S. Agency Obligations	$ 21,137	$ 479	$ -	21,616
U.S. Government Sponsored Enterprises ("U.S. GSEs")	9,527	88	-	9,615
FHLB Obligations	4,739	110	-	4,849
Agency CMOs	86,340	313	547	86,106
Agency MBSs	7,569	117	-	7,686
Total Held to Maturity	$ 129,312	$ 1,107	$ 547	$ 129,872

The amortized cost and fair values of the securities classified as available for sale and held to maturity as of December 31, 2014 are as follows:


		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
(In thousands)	Cost	Gains	Losses	Value
Available for Sale:
U.S. Treasury Obligations	$ 25,048	$ 57	$ 12	$ 25,093
Agency MBSs	92,827	2,680	100	95,407
Agency CMBSs	22,056	20	372	21,704
Agency CMOs	60,880	241	239	60,882
ABSs	351	36	-	387
Total Available for Sale	$ 201,162	$ 3,034	$ 723	$ 203,473
		Gross	Gross
	Amortized	Unrecognized	Unrecognized	Fair
(In thousands)	Cost	Gains	Losses	Value
Held to Maturity:
U.S. Agency Obligations	$ 22,072	$ 597	$ -	$ 22,669
U.S. GSEs	9,498	59	-	9,557
FHLB Obligations	4,720	100	-	4,820
Agency CMOs	94,022	280	519	93,783
Agency MBSs	8,109	233	-	8,342
Total Held to Maturity	$ 138,421	$ 1,269	$ 519	$ 139,171

The contractual final maturity distribution of the debt securities classified as available for sale as of June 30, 2015, are as follows:


		After One	After Five
	Within	But Within	But Within	After Ten
(In thousands)	One Year	Five Years	Ten Years	Years	Total
Available for Sale (at fair value):
U.S. Treasury Obligations	$ -	$ 25,248	$ -	$ -	$ 25,248
FHLB Obligations	-	22,131	11,946	-	34,077
Agency MBSs	54	3,797	36,018	69,022	108,891
Agency CMBSs	1,424	13,175	5,018	4,034	23,651
Agency CMOs	-	-	1,962	65,356	67,318
ABSs	-	-	-	371	371
Total Available for Sale	$ 1,478	$ 64,351	$ 54,944	$ 138,783	$ 259,556
Available for Sale (at amortized cost):
U.S. Treasury Obligations	$ -	$ 25,055	$ -	$ -	$ 25,055
FHLB Obligations	-	22,083	11,899	-	33,982
Agency MBSs	53	3,692	35,573	67,869	107,187
Agency CMBSs	1,417	13,374	5,036	4,165	23,992
Agency CMOs	-	-	1,949	65,178	67,127
ABSs	-	-	-	337	337
Total Available for Sale	$ 1,470	$ 64,204	$ 54,457	$ 137,549	$ 257,680

The contractual final maturity distribution of the debt securities classified as held to maturity as of June 30, 2015, are as follows:


		After One	After Five
	Within	But Within	But Within	After Ten
(In thousands)	One Year	Five Years	Ten Years	Years	Total
Held to Maturity (at fair value):
U.S. Agency Obligations	$ -	$ -	$ -	$ 21,616	$ 21,616
U.S. GSEs	-	-	9,615	-	9,615
FHLB Obligations	-	-	4,849	-	4,849
Agency CMOs	-	-	-	86,106	86,106
Agency MBSs	7	-	103	7,576	7,686
Total Held to Maturity	$ 7	$ -	$ 14,567	$ 115,298	$ 129,872
Held to Maturity (at amortized cost):
U.S. Agency Obligations	$ -	$ -	$ -	$ 21,137	21,137
U.S. GSEs	-	-	9,527	-	9,527
FHLB Obligations	-	-	4,739	-	4,739
Agency CMOs	-	-	-	86,340	86,340
Agency MBSs	7	-	90	7,472	7,569
Total Held to Maturity	$ 7	$ -	$ 14,356	$ 114,949	$ 129,312

Actual maturities will differ from contractual maturities because borrowers may have rights to call or prepay obligations. Maturities of Agency MBSs and Agency CMOs in the tables above are based on final contractual maturities.

The following table presents the proceeds, gross gains and gross losses on available for sale securities for the three and six months ended June 30, 2015 and 2014.


	Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2015	2014	2015	2014
Proceeds	$ -	18,574	$ -	45,215
Gross gains	-	77	-	302
Gross losses	-	(60)	-	(159)
Net gains	$ -	17	$ -	143

Securities with a carrying amount of $291.06 million and $317.22 million at June 30, 2015 and December 31, 2014, respectively, were pledged to secure U.S. Treasury borrowings, public deposits, securities sold under agreements to repurchase, and for other purposes required by law.

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at June 30, 2015 were as follows:


	Less Than 12 Months		12 Months or More		Total
	Fair		Fair		Fair
(In thousands)	Value	Loss	Value	Loss	Value	Loss
Available for Sale:
FHLB Obligations	$ 5,086	$ 14	$ -	$ -	$ 5,086	$ 14
Agency MBSs	58,192	427	-	-	58,192	427
Agency CMBSs	5,017	19	17,209	330	22,226	349
Agency CMOs	10,982	80	6,846	110	17,828	190
Total Available for Sale	$ 79,277	$ 540	$ 24,055	$ 440	$ 103,332	$ 980
Held to Maturity:
U.S. Agency Obligations	$ -	$ -	$ -	$ -	$ -	$ -
Agency CMOs	49,727	446	5,983	101	55,710	547
Agency MBSs	-	-	-	-	-	-
Total Held to Maturity	$ 49,727	$ 446	$ 5,983	$ 101	$ 55,710	$ 547


	Less Than 12 Months		12 Months or More		Total
	Fair		Fair		Fair
(In thousands)	Value	Loss	Value	Loss	Value	Loss
Available for Sale:
U.S. Treasury Obligations	$ 5,080	$ 12	$ -	$ -	$ 5,080	$ 12
Agency MBSs	7,893	23	10,763	77	18,656	100
Agency CMBSs	-	-	17,478	372	17,478	372
Agency CMOs	11,384	49	10,962	190	22,346	239
Total Available for Sale	$ 24,357	$ 84	$ 39,203	$ 639	$ 63,560	$ 723
Held to Maturity:
U.S. Agency Obligations	$ -	$ -	$ -	$ -	$ -	$ -
U.S. GSEs	-	-	-	-	-	-
FHLB Obligations	-	-	-	-	-	-
Agency CMOs	14,338	108	43,911	411	58,249	519
Agency MBSs	-	-	-	-	-	-
Total Held to Maturity	$ 14,338	$ 108	$ 43,911	$ 411	$ 58,249	$ 519

There were no securities classified as trading at June 30, 2015 and December 31, 2014.

Unrealized losses on investment securities result from the cost basis of the security being higher than its current fair value. These discrepancies generally occur because of changes in interest rates since the time of purchase, or because the credit quality of the issuer has deteriorated. We perform a quarterly analysis of each security in our portfolio to determine if impairment exists, and if it does, whether that impairment is other-than-temporary.

At June 30, 2015, all of our Agency MBSs and Agency CMOs held were issued by U.S. government-sponsored entities and agencies, primarily the Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corp (“FHLMC”), institutions which 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 we do not have the intent to sell these securities and it is not likely that we will be required to sell the securities before their anticipated recovery, we do not consider these securities to be other-than-temporarily impaired at June 30, 2015.

We use external pricing services to obtain fair market values for our investment portfolio. We have obtained and reviewed the service providers’ pricing and reference data documentation. Evaluations are based on market data and vary by asset class and incorporate available trade, bid and other market information. Because many fixed income securities do not trade on a daily basis, the service provider’s evaluated pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. In addition, model processes, such as the Option Adjusted Spread model are used to assess interest rate impact and develop prepayment scenarios, with inputs determined based on knowledge of the market. We periodically test the values provided to us by the pricing service by obtaining prices on all bonds from an alternative pricing source.

We do not intend to sell the investment securities that are in an unrealized loss position, and it is unlikely that we will be required to sell the investment securities before recovery of their amortized cost bases, which may be maturity. During the first quarter of 2014 and the third and fourth quarters of 2013, we transferred securities from available for sale to held to maturity. The unrealized holding loss at the time of transfer continues to be reported in accumulated other comprehensive income, net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield. The amortization of the unamortized holding loss reported in accumulated other comprehensive income will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the losses for the securities transferred from available for sale to held to maturity from prior years was $3.96 million, or $2.57 million, net of tax at June 30, 2015.