Note 2 – Investment Securities

All investment securities held at June 30, 2016 and December 31, 2015 are classified as available-for-sale.

The following tables summarize the amortized cost and fair value of the available-for-sale investment securities portfolio at June 30, 2016 and December 31, 2015 and the corresponding amounts of unrealized gains and losses therein.

	June 30, 2016
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
Available-for-sale	(Dollars in thousands)
Obligations of U.S. Government agencies	$	102,797		452		(207	)		103,042
Obligations of states and political subdivisions		127,699		6,366		(17	)		134,048
Mortgage backed securities
U.S. GSE’s* MBS - residential		127,509		2,521		(21	)		130,009
U.S. GSE’s* MBS - commercial		28,855		527		—			29,382
U.S. GSE’s CMO		177,314		3,353		(107	)		180,560
Corporate bonds		118,463		1,771		(1,018	)		119,216
	$	682,637		14,990		(1,370	)		696,257

* Government sponsored entities

	December 31, 2015
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
Available-for-sale	(Dollars in thousands)
Obligations of U.S. Government agencies	$	147,135		274		(1,433	)		145,976
Obligations of states and political subdivisions		136,499		3,827		(266	)		140,060
Mortgage backed securities
U.S. GSE’s MBS - residential		121,646		752		(890	)		121,508
U.S. GSE’s MBS - commercial		21,805		125		(261	)		21,669
U.S. GSE’s CMO		146,782		437		(1,642	)		145,577
Corporate bonds		117,666		524		(1,417	)		116,773
	$	691,533		5,939		(5,909	)		691,563

As of June 30, 2016 and December 31, 2015, except for the U.S. Government agencies and government sponsored entities, there was no issuer who represented 10% or more of stockholders’ equity within the investment portfolio.

Proceeds from sales of securities available-for-sale and the associated gains (losses), excluding gains (losses) on called securities, for the three and six months ended June 30, 2016 and 2015 were as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Dollars in thousands)						(Dollars in thousands)
Proceeds from Sales	$	19,390		$	53,848		$	70,394		$	77,148
Gross Gains		197			111			660			219
Gross Losses		(71	)		(1,008	)		(298	)		(1,059	)

The amortized cost and fair value of the investment securities portfolio are shown below by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016
	Amortized		Estimated
	cost		fair value
	(Dollars in thousands)
Available-for-sale:
One year or less	$	8,336		8,354
After one year through five years		107,874		110,292
After five years through ten years		167,396		169,475
After ten years		399,031		408,136
	$	682,637		696,257

The following tables summarize the investment securities with unrealized losses at June 30, 2016 and December 31, 2015, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position.

	June 30, 2016
	Less than 12 months				12 months or longer				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	fair value		loss		fair value		loss		fair value		loss
Temporarily impaired	(Dollars in thousands)
Obligations of U.S. Government agencies	$	7,849		55		27,001		152		34,850		207
Obligations of states and political subdivisions		—		—		1,290		17		1,290		17
Mortgage backed securities
U.S. GSE’s MBS - residential		—		—		5,293		21		5,293		21
U.S. GSE’s MBS - commercial		—		—		—		—		—		—
U.S. GSE’s CMO		7,039		47		4,334		60		11,373		107
Corporate bonds		5,939		61		19,995		957		25,934		1,018
	$	20,827		163		57,913		1,207		78,740		1,370

	December 31, 2015
	Less than 12 months				12 months or longer				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	fair value		loss		fair value		loss		fair value		loss
Temporarily impaired	(Dollars in thousands)
Obligations of U.S. Government agencies	$	57,409		388		63,971		1,045		121,380		1,433
Obligations of states and political subdivisions		21,421		235		2,794		31		24,215		266
Mortgage backed securities
U.S. GSE’s MBS - residential		71,185		607		11,105		283		82,290		890
U.S. GSE’s MBS - commercial		9,428		261		—		—		9,428		261
U.S. GSE’s CMO		102,082		1,463		6,584		179		108,666		1,642
Corporate bonds		69,459		705		17,683		712		87,142		1,417
	$	330,984		3,659		102,137		2,250		433,121		5,909

Other-Than-Temporary Impairment – June 30, 2016

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. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under the provisions of ASC 320-10, Investments – Debt and Equity Securities. In determining OTTI, 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 entity 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 an entity 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 an entity 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 an entity 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 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 or loss, 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, 2016, the Company’s security portfolio consisted of 431 securities, 44 of which were in an unrealized loss position. Of these securities with unrealized losses, 83.65% were related to the Company’s mortgage-backed and corporate securities as discussed below.

Mortgage-backed Securities

At June 30, 2016, all of the Company’s mortgage-backed securities were issued by U.S. government-sponsored entities and agencies, primarily the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Government National Mortgage Association (“Ginnie Mae”), institutions which the government has affirmed its commitment to support. 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 not more likely than not that it will 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, 2016.

Corporate Securities

The Company holds forty-five corporate securities totaling $119,216, of which thirteen had an unrealized loss of $1,018 at June 30, 2016. Twelve of the securities with an unrealized loss of $992 were issued by entities rated lower medium investment grade or higher. Because the decline in fair value is attributable primarily to changes in interest rates and not credit quality and because the Company does not have the intent to sell the securities and it is not more likely than not that it will 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, 2016.

Included in the Company’s corporate bonds is one trust preferred security with an amortized cost of $250, which had an unrealized loss of $26, resulting in a fair value of $224 at June 30, 2016. This security is not rated. Although the issuer is not in default, in January of 2011 the Company was notified that the issuer had elected to defer interest payments in accordance with the terms of the instrument. As of July of 2015, the issuer is no longer deferring interest and is current on all payments. Because the Company does not have the intent to sell this security and it is not more likely than not that it will be required to sell the security before its anticipated recovery, the Company does not consider this security to be other-than-temporarily impaired at June 30, 2016.

There were no credit losses recognized in earnings for the six month periods ended June 30, 2016 and 2015.