Note 2 – Investment Securities

All investment securities held at September 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 September 30, 2016 and December 31, 2015 and the corresponding amounts of unrealized gains and losses therein.

	September 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	$	72,823		402		(159	)		73,066
Obligations of states and political subdivisions		118,630		5,050		(54	)		123,626
Mortgage backed securities
U.S. GSE's* MBS - residential		129,989		2,422		(162	)		132,249
U.S. GSE's* MBS - commercial		28,555		324		(5	)		28,874
U.S. GSE's* CMO		184,105		1,960		(348	)		185,717
Corporate bonds		114,267		1,567		(921	)		114,913
	$	648,369		11,725		(1,649	)		658,445

* 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

* Government sponsored entities

As of September 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 nine months ended September 30, 2016 and 2015 were as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(Dollars in thousands)						(Dollars in thousands)
Proceeds from Sales	$	25,324		$	33,487		$	95,718		$	110,635
Gross Gains		187			110			847			329
Gross Losses		(157	)		(276	)		(455	)		(1,335	)

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.

	September 30, 2016
	Amortized		Estimated
	cost		fair value
	(Dollars in thousands)
Available-for-sale:
One year or less	$	12,378		12,541
After one year through five years		106,685		108,612
After five years through ten years		145,868		147,257
After ten years		383,438		390,035
	$	648,369		658,445

The following tables summarize the investment securities with unrealized losses at September 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.

	September 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	$	5,005		28		16,988		131		21,993		159
Obligations of states and political subdivisions		4,101		27		1,278		27		5,379		54
Mortgage backed securities
U.S. GSE's MBS - residential		17,957		143		2,430		19		20,387		162
U.S. GSE's MBS - commercial		5,298		5		—		—		5,298		5
U.S. GSE's CMO		50,244		288		4,072		60		54,316		348
Corporate bonds		5,930		70		20,099		851		26,029		921
	$	88,535		561		44,867		1,088		133,402		1,649

	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 – September 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 September 30, 2016, the Company’s security portfolio consisted of 410 securities, 63 of which were in an unrealized loss position. Of these securities with unrealized losses, 87.08% were related to the Company’s mortgage-backed and corporate securities as discussed below.

Mortgage-backed Securities

At September 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 September 30, 2016.

Corporate Securities

The Company holds forty-two corporate securities totaling $114,913, of which thirteen had an unrealized loss of $921 at September 30, 2016. Twelve of the securities with an unrealized loss of $903 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 September 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 $18, resulting in a fair value of $232 at September 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 September 30, 2016.

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