(4.) INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are summarized below (in thousands):


		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
September 30, 2015
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	261,364	$	2,539	$	351	$	263,552
Mortgage-backed securities:
Federal National Mortgage Association		220,626		3,482		468		223,640
Federal Home Loan Mortgage Corporation		27,371		582		73		27,880
Government National Mortgage Association		33,533		1,399		3		34,929
Collateralized mortgage obligations:
Federal National Mortgage Association		20,798		408		5		21,201
Federal Home Loan Mortgage Corporation		5,181		1		6		5,176
Privately issued		-		920		-		920
Total mortgage-backed securities		307,509		6,792		555		313,746
Asset-backed securities		-		211		-		211
Total available for sale securities	$	568,873	$	9,542	$	906	$	577,509
Securities held to maturity:
State and political subdivisions		289,986		6,110		70		296,026
Mortgage-backed securities:
Federal National Mortgage Association		9,293		81		11		9,363
Government National Mortgage Association		26,121		112		109		26,124
Collateralized mortgage obligations:
Federal National Mortgage Association		59,490		-		-		59,490
Federal Home Loan Mortgage Corporation		84,350		-		-		84,350
Government National Mortgage Association		21,398		-		-		21,398
Total mortgage-backed securities		200,652		193		120		200,725
Total held to maturity securities	$	490,638	$	6,303	$	190	$	496,751


December 31, 2014
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	160,334	$	1,116	$	975	$	160,475
Mortgage-backed securities:
Federal National Mortgage Association		184,857		2,344		1,264		185,937
Federal Home Loan Mortgage Corporation		29,478		799		7		30,270
Government National Mortgage Association		48,800		2,022		-		50,822
Collateralized mortgage obligations:
Federal National Mortgage Association		76,247		489		944		75,792
Federal Home Loan Mortgage Corporation		89,623		199		2,585		87,237
Government National Mortgage Association		29,954		598		40		30,512
Privately issued		-		1,218		-		1,218
Total mortgage-backed securities		458,959		7,669		4,840		461,788
Asset-backed securities		-		231		-		231
Total available for sale securities	$	619,293	$	9,016	$	5,815	$	622,494
Securities held to maturity:
State and political subdivisions		277,273		4,231		120		281,384
Mortgage-backed securities:
Federal National Mortgage Association		3,279		24		-		3,303
Government National Mortgage Association		13,886		122		-		14,008
Total mortgage-backed securities		17,165		146		-		17,311
Total held to maturity securities	$	294,438	$	4,377	$	120	$	298,695

Investment securities with a total fair value of $810.6 million at September 30, 2015 were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

During the third quarter of 2015, the Company transferred $165.2 million of available for sale mortgage backed securities to the held to maturity category, reflecting the Company's intent to hold those securities to maturity. Transfers of investment securities into the held to maturity category from the available for sale category are made at fair value at the date of transfer. The related $1.1 million of unrealized holding losses that were included in the transfer are retained in accumulated other comprehensive income and in the carrying value of the held to maturity securities. This amount will be amortized as an adjustment to interest income over the remaining life of the securities. This will offset the impact of amortization of the net premium created in the transfer. There were no gains or losses recognized as a result of this transfer.

Sales and calls of securities available for sale were as follows (in thousands):


		Three months ended				Nine months ended
		September 30,				September 30,
		2015		2014		2015		2014
Proceeds from sales	$	8,112	$	14,672	$	37,620	$	76,100
Gross realized gains		286		515		1,359		1,777
Gross realized losses		-		-		11		-

The scheduled maturities of securities available for sale and securities held to maturity at September 30, 2015 are shown below (in thousands). Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.


		Amortized		Fair
		Cost		Value
Debt securities available for sale:
Due in one year or less	$	25,099	$	25,201
Due from one to five years		172,819		174,865
Due after five years through ten years		296,229		300,942
Due after ten years		74,726		76,501
	$	568,873	$	577,509
Debt securities held to maturity:
Due in one year or less	$	21,222	$	21,325
Due from one to five years		167,246		170,997
Due after five years through ten years		119,314		121,512
Due after ten years		182,856		182,917
	$	490,638	$	496,751

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 a continuous unrealized loss position, were as follows (in thousands):


		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
September 30, 2015
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	52,180	$	268	$	26,640	$	83	$	78,820	$	351
Mortgage-backed securities:
Federal National Mortgage Association		36,563		428		9,768		40		46,331		468
Federal Home Loan Mortgage Corporation		5,967		73		-		-		5,967		73
Government National Mortgage Association		1,525		3		-		-		1,525		3
Collateralized mortgage obligations:
Federal National Mortgage Association		2,542		5		-		-		2,542		5
Federal Home Loan Mortgage Corporation		5,086		6		-		-		5,086		6
Total mortgage-backed securities		51,683		515		9,768		40		61,451		555
Total available for sale securities		103,863		783		36,408		123		140,271		906
Securities held to maturity:
State and political subdivisions		11,985		70		-		-		11,985		70
Mortgage-backed securities:
Federal National Mortgage Association		1,369		11		-		-		1,369		11
Government National Mortgage Association		8,888		109		-		-		8,888		109
Total mortgage-backed securities		10,257		120		-		-		10,257		120
Total held to maturity securities		22,242		190		-		-		22,242		190
Total temporarily impaired securities	$	126,105	$	973	$	36,408	$	123	$	162,513	$	1,096

December 31, 2014
Securities available for sale:
U.S. Government agencies and government
sponsored enterprises	$	34,995	$	77	$	41,070	$	898	$	76,065	$	975
Mortgage-backed securities:
Federal National Mortgage Association		2,242		8		62,592		1,256		64,834		1,264
Federal Home Loan Mortgage Corporation		3,387		7		-		-		3,387		7
Collateralized mortgage obligations:
Federal National Mortgage Association		11,228		24		25,644		920		36,872		944
Federal Home Loan Mortgage Corporation		-		-		76,126		2,585		76,126		2,585
Government National Mortgage Association		-		-		2,510		40		2,510		40
Total mortgage-backed securities		16,857		39		166,872		4,801		183,729		4,840
Total available for sale securities		51,852		116		207,942		5,699		259,794		5,815
Securities held to maturity:
State and political subdivisions		18,036		120		-		-		18,036		120
Total temporarily impaired securities	$	69,888	$	236	$	207,942	$	5,699	$	277,830	$	5,935

The total number of security positions in the investment portfolio in an unrealized loss position at September 30, 2015 was 82 compared to 122 at December 31, 2014. At September 30, 2015, the Company had positions in 10 investment securities with a fair value of $36.4 million and a total unrealized loss of $123 thousand that have been in a continuous unrealized loss position for more than 12 months. At September 30, 2015, there were a total of 72 securities positions in the Company's investment portfolio with a fair value of $126.1 million and a total unrealized loss of $973 thousand that had been in a continuous unrealized loss position for less than 12 months. At December 31, 2014, the Company had positions in 51 investment securities with a fair value of $207.9 million and a total unrealized loss of $5.7 million that have been in a continuous unrealized loss position for more than 12 months. At December 31, 2014, there were a total of 71 securities positions in the Company's investment portfolio with a fair value of $69.9 million and a total unrealized loss of $236 thousand that had been in a continuous unrealized loss position for less than 12 months.

The unrealized loss on investment securities was predominantly caused by changes in market interest rates subsequent to purchase. The fair value of most of the investment securities in the Company's portfolio fluctuates as market interest rates change. The Company reviews investment securities on an ongoing basis for the presence of OTTI with formal reviews performed quarterly. When evaluating debt securities for 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 Company has the intention to sell the debt security or whether it is more likely than not that it will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information then available to management. There was no OTTI recorded during the nine months ended September 30, 2015 and 2014.

Based on management's review and evaluation of the Company's debt securities as of September 30, 2015, the debt securities with unrealized losses were not considered to be other-than-temporarily imparied. As of September 30, 2015, the Company did not intend to sell any of the securities in a loss position and believes that it is not likely that it will be required to sell any such securities before the anticipated recovery of amortized cost. Accordingly, as of September 30, 2015, management has concluded that unrealized losses on its investment securities are temporary and no further impairment loss has been realized in the Company's consolidated statements of income.