Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at June 30, 2016 and December 31, 2015 are summarized as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

June 30, 2016
Securities available for sale:
Agency mortgage-backed securities	$	86,056	$	644	$	35	$	86,665
Agency CMO		17,092		135		19		17,208
Other debt securities:
Agency notes and bonds		86,846		192		20		87,018
Municipal obligations		52,310		2,345		2		54,653
Subtotal - debt securities		242,304		3,316		76		245,544

Mutual funds		4,060		0		0		4,060

Total securities available for sale	$	246,364	$	3,316	$	76	$	249,604

Securities held to maturity:
Agency mortgage-backed securities	$	3	$	0	$	0	$	3

Total securities held to maturity	$	3	$	0	$	0	$	3

December 31, 2015
Securities available for sale:
Agency mortgage-backed securities	$	42,158	$	123	$	271	$	42,010
Agency CMO		9,391		41		101		9,331
Other debt securities:
Agency notes and bonds		84,797		11		355		84,453
Municipal obligations		49,527		1,372		60		50,839
Subtotal - debt securities		185,873		1,547		787		186,633

Mutual funds		118		0		0		118

Total securities available for sale	$	185,991	$	1,547	$	787	$	186,751

Securities held to maturity:
Agency mortgage-backed securities	$	4	$	0	$	0	$	4

Total securities held to maturity	$	4	$	0	$	0	$	4

Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (CMO) include securities issued by the Government National Mortgage Association (GNMA), a U.S. government agency, and the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Bank (FHLB), which are government-sponsored enterprises.

The amortized cost and fair value of debt securities as of June 30, 2016, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.

	Securities Available for Sale				Securities Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
(In thousands)

Due in one year or less	$	2,939	$	2,949	$	0	$	0
Due after one year through five years		87,145		87,476		0		0
Due after five years through ten years		17,626		18,072
Due after ten years		31,446		33,174		0		0
		139,156		141,671		0		0
Mortgage-backed securities and
CMO		103,148		103,873		3		3

	$	242,304	$	245,544	$	3	$	3

Information pertaining to investment securities available for sale with gross unrealized losses at June 30, 2016, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows:

	Number of Investment Positions		Fair Value		Gross Unrealized Losses
(Dollars in thousands)

Continuous loss position less than twelve months:
Agency notes and bonds		4	$	18,987	$	20
Agency CMO		2		1,736		9
Agency mortgage-backed securities		6		17,533		30
Muncipal obligations		2		930		2

Total less than twelve months		14		39,186		61

Continuous loss position more than twelve months:
Agency CMO		5		2,959		10
Agency mortgage-backed securities		2		1,241		5

Total more than twelve months		7		4,200		15

Total securities available for sale		21	$	43,386	$	76

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (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, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recover in fair value.

At June 30, 2016, the U.S. government agency debt securities, including agency notes and bonds, mortgage-backed securities and CMO, and municipal obligations in a loss position had depreciated approximately 0.2% from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by first mortgage loans and municipal project revenues. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

While management does not anticipate any credit-related impairment losses at June 30, 2016, additional deterioration in market and economic conditions may have an adverse impact on credit quality in the future.

During the three and six months ended June 30, 2016, the Company realized gross gains on sales of available for sale municipal securities of $176,000. During the three and six months ended June 30, 2015, the Company did not have any security sales.

In June 2014, the Company acquired an additional 31,750 shares of common stock in another financial institution, in addition to the 100,000 shares acquired in December 2013, representing approximately 9% of the outstanding common stock of the entity, for a total investment of $711,000. The investment is accounted for using the cost method of accounting and is included in other assets in the consolidated balance sheet. The Company’s investment was sold for $856,000 in July 2016, resulting in a gain of $145,000 to be recognized in the quarter ending September 30, 2016.