Note 3.Investment Securities

The carrying value and fair value of investment securities available-for-sale (“AFS”) at September 30, 2015 and December 31, 2014 are as follows:


As of September 30, 2015			Included in OCI*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	26,126	$	20	$	(239)	$	25,907
Mortgage-backed securities-residential		14,184		249		(15)		14,418
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		170,111		3,122		(488)		172,745
Non-agency		2,910		25		(8)		2,927
Corporate bonds		1,500		20		—		1,520
Municipal bonds		9,926		165		(19)		10,072
Other securities		2,198		823		(24)		2,997
Common stocks		26		—		—		26
Total available for sale	$	226,981	$	4,424	$	(793)	$	230,612


As of December 31, 2014			Included in OCI*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	26,123	$	—	$	(834)	$	25,289
Mortgage-backed securities-residential		22,073		375		(61)		22,387
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		167,711		2,350		(1,084)		168,977
Non-agency		3,738		7		(14)		3,731
Corporate bonds		15,617		144		(34)		15,727
Municipal bonds		10,117		91		(35)		10,173
Other securities		2,684		1,350		—		4,034
Common stocks		33		17		—		50
Total available for sale	$	248,096	$	4,334	$	(2,062)	$	250,368

*Other comprehensive income

The amortized cost and fair value of investment securities at September 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	As of September 30, 2015
	Amortized
(In thousands)	cost		Fair value
Within 1 year	$	—	$	—
After 1 but within 5 years		8,085		8,080
After 5 but within 10 years		20,354		20,382
After 10 years		9,113		9,037
Mortgage-backed securities-residential		14,184		14,418
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		170,111		172,745
Non-agency		2,910		2,927
Total available for sale debt securities		224,757		227,589
No contractual maturity		2,224		3,023
Total available for sale securities	$	226,981	$	230,612

Proceeds from the sales of AFS investments during the three months ended September 30, 2015 and 2014 were $9.2 million and $19.3 million, respectively. Proceeds from the sales of AFS investments during the nine months ended September 30, 2015 and 2014 were $33.7 million and $55.3 million, respectively. The following table summarizes gross realized gains and losses on the sale of securities recognized in earnings in the periods indicated:


	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2015		2014		2015		2014
Gross realized gains	$	104	$	446	$	676	$	1,143
Gross realized losses		(24)		(208)		(24)		(813)
Net realized gains	$	80	$	238	$	652	$	330

The tables below indicate the length of time individual AFS securities have been in a continuous unrealized loss position at September 30, 2015 and December 31, 2014:


September 30, 2015	Less than 12 months					12 months or longer					Total
			Gross		Number			Gross		Number			Gross		Number
			unrealized		of			unrealized		of			unrealized		of
(In thousands)	Fair value		losses		positions	Fair value		losses		positions	Fair value		losses		positions
U.S. government agencies	$	—	$	—	—	$	19,149	$	(239)	6	$	19,149	$	(239)	6
Mortgage-backed securities-residential		—		—	—		2,691		(15)	1		2,691		(15)	1
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		15,253		(13)	5		26,704		(475)	9		41,957		(488)	14
Non-agency		1,184		(8)	1		—		—	—		1,184		(8)	1
Municipal bonds		3,557		(19)	4		—		—	—		3,557		(19)	4
Other securities		235		(24)	1		—		—	—		235		(24)	1
Total available for sale	$	20,229	$	(64)	11	$	48,544	$	(729)	16	$	68,773	$	(793)	27


December 31, 2014	Less than 12 months					12 months or longer					Total
			Gross		Number			Gross		Number			Gross		Number
			unrealized		of			unrealized		of			unrealized		of
(In thousands)	Fair value		losses		positions	Fair value		losses		positions	Fair value		losses		positions
U.S. government agencies	$	—	$	—	—	$	25,289	$	(834)	8	$	25,289	$	(834)	8
Mortgage-backed securities-residential		—		—	—		8,913		(61)	3		8,913		(61)	3
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		36,757		(204)	12		38,798		(880)	12		75,555		(1,084)	24
Non-agency		1,432		(14)	1		—		—	—		1,432		(14)	1
Corporate bonds		8,054		(25)	5		991		(9)	1		9,045		(34)	6
Municipal bonds		1,639		(7)	2		3,079		(28)	4		4,718		(35)	6
Total available for sale	$	47,882	$	(250)	20	$	77,070	$	(1,812)	28	$	124,952	$	(2,062)	48

We evaluate declines in the fair value of securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis. We assess whether OTTI is present when the fair value of a security is less than its amortized cost. Under ASC Topic 320, OTTI is considered to have occurred with respect to debt securities (1) if an entity intends to sell the security; (2) if it is more likely than not an entity will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis. We did not record OTTI charges to earnings during the first three quarters of 2015 and 2014. There was no credit-related impairment losses on debt securities held at September 30, 2015 September 30, 2014 for which a portion of OTTI was recognized in other comprehensive income.

For all debt security types discussed below the fair value is based on prices provided by brokers and safekeeping custodians.

U.S. government-sponsored agencies (“U.S. Agency”): As of September 30, 2015, we had six U.S. Agency securities with a fair value of $19.1 million and gross unrealized losses of $239,000. All six bonds had been in an unrealized loss position for twelve months or longer at September 30, 2015. Management believes that the unrealized losses on these debt securities are a function of changes in investment spreads. Management expects to recover the entire amortized cost basis of these securities. We do not intend to sell these securities before recovery of their cost basis and have not determined that it is not more likely than not that we will be required to sell these securities before recovery of their cost basis. Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2015.

Mortgage-backed securities issued by U.S. government agencies and U.S. government sponsored enterprises: As of September 30, 2015, we had one mortgage-backed security with a fair value of $2.7 million and a gross unrealized loss of $15,000. This mortgage-backed security has been in an unrealized loss position for twelve months or longer. The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for this security is guaranteed by a U.S. government-sponsored enterprise. Based on its assessment of these factors, management believes that the unrealized loss on this debt security is a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality. Management expects to recover the entire amortized cost basis of this security. We do not intend to sell this security before recovery of its cost basis and have not determined that it is not more likely than not that we will be required to sell this security before recovery of its cost basis. Therefore, management has determined that this security is not other-than-temporarily impaired at September 30, 2015.

U.S. government issued or sponsored collateralized mortgage obligations (“Agency CMOs”): As of September 30, 2015, we had 14 Agency CMOs with a fair value of $42.0 million and gross unrealized losses of $488,000. Nine of the Agency CMOs have been in an unrealized loss position for twelve months or longer and the remaining five Agency CMOs have been in an unrealized loss position for less than twelve months. The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. We do not intend to sell these securities before recovery of their cost basis and have not determined that it is not more likely than not that we will be required to sell these securities before recovery of their cost basis. Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2015.

Non-agency collateralized mortgage obligations (“Non-agency CMOs”): As of September 30, 2015, the Company had one non-agency CMO with a fair value of $1.2 million and a gross unrealized loss of $8,000. The bond has been in an unrealized loss position for less than twelve months. The Company does not intend to sell this security before recovery of its cost basis, and it is not more likely than not that the Company be required to sell this security before recovery of its cost basis. Therefore, management has determined that this security is not other-than-temporarily impaired at September 30, 2015.

Corporate bonds: As of September 30, 2015, we had two corporate bonds with a fair value of $1.5 million and a gross unrealized gain of $20,000.

Municipal bonds: As of September 30, 2015, we had four municipal bonds with a fair value $3.6 million and gross unrealized losses of $19,000. All four of the municipal bonds have been in an unrealized loss position for less than twelve months. Because we do not intend to sell the bonds and it is not more likely than not that we will be required to sell the bonds before recovery of their amortized cost basis, which may be maturity, we do not consider the bonds to be other-than-temporarily impaired at September 30, 2015.

Other securities: As of September 30, 2015, we had five investments in private equity funds which were predominantly invested in real estate. In determining whether or not OTTI exists, we review the funds’ financials, asset values, and near-term projections. At September 30, 2015, one of the private equity fund investments had a fair value of $235,000 and an unrealized loss of $24,000. OTTI charges were recorded in a prior period on this fund. Management concluded that there was no additional impairment on this investment as of September 30, 2015.

We will continue to monitor these investments to determine if the discounted cash flow analysis, continued negative trends, market valuations or credit defaults result in impairment that is other than temporary.