Note 4. Securities

The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at June 30, 2016 and December 31, 2015 are as follows (in thousands):


	At June 30, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale:
Investment securities:
U.S. agency obligations	$	12,494	$	18	$	(3	)	$	12,509


Held-to-maturity:
Investment securities:
U.S. agency obligations	$	44,981	$	460	$	—		$	45,441
State and municipal obligations		38,197		252		(2	)		38,447
Corporate debt securities		76,143		199		(9,595	)		66,747
Other investments		8,702		66		—			8,768

Total investment securities		168,023		977		(9,597	)		159,403


Mortgage-backed securities:
FHLMC		145,664		1,641		(168	)		147,137
FNMA		189,368		4,428		(104	)		193,692
GNMA		10,973		183		—			11,156
Other mortgage-backed securities		9,562		21		—			9,583

Total mortgage-backed securities		355,567		6,273		(272	)		361,568


Total held-to-maturity	$	523,590	$	7,250	$	(9,869	)	$	520,971


Total securities	$	536,084	$	7,268	$	(9,872	)	$	533,480


	At December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale:
Investment securities:
U.S. agency obligations	$	29,906	$	23	$	(27	)	$	29,902


Held-to-maturity:
Investment securities:
U.S. agency obligations	$	55,178	$	87	$	(59	)	$	55,206
State and municipal obligations		13,311		18		(3	)		13,326
Corporate debt securities		56,000		—		(8,527	)		47,473

Total investment securities		124,489		105		(8,589	)		116,005


Mortgage-backed securities:
FHLMC		120,116		364		(1,489	)		118,991
FNMA		160,254		3,039		(1,123	)		162,170
GNMA		502		95		—			597

Total mortgage-backed securities		280,872		3,498		(2,612	)		281,758


Total held-to-maturity	$	405,361	$	3,603	$	(11,201	)	$	397,763


Total securities	$	435,267	$	3,626	$	(11,228	)	$	427,665

During the third quarter 2013, the Bank transferred $536.0 million of previously designated available-for-sale securities to a held-to-maturity designation at estimated fair value. The securities transferred had an unrealized net loss of $13.3 million at the time of transfer which continues to be reflected in accumulated other comprehensive loss on the consolidated balance sheet, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of the held-to-maturity investment securities at June 30, 2016 and December 31, 2015 are as follows (in thousands):


	June 30, 2016			December 31, 2015
Amortized cost	$	523,590		$	405,361
Net loss on date of transfer from available-for-sale		(13,347	)		(13,347	)
Accretion of net unrealized loss on securities reclassified as held-to-maturity		3,478			2,799

Carrying value	$	513,721		$	394,813

There were $75,000 in realized gains and $87,000 in realized losses on the sale of available-for-sale securities for the three and six months ended June 30, 2016, respectively. There were no realized gains or losses on the sale of securities for the three and six months ended June 30, 2015.

The amortized cost and estimated fair value of investment securities at June 30, 2016 by contractual maturity are shown below (in thousands). Actual maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. At June 30, 2016, corporate debt securities with an amortized cost of $67.6 million and estimated fair value of $58.1 million were callable prior to the maturity date.


June 30, 2016	Amortized Cost		Estimated Fair Value
Less than one year	$	36,969	$	37,025
Due after one year through five years		59,628		60,241
Due after five years through ten years		20,218		20,471
Due after ten years		63,702		54,175

	$	180,517	$	171,912

Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.

The estimated fair value and unrealized loss of securities available-for-sale and held-to-maturity at June 30, 2016 and December 31, 2015, segregated by the duration of the unrealized loss, are as follows (in thousands):


	At June 30, 2016
	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses

Available-for-sale:
Investment securities:
U.S. agency obligations	$	4,002		(3	)		—		—		$	4,002	$	(3	)


Held-to-maturity:
Investment securities:
State and municipal obligations	$	1,076		(1	)	$	275	$	(1	)	$	1,351	$	(2	)
Corporate debt securities		2,543		(1	)		45,406		(9,594	)		47,949		(9,595	)

Total investment securities		3,619		(2	)		45,681		(9,595	)		49,300		(9,597	)


Mortgage-backed securities:
FHLMC		1,834		(1	)		30,978		(167	)		32,812		(168	)
FNMA		4,259		(3	)		10,312		(101	)		14,571		(104	)

Total mortgage-backed securities		6,093		(4	)		41,290		(268	)		47,383		(272	)


Total held-to-maturity	$	9,712	$	(6	)	$	86,971	$	(9,863	)	$	96,683	$	(9,869	)


Total securities	$	13,714	$	(9	)	$	86,971	$	(9,863	)	$	100,685	$	(9,872	)


	At December 31, 2015
	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Available-for-sale:
Investment securities:
U.S. agency obligations	$	14,937	$	(27	)	$	—	$	—		$	14,937	$	(27	)


Held-to-maturity:
Investment securities:
U.S. agency obligations	$	30,175	$	(43	)	$	5,023	$	(16	)	$	35,198	$	(59	)
State and municipal obligations		2,857		(2	)		639		(1	)		3,496		(3	)
Corporate debt securities		—		—			46,473		(8,527	)		46,473		(8,527	)

Total investment securities		33,032		(45	)		52,135		(8,544	)		85,167		(8,589	)


Mortgage-backed securities:
FHLMC		35,816		(200	)		53,604		(1,289	)		89,420		(1,489	)
FNMA		44,004		(434	)		23,318		(689	)		67,322		(1,123	)

Total mortgage-backed securities		79,820		(634	)		76,922		(1,978	)		156,742		(2,612	)


Total held-to-maturity	$	112,852	$	(679	)	$	129,057	$	(10,522	)	$	241,909	$	(11,201	)


Total securities	$	127,789	$	(706	)	$	129,057	$	(10,522	)	$	256,846	$	(11,228	)

At June 30, 2016, the amortized cost, estimated fair value and credit rating of the individual corporate debt securities in an unrealized loss position for greater than one year are as follows (in thousands):


Security Description	Amortized Cost		Estimated Fair Value		Credit Rating Moody’s/S&P
BankAmerica Capital	$	15,000	$	12,350		Ba1/BB+
Chase Capital		10,000		8,400		Baa2/BBB-
Wells Fargo Capital		5,000		4,213		A1/BBB+
Huntington Capital		5,000		3,800		Baa2/BB
Keycorp Capital		5,000		4,019		Baa2/BB+
PNC Capital		5,000		4,400		Baa1/BBB-
State Street Capital		5,000		4,262		A3/BBB
SunTrust Capital		5,000		3,962		Baa3/BB+

	$	55,000	$	45,406

At June 30, 2016, the estimated fair value of each of the above corporate debt securities was below cost. However, the estimated fair value of the corporate debt securities has steadily increased over the past several years. The corporate debt securities are issued by other financial institutions with credit ratings ranging from a high of A1 to a low of BB as rated by one of the internationally-recognized credit rating services. These floating-rate securities were purchased in 1998 and have paid coupon interest continuously since issuance. Floating-rate debt securities such as these pay a fixed interest rate spread over 90-day LIBOR. Following the purchase of these securities, the required interest rate spread increased for these types of securities causing a decline in the market price. The Company concluded that unrealized losses on corporate debt securities were only temporarily impaired at June 30, 2016. In concluding that the impairments were only temporary, the Company considered several factors in its analysis. The Company noted that each issuer made all the contractually due payments when required. There were no defaults on principal or interest payments and no interest payments were deferred. All of the financial institutions are also considered well-capitalized. Interest rate spreads have now decreased for these types of securities and market prices have improved. Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security. Furthermore, the Company does not have the intent to sell these securities and it is more likely than not that the Company will not be required to sell the securities. The Company has held the securities continuously since 1998 and expects to receive its full principal at maturity in 2028 or prior if called by the issuer. Historically, the Company has not utilized securities sales as a source of liquidity. The Company’s long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.

The mortgage-backed securities are issued and guaranteed by either the Federal Home Loan Mortgage Corporation (“FHLMC”) or Federal National Mortgage Association (“FNMA”), corporations which are chartered by the United States Government and whose debt obligations are typically rated AA+ by one of the internationally-recognized credit rating services. The Company considers the unrealized losses to be the result of changes in interest rates which over time can have both a positive and negative impact on the estimated fair value of the mortgage-backed securities. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost. As a result, the Company concluded that these securities were only temporarily impaired at June 30, 2016.