Investment Securities

The amortized cost and estimated fair value of securities were as follows:



	December 31, 2016
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(dollars in thousands)
Available-for-sale:
Corporate	$	37,475	$	372	$	(205	)	$	37,642
Municipal bonds	120,155		338		(1,690		)	118,803
Collateralized mortgage obligation: residential	31,536		25		(173		)	31,388
Mortgage-backed securities: residential	196,496		69		(3,435		)	193,130
Total available-for-sale	385,662		804		(5,503		)	380,963
Held-to-maturity:
Mortgage-backed securities: residential	7,375		—		(104		)	7,271
Other	1,190		—		—			1,190
Total held-to-maturity	8,565		—		(104		)	8,461
Total securities	$	394,227	$	804	$	(5,607	)	$	389,424

	December 31, 2015
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value
	(dollars in thousands)
Available-for-sale:
Municipal bonds	$	128,546	$	1,796	$	(97	)	$	130,245
Collateralized mortgage obligation: residential	24,722		4		(183		)	24,543
Mortgage-backed securities: residential	126,443		153		(1,111		)	125,485
Total available-for-sale	279,711		1,953		(1,391		)	280,273
Held-to-maturity:
Mortgage-backed securities: residential	8,400		—		(70		)	8,330
Other	1,242		—		—			1,242
Total held-to-maturity	9,642		—		(70		)	9,572
Total securities	$	289,353	$	1,953	$	(1,461	)	$	289,845

At December 31, 2016, mortgage-backed securities (“MBS”) with an estimated par value of $63.6 million and a fair value of $65.3 million were pledged as collateral for the Bank’s three inverse putable reverse repurchase agreements which totaled $28.5 million and Homeowner's Association ("HOA") reverse repurchase agreements which totaled $21.5 million.

At December 31, 2016 and 2015, there were not holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

The Company reviews individual securities classified as available-for-sale to determine whether a decline in fair value below the amortized cost basis is temporary (i) those declines were due to interest rate changes and not to a deterioration in the creditworthiness of the issuers of those investment securities, and (ii) we have the ability to hold those securities until there is a recovery in their values or until their maturity.

If it is probable that the Company will be unable to collect all amounts due according to contractual terms of the debt security not impaired at acquisition, an other-than-temporary impairment ("OTTI") shall be considered to have occurred. If an OTTI occurs, the cost basis of the security will be written down to its fair value as the new cost basis and the write down accounted for as a realized loss. The Company realized OTTI recovery of $2,000 as of December 31, 2016, which relates to investment income from previously charged-off investments. As of December 31, 2016, the Company realized OTTI losses net of recoveries of $205,000. A $207,000 OTTI was taken in the first quarter of 2016, related to a CRA investment purchased in June of 2014 with a par value of $50, and a book value of $500,000. In March of 2016, the shareholders of the investment voted to approve a sale of the institution at a per share acquisition price less than the Bank's book value, and the sale closed in July 2016. The Company is currently waiting to receive the proceeds for its outstanding shares. As a result, the Bank's current holdings were written down and the loss recognized. The Company did not realize any OTTI losses in 2015 and $29,000 in 2014.

During the years ended December 31, 2016, 2015 and 2014, the Company recognized gross gains on sales of available-for-sale securities in the amount of $1.8 million, $317,000 and $2.1 million, respectively. During the years ended December 31, 2016, 2015 and 2014, the Company recognized gross losses on sales of available-for-sale securities in the amount of $9,000, $27,000 and $578,000, respectively. The Company had net proceeds from the sale of available-for-sale securities of $223 million, $22 million and $163 million during the years ended December 31, 2016, 2015 and 2014, respectively. In addition, the Company had net proceeds from the maturity/call of available-for-sale securities of $7.6 million, $5.6 million and $3.1 million during the years ended December 31, 2016, 2015 and 2014.

The table below shows the number, fair value and gross unrealized holding losses of the Company’s investment securities by investment category and length of time that the securities have been in a continuous loss position.



	December 31, 2016
	Less than 12 months						12 months or Longer						Total
	Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses
	(dollars in thousands)
Available-for-sale:
Corporate	3	$	7,609	$	(205	)	—	$	—	$	—		3	$	7,609	$	(205	)
Municipal bonds	152	85,750		(1,690		)	—	—		—			152	85,750		(1,690		)
Collateralized mortgage obligation: residential	5	19,092		(173		)	—	—		—			5	19,092		(173		)
Mortgage-backed securities: residential	55	149,740		(2,916		)	4	16,039		(519		)	59	165,779		(3,435		)
Total available-for-sale	215	262,191		(4,984		)	4	16,039		(519		)	219	278,230		(5,503		)
Held-to-maturity:
Mortgage-backed securities: residential	1	7,271		(104		)	—	—		$	—		1	7,271		(104		)
Total held-to-maturity	1	7,271		(104		)	—	—		$	—		1	7,271		(104		)
Total securities	216	$	269,462	$	(5,088	)	4	$	16,039	$	(519	)	220	$	285,501	$	(5,607	)

	December 31, 2015
	Less than 12 months						12 months or Longer						Total
	Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses			Number	Fair Value		Gross Unrealized Holding Losses
	(dollars in thousands)
Available-for-sale:
Municipal bonds	32	$	15,516	$	(61	)	6	$	3,349	$	(36	)	38	$	18,865	$	(97	)
Collateralized mortgage obligation: residential	5	22,771		(183		)	—	—		—			5	22,771		(183		)
Mortgage-backed securities: residential	34	83,488		(679		)	3	12,935		(432		)	37	96,423		(1,111		)
Total available-for-sale	71	$	121,775	(923		)	9	16,284		(468		)	80	138,059		(1,391		)
Held-to-maturity:
Mortgage-backed securities: residential	1	8,330		(70		)	—	—		—			1	8,330		(70		)
Total held-to-maturity	1	8,330		(70		)	—	—		—			1	8,330		(70		)
Total securities	72	$	130,105	$	(993	)	9	$	16,284	$	(468	)	81	$	146,389	$	(1,461	)

The amortized cost and estimated fair value of investment securities available for sale at December 31, 2016, by contractual maturity are shown in the table below.



	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(dollars in thousands)
Available-for-sale:
Corporate	$	—	$	—	$	—	$	—	$	37,475	$	37,642	$	—	$	—	$	37,475	$	37,642
Municipal bonds	1,236		1,236		28,450		28,361		43,307		42,715		47,162		46,491		120,155		118,803
Collateralized mortgage obligation: residential	—		—		—		—		1,392		1,395		30,144		29,993		31,536		31,388
Mortgage-backed securities: residential	—		—		1,166		1,160		22,813		22,627		172,517		169,343		196,496		193,130
Total available-for-sale	1,236		1,236		29,616		29,521		104,987		104,379		249,823		245,827		385,662		380,963
Held-to-maturity:
Mortgage-backed securities: residential	—		—		—		—		—		—		7,375		7,271		7,375		7,271
Other	—		—		—		—		—		—		1,190		1,190		1,190		1,190
Total held-to-maturity	—		—		—		—		—		—		8,565		8,461		8,565		8,461
Total securities	$	1,236	$	1,236	$	29,616	$	29,521	$	104,987	$	104,379	$	258,388	$	254,288	$	394,227	$	389,424

Unrealized gains and losses on investment securities available-for-sale are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At December 31, 2016, the Company had accumulated other comprehensive loss of $4.7 million, or $2.7 million net of tax, compared to accumulated other comprehensive income of $562,000 or $332,000 net of tax, at December 31, 2015.

FHLB, FRB, and other stock

At December 31, 2016, the Company had $14.4 million in Federal Home Loan Bank ("FHLB") stock, $10.9 million in Federal Reserve Bank ("FRB") stock, and $12.0 million in other stock, all carried at cost. During the year ended December 31, 2016, FHLB did not repurchase any of the Company’s excess FHLB stock through their stock repurchase program. During the years ended December 31, 2015 and 2014, the FHLB had repurchased $16.4 million and $3.4 million respectively, of the Company’s excess FHLB stock through their stock repurchase program. The Company evaluates its investments in FHLB and other stock for impairment periodically, including their capital adequacy and overall financial condition. No impairment losses have been recorded through December 31, 2016.