Note 5. Investment Securities

The aggregate amortized cost and fair values of the available-for-sale securities portfolio are as follows:


(Dollars in thousands)			Gross		Gross
Available-for-sale securities	Amortized		Unrealized		Unrealized			Fair
December 31, 2016	Cost		Gains		(Losses)			Value
Corporate bonds	$	7,695	$	14	$	(5	)	$	7,704
U.S. Government agencies		25,668		53		(408	)		25,313
State and municipal obligations		18,566		49		(459	)		18,156

	$	51,929	$	116	$	(872	)	$	51,173


			Gross		Gross
Available-for-sale securities	Amortized		Unrealized		Unrealized			Fair
December 31, 2015	Cost		Gains		(Losses)			Value
Corporate bonds	$	3,950	$	—	$	(5	)	$	3,945
U.S. Government agencies		21,375		69		(156	)		21,288
State and municipal obligations		28,599		313		(55	)		28,857

	$	53,924	$	382	$	(216	)	$	54,090

The cost of securities sold is based on actual net cost. Gross realized gains and gross realized losses, as well as proceeds on sales and calls of securities, were as follows:


	For the years ended December 31,
(Dollars in thousands)	2016			2015
Gross realized gains	$	445		$	68
Gross realized losses		(10	)		(26	)

Net realized gains	$	435		$	42

Aggregate proceeds	$	19,509		$	13,540

The aggregate amortized cost and market values of the investment securities portfolio by contractual maturity at December 31, 2016 are shown below:


(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	52	$	52
Due after one year through five years		28,093		27,865
Due after five through ten years		17,952		17,530
Due after ten years		5,832		5,726

	$	51,929	$	51,173

Average yields (taxable equivalent) on securities were 3.09% and 2.55% for the years ended December 31, 2016 and 2015, respectively.

Securities with a market value of $19.1 million and $8.6 million at December 31, 2016 and 2015, respectively, were pledged as collateral for repurchase agreements and for other purposes as required by law. As of December 31, 2016 and 2015, all the securities pledged to repurchase agreements were state and municipal obligations. All the repurchase agreements had remaining contractual maturities that were overnight and continuous. Securities sold under repurchase agreements were $18.3 million and $7.2 million as of December 31, 2016 and December 31, 2015, respectively, and included in liabilities on the consolidated balance sheets. The securities pledged to each agreement are reviewed daily and can be changed at the option of the Bank with minimal risk of loss due to fair value.

Securities in an unrealized loss position at December 31, 2016 and 2015, by duration of the unrealized loss, are shown below. The unrealized loss positions were directly related to interest rate movements as there is minimal credit risk exposure in these investments. All agency securities, states and municipal securities and certificates of deposit are investment grade or better and their losses are considered temporary. The corporate bonds are subordinated debt notes issued by financial institutions. Management does not intend to sell the securities and does not expect to be required to sell the securities. All amortized cost bases are expected to be recovered. Bonds with unrealized loss positions at December 31, 2016 included 37 federal agencies, one corporate bond and 39 municipals. Bonds with unrealized loss positions at December 31, 2015 included five federal agencies, one corporate bond and 17 municipals.


(Dollars in thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2016	Value		Loss			Value		Loss			Value		Loss
Corporate bonds	$	995	$	(5	)	$	—	$	—		$	995	$	(5	)
U.S. Government agencies		20,933		(396	)		1,308		(12	)		22,241		(408	)
States and municipal obligations		12,888		(459	)		—		—			12,888		(459	)

Total temporarily impaired securities	$	34,816	$	(860	)	$	1,308	$	(12	)	$	36,124	$	(872	)


	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2015	Value		Loss			Value		Loss			Value		Loss
Corporate bonds	$	495	$	(5	)	$	—	$	—		$	495	$	(5	)
U.S. Government agencies		13,871		(141	)		1,619		(15	)		15,490		(156	)
States and municipal obligations		2,566		(17	)		3,281		(38	)		5,847		(55	)

Total temporarily impaired securities	$	16,932	$	(163	)	$	4,900	$	(53	)	$	21,832	$	(216	)

The Company’s investment in Federal Home Loan Bank of Atlanta (“FHLB”) stock totaled $1.9 million and $2.0 million at December 31, 2016 and December 31, 2015, respectively, and are included in restricted securities on the consolidated balance sheets. The Company also had an investment in Federal Reserve Bank of Richmond (“FRB”) stock which totaled $580 thousand and $505 thousand at December 31, 2016 and December 31, 2015. The investments in both FHLB and FRB stock are required investments related to the Bank’s membership with the FHLB and FRB. These securities do not have a readily determinable fair value as their ownership is restricted, and they lack an active market for trading. Additionally, per charter provisions related to the FHLB and FRB stock, all repurchase transactions of such stock must occur at par. Accordingly, these securities are carried at cost, and are periodically evaluated for impairment. The Company’s determination as to whether its investment in FHLB and FRB stock is impaired is based on management’s assessment of the ultimate recoverability of its par value rather than recognizing temporary declines in its value. The determination of whether the decline affects the ultimate recoverability of the investments is influenced by available information regarding various factors. These factors include, among others, the significance of the decline in net assets of the issuing banks as compared to the capital stock amount reported by these banks, and the length of time a decline has persisted; commitments by such banks to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuing bank; and the overall liquidity position of the issuing bank. Based on its most recent analysis of publicly available information regarding the financial condition of the issuing banks, management concluded that no impairment existed in the carrying value of FHLB and FRB stock.