Investment Securities

The following is a summary of the Company's investment in available for sale and held to maturity securities as of December 31, 2015 and 2014:



As of December 31, 2015	Amortized cost		Gross unrealized gains		Gross unrealized losses		Other than temporary impairments in OCI		Fair value
	(Amounts in thousands)
Available for sale:
Corporate debt obligations	$	1,000	$	31	$	—	$	—	$	1,031
Residential mortgage-backed securities	40,788		451		418		—		40,821
Collateralized mortgage obligations	246		7		—		—		253
Collateralized debt obligations	806		—		—		344		462
Total available for sale	$	42,840	$	489	$	418	$	344	$	42,567

Held to maturity:
States and political subdivisions	$	2,181	$	290	$	—	$	—	$	2,471



As of December 31, 2014	Amortized cost		Gross unrealized gains		Gross unrealized losses		Other than temporary impairments in OCI		Fair value
	(Amounts in thousands)
Available for sale:
Corporate debt obligations	$	500	$	22	$	—	$	—	$	522
Residential mortgage-backed securities	26,252		754		59		—		26,947
Collateralized mortgage obligations	375		15		—		—		390
Collateralized debt obligations	806		—		—		457		349
Total available for sale	$	27,933	$	791	$	59	$	457	$	28,208

Held to maturity:
States and political subdivisions	$	2,141	$	236	$	—	$	—	$	2,377

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity, as of December 31, 2015, are as follows:



	Amortized Cost		Fair Value
	(Amounts in thousands)
Available for sale:
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	500		500
Due after ten years	1,306		993
Residential mortgage-backed securities and collateralized mortgage obligations	41,034		41,074
Total available for sale	$	42,840	$	42,567

Held to maturity:
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	1,217		1,298
Due after ten years	964		1,173
Total held to maturity	$	2,181	$	2,471

Expected maturities will differ from contractual maturities for mortgage related securities because the issuers of certain debt securities do have the right to call or prepay their obligations without any penalties.

During the year ending December 31, 2015, the Company did not sell any investment securities however during the year ending December 31, 2014, the Company sold 3 investment securities with a carrying value of $4,000,000, recognizing a gain of $178,000.

Securities with a carrying value of $15.6 million and $15.0 million, respectively, were pledged to secure public deposits at December 31, 2015 and 2014.

The following tables show the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other than temporarily impaired (“OTTI”), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2015 there were 5 securities in a less than 12 months loss position and 3 in a greater than 12 months. At December 31, 2014 there were 3 securities in a less than 12 months loss postion and none greater than 12 months.



As of December 31, 2015	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Amounts in thousands)
Available for sale:
Residential mortgage-backed securities	$	19,191	$	343	$	3,221	$	75	$	22,412	$	418
Total available for sale	$	19,191	$	343	$	3,221	$	75	$	22,412	$	418



As of December 31, 2014	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Amounts in thousands)
Available for sale:
Residential mortgage-backed securities	$	3,968	$	59	$	—	$	—	$	3,968	$	59
Total available for sale	$	3,968	$	59	$	—	$	—	$	3,968	$	59

Residential Mortgage-Backed Securities

The unrealized losses on the Company’s investment in mortgage-backed securities relates to eight securities. The losses were caused by movement in interest rates. The securities were issued by FNMA, a government sponsored entity. Because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, it does not consider the investment in these securities to be OTTI at December 31, 2015.

Other Than Temporarily Impaired Debt Securities

The Company assesses whether we intend to sell or whether it is more likely than not that we will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered OTTI and that we do not intend to sell and will not be required to sell prior to recovery of our amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income.

The present value of expected future cash flows is determined using the best estimate of cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate of cash flows vary depending on the type of security. The asset-backed securities’ cash flow estimates are based on bond-specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity.

We have a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. On a quarterly basis, we review all securities to determine whether an OTTI exists and whether losses should be recognized. We consider relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value.

The following table presents a roll-forward of the credit loss component of the amortized cost of debt securities that we have written down for OTTI and the credit component of the loss that is recognized in earnings. OTTI recognized in earnings for credit-impaired debt securities is presented as additions in two components based upon whether the current period is the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if we receive cash flows in excess of what we expected to receive over the remaining life of the credit-impaired debt security, the security matures, or is fully written down. Changes in the credit loss component of credit-impaired debt securities were as follows for 2015 and 2014:



	2015		2014
	(Amounts in thousands)
Beginning balance	$	171	$	1,126
Initial credit impairment	—		—
Subsequent credit impairments	—		—
Increases for impairment recognized in earnings due to intent or requirement to sell	—		—
Reductions for securities sold	—		(955		)
Reductions for securities deemed worthless⁽¹⁾	—		—
Reductions for increases in cash flows expected to be collected	—		—
Ending balance	$	171	$	171

(1) Reduction due to credit losses applied to private label CMO tranche.

A summary of investment gains and losses recognized in income during the years ended December 31, 2015 and 2014 are as follows:



	2015		2014
	(Amounts in thousands)
Available for sale securities:
Realized gains	$	—	$	178
Realized (losses)	—		—
Other than temporary impairment	—		—
Total available for sale securities	$	—	$	178
Held to maturity securities:
Realized gains	$	—	$	—
Realized (losses)	—		—
Other than temporary impairment	—		—
Total held to maturity securities	$	—	$	—

During 2014, the Company recognized a gain of $178,000 from the sale of three Trust Preferred Securities.