Investment Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and is reported, net of deferred taxes, as a component of shareholders' equity as accumulated other comprehensive income (loss). Securities designated as held-to-maturity are carried at amortized cost, as the Company has the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. We maintain investment balances based on a continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and an assessment of the potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risks.

The following table summarizes the amortized cost and estimated fair value of investment securities and presents the related gross unrealized gains and losses:



March 31, 2015
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Obligations of U.S. government sponsored enterprises	$	2,022	$	14	$	—	$	2,036
Residential mortgage-backed securities-GSE	288,622		899		3,802		285,719
Residential mortgage-backed securities-Private	15,744		690		4		16,430
Commercial mortgage-backed securities-GSE	22,279		—		71		22,208
Commercial mortgage-backed securities-Private	10,354		103		—		10,457
Corporate notes	31,017		—		25		30,992
Total available-for-sale	370,038		1,706		3,902		367,842
Held-to-Maturity:
Residential mortgage-backed securities-GSE	130,496		590		372		130,714
Commercial mortgage-backed securities-Private	10,063		182		—		10,245
Total held-to-maturity	140,559		772		372		140,959
Total investment securities	$	510,597	$	2,478	$	4,274	$	508,801

December 31, 2014
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Obligations of U.S. government sponsored enterprises	$	2,028	$	16	$	—	$	2,044
Residential mortgage-backed securities-GSE	295,300		438		5,593		290,145
Residential mortgage-backed securities-Private	16,455		820		4		17,271
Commercial mortgage-backed securities-GSE	22,377		—		419		21,958
Commercial mortgage-backed securities-Private	10,365		—		150		10,215
Corporate notes	8,399		8		—		8,407
Total available-for-sale	354,924		1,282		6,166		350,040
Held-to-Maturity:
Residential mortgage-backed securities-GSE	132,396		116		1,635		130,877
Commercial mortgage-backed securities-Private	10,065		—		67		9,998
Total held-to-maturity	142,461		116		1,702		140,875
Total investment securities	$	497,385	$	1,398	$	7,868	$	490,915

As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), the Bank is required to own capital stock in the FHLB based generally upon the balances of total assets and FHLB advances. FHLB capital stock is pledged to secure FHLB advances. This investment is carried at cost since no ready market exists for FHLB stock and there is no quoted market value. However, redemption of this stock has historically been at par value. The Bank owned a total of $4.9 million of FHLB stock at March 31, 2015 and $4.9 million at December 31, 2014. Due to the redemption provisions of FHLB stock, we have estimated that fair value approximated cost and that this investment was not impaired at March 31, 2015. FHLB stock is included in other assets at its original cost basis.

As a member bank of the Federal Reserve Bank of Richmond (“FRBR”), the Bank also is required to own capital stock of the FRBR based upon a percentage of the Bank's common stock and surplus. This investment is carried at cost since no ready market exists for FRBR stock and there is no quoted market value. At March 31, 2015 and December 31, 2014, the Bank owned a total of $9.6 million and $4.7 million of FRBR stock, respectively. Because this investment is in an entity of the U.S. government, we have estimated that fair value approximated the cost and that this investment was not impaired at March 31, 2015. FRBR stock is included in other assets at its original cost basis.

At March 31, 2015, $120.2 million of the investment securities portfolio was pledged to secure public deposits, $16.5 million was pledged to retail repurchase agreements and $170.9 million was pledged to others, leaving $200.8 million available as pledgeable collateral.

The Bank did not sell any investment securities during the three months ended March 31, 2015 or March 31, 2014.

The following tables show our investments' estimated fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2015 and December 31, 2014. The change in unrealized losses during the three months ending March 31, 2015 was attributed to changes in interest rates and not to changes in the credit quality of these securities. All unrealized losses on investment securities are considered by management to be temporary given the credit quality of these investment securities or the short duration of the unrealized loss, or both.



	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
March 31, 2015
Available-for-Sale:
Residential mortgage-backed securities-GSE	$	80,677	$	557	$	145,265	$	3,245	$	225,942	$	3,802
Residential mortgage-backed securities-Private	1,135		4		—		—		1,135		4
Commercial mortgage-backed securities-GSE	22,208		71		—		—		22,208		71
Corporate Notes	30,992		25						30,992		25
Total available-for-sale	135,012		657		145,265		3,245		280,277		3,902
Held-to-Maturity:
Residential mortgage-backed securities-GSE	34,426		80		39,603		292		74,029		372
Total held-to-maturity	34,426		80		39,603		292		74,029		372
Total	$	169,438	$	737	$	184,868	$	3,537	$	354,306	$	4,274

December 31, 2014
Available-for-Sale
Residential mortgage-backed securities-GSE	$	—	$	—	$	245,457	$	5,593	$	245,457	$	5,593
Residential mortgage-backed securities-Private	1,154		4		—		—		1,154		4
Commercial mortgage-backed securities-GSE	—		—		21,958		419		21,958		419
Commercial mortgage-backed securities-Private	—		—		10,215		150		10,215		150
Total available-for-sale	1,154		4		277,630		6,162		278,784		6,166
Held-to-Maturity:
Residential mortgage-backed securities-GSE	—		—		112,878		1,635		112,878		1,635
Commercial mortgage-backed securities-Private	—		—		9,998		67		9,998		67
Total held-to-maturity	—		—		122,876		1,702		122,876		1,702
Total	$	1,154	$	4	$	400,506	$	7,864	$	401,660	$	7,868

At March 31, 2015 and December 31, 2014, there were 15 and 33 available-for-sale securities that were in an unrealized loss position for 12 months or more, respectively.

We analyzed our securities portfolio at March 31, 2015, and considered ratings, fair value, cash flows and other factors to determine if any of the securities were other than temporarily impaired. Since none of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption obligations, and we have determined that it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis, none of the securities are deemed to be other than temporarily impaired.

The aggregate amortized cost and fair value of securities at March 31, 2015, by remaining contractual maturity, are shown in the following table. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations. Mortgage backed securities are grouped based on stated maturity date, but actual maturity will vary based on the actual repayment of the underlying mortgage loans.



	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
U.S. government sponsored agencies
Due after one year through five years	$	2,022	$	2,036	$	—	$	—
Residential mortgage-backed securities-GSE
Due after five years through 10 years	2,200		2,263		—		—
Due after ten years	286,422		283,456		130,496		130,714
Residential mortgage-backed securities-Private
Due after ten years	15,744		16,430		—		—
Commercial mortgage-backed securities-GSE
Due after five years through 10 years	22,279		22,208		—		—
Commercial mortgage-backed securities-Private
Due after ten years	10,354		10,457		10,063		10,245
Corporate notes
Due after one year through five years	31,017		30,992		—		—
Total	$	370,038	$	367,842	$	140,559	$	140,959