Investment Securities

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:



December 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	$	2,005	$	3	$	—	$	2,008
Residential mortgage-backed securities-GSE	286,057		339		8,289		278,107
Residential mortgage-backed securities-Private	33,235		578		236		33,577
Commercial mortgage-backed securities-GSE	21,980		—		368		21,612
Commercial mortgage-backed securities-Private	17,869		—		294		17,575
Corporate notes	37,669		—		114		37,555
Total available-for-sale	$	398,815	$	920	$	9,301	$	390,434
Held-to-Maturity:
Residential mortgage-backed securities-GSE	120,197		—		2,310		117,887
Residential mortgage-backed securities-Private	17,712		—		298		17,414
Commercial mortgage-backed securities-Private	10,058		—		174		9,884
Total held-to-maturity	$	147,967	$	—	$	2,782	$	145,185
Total investment securities	$	546,782	$	920	$	12,083	$	535,619

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 $6.0 million of FHLB stock at December 31, 2015 and $4.9 million at December 31, 2014. Due to the redemption provisions of FHLB stock, we estimate that fair value approximates cost and that this investment is not impaired at December 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 December 31, 2015 and December 31, 2014, the Bank owned a total of $9.9 million and $4.7 million of FRBR stock, respectively. Due to the nature of this investment 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 December 31, 2015. FRBR stock is included in other assets at its original cost basis.

These investments recorded at cost are included in Other Assets on the Consolidated Balance Sheets, as follows:



(dollars in thousands)	December 31,
	2015		2014
Federal Home Loan Bank stock	$	5,971	$	4,855
Federal Reserve Bank stock	9,884		4,713
Total other investments	$	15,855	$	9,568

Gross gains and losses recognized (by specific identification) on the sale of securities are summarized as follows:



(dollars in thousands)	Years Ended December 31,
	2015		2014			2013
Proceeds from sales of investment securities	$	—	$	37,239		$	177,826

Gains on sales of investment securities available-for-sale	—		1,392			2,953
Losses on sales of investment securities available-for-sale	—		(418		)	(181		)
Total securities gains, net	$	—	$	974		$	2,772

At December 31, 2015, $150.0 million of the investment securities portfolio was pledged to secure public deposits, $17.1 million was pledged to retail repurchase agreements and $157.7 million was pledged to others, principally the FHLB and FRBR, leaving $213.6 million available as unpledged securities collateral. At December 31, 2014, $121.9 million of the investment securities portfolio was pledged to secure public deposits, $16.8 million was pledged to retail repurchase agreement and $173.2 million was pledged to others, leaving $180.6 million available as lendable collateral.

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 December 31, 2015 and December 31, 2014. The change in unrealized losses during the years ending December 31, 2015 and 2014 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
December 31, 2015
Available-for-Sale:
Residential mortgage-backed securities-GSE	$	137,998	$	2,560	$	132,148	$	5,729	$	270,146	$	8,289
Residential mortgage-backed securities-Private	26,265		231		636		5		26,901		236
Commercial mortgage-backed securities-GSE	21,612		368		—		—		21,612		368
Corporate Notes	30,523		114		—		—		30,523		114
Commercial mortgage-backed securities-Private	17,575		294		—		—		17,575		294
Total available-for-sale	$	233,973	$	3,567	$	132,784	$	5,734	$	366,757	$	9,301
Held-to-Maturity:
Residential mortgage-backed securities-GSE	$	83,014	$	1,481	$	34,872	$	829	$	117,886	$	2,310
Residential mortgage-backed securities-Private	17,414		298		—		—		17,414		298
Commercial mortgage-backed securities-Private	9,884		174		—		—		9,884		174
Total held-to-maturity	$	110,312	$	1,953	$	34,872	$	829	$	145,184	$	2,782
Total	$	344,285	$	5,520	$	167,656	$	6,563	$	511,941	$	12,083

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 December 31, 2015, there were 18 investment securities that had continuous unrealized losses for more than twelve months. At December 31, 2014, there were 42 investment securities that had continuous unrealized losses for more than twelve months. The unrealized losses relate to fixed-rate debt securities that have incurred fair value reductions due to higher market interest rates and, for certain securities, increased credit spreads since the respective purchase date. The unrealized losses are not likely to reverse unless and until market interest rates and credit spreads decline to the levels that existed when the securities were purchased.

Unrealized losses for all investment securities are reviewed to determine whether the losses are other than temporary. Investment securities are evaluated on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other than temporary. In conducting this assessment, COB evaluates a number of factors including, but not limited to:


•	How much fair value has declined below amortized cost;


•	How long the decline in fair value has existed;


•	The financial condition of the issuer;


•	Contractual or estimated cash flows of the security;


•	Underlying supporting collateral;


•	Past events, current conditions, forecasts;


•	Significant rating agency changes on the issuer; and


•	COB’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

COB analyzed its securities portfolio at December 31, 2015 and 2014, 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 COB has determined that it is not more likely than not that COB 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 December 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 obligations.



	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 in one year or less	$	2,005	$	2,008	$	—	$	—
Residential mortgage-backed securities-GSE
Due after five years through 10 years	1,789		1,821		—		—
Due after ten years	284,268		276,286		120,197		117,887
Residential mortgage-backed securities-Private
Due after ten years	33,235		33,577		17,712		17,414
Commercial mortgage-backed securities-GSE
Due after five years through 10 years	21,980		21,612		—		—
Commercial mortgage-backed securities-Private
Due after ten years	17,869		17,575		10,058		9,884
Corporate notes
Due after five years through 10 years	37,669		37,555		—		—
Total	$	398,815	$	390,434	$	147,967	$	145,185