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 it 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:



June 30, 2016
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Residential mortgage-backed securities-GSE	$	269,169	$	2,497	$	671	$	270,995
Residential mortgage-backed securities-Private	28,567		450		33		28,984
Commercial mortgage-backed securities-GSE	21,779		388		—		22,167
Commercial mortgage-backed securities-Private	17,847		362		128		18,081
Corporate notes	37,378		43		2		37,419
Total available-for-sale	374,740		3,740		834		377,646
Held-to-Maturity:
Residential mortgage-backed securities-GSE	115,395		1,975		13		117,357
Residential mortgage-backed securities-Private	14,363		38		—		14,401
Commercial mortgage-backed securities-Private	10,055		404		—		10,459
Total held-to-maturity	139,813		2,417		13		142,217
Total investment securities	$	514,553	$	6,157	$	847	$	519,863

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

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 June 30, 2016 and $6.0 million at December 31, 2015. Due to the redemption provisions of FHLB stock, we have estimated that fair value approximated cost and that this investment was not impaired at June 30, 2016. 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 June 30, 2016 and December 31, 2015, the Bank owned a total of $10.1 million and $9.9 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 June 30, 2016. FRBR stock is included in other assets at its original cost basis.

At June 30, 2016, $158.0 million of the investment securities portfolio was pledged to secure public deposits, $15.9 million was pledged to retail repurchase agreements and $162.5 million was pledged to others, leaving $181.0 million available as pledgeable collateral.

The Bank did not sell any investment securities during the three and six months ended June 30, 2016 or the three and six months ended June 30, 2015.

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 June 30, 2016 and December 31, 2015. The change in unrealized losses during the six months ending June 30, 2016 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
June 30, 2016
Available-for-Sale:
Residential mortgage-backed securities-GSE	$	—	$	—	$	119,845	$	671	$	119,845	$	671
Residential mortgage-backed securities-Private	2,791		28		621		5		3,412		33
Commercial mortgage-backed securities-Private	—		—		7,422		128		7,422		128
Corporate Notes	10,004		2		—		—		10,004		2
Total available-for-sale	12,795		30		127,888		804		140,683		834
Held-to-Maturity:
Residential mortgage-backed securities-GSE	—		—		12,739		13		12,739		13
Total held-to-maturity	—		—		12,739		13		12,739		13
Total	$	12,795	$	30	$	140,627	$	817	$	153,422	$	847

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
Commercial mortgage-backed securities-Private	17,575		294		—		—		17,575		294
Corporate notes	30,523		114		—		—		30,523		114
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

At both June 30, 2016 and December 31, 2015, there were 18 securities that were in a continuous unrealized loss position for 12 months or more.

We analyzed our securities portfolio at June 30, 2016, 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 June 30, 2016, 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
Residential mortgage-backed securities-GSE
Due after five years through 10 years	$	1,568	$	1,617	$	—	$	—
Due after ten years	267,601		269,378		115,395		117,357
Residential mortgage-backed securities-Private
Due after ten years	28,567		28,984		14,363		14,401
Commercial mortgage-backed securities-GSE
Due after one year through five years	21,779		22,167		—		—
Commercial mortgage-backed securities-Private
Due after ten years	17,847		18,081		10,055		10,459
Corporate notes
Due in one year or less	30,335		30,354		—		—
Due after one year through five years	7,043		7,065		—		—
Total	$	374,740	$	377,646	$	139,813	$	142,217