Note 3. Investment Securities

The carrying value and fair value of investment securities available for sale (“AFS”) at December 31, 2016 and December 31, 2015 are as follows:


As of December 31, 2016
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	988	$	—	$	(22)	$	966
Mortgage-backed securities-residential		6,985		70		(17)		7,038
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		146,666		1,022		(2,129)		145,559
Non-agency		4,121		—		(86)		4,035
Corporate bonds		1,700		1		—		1,701
Municipal bonds		8,691		92		(75)		8,708
Other securities		1,821		—		—		1,821
Common stocks		26		—		—		26
Total available for sale	$	170,998	$	1,185	$	(2,329)	$	169,854


As of December 31, 2015
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	26,127	$	—	$	(564)	$	25,563
Mortgage-backed securities-residential		11,002		106		(50)		11,058
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		170,764		1,524		(1,554)		170,734
Non-agency		2,729		1		(26)		2,704
Corporate bonds		1,500		56		—		1,556
Municipal bonds		9,910		73		(52)		9,931
Other securities		2,050		445		—		2,495
Common stocks		26		—		—		26
Total available for sale	$	224,108	$	2,205	$	(2,246)	$	224,067

The amortized cost and fair value of investment securities at December 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	As of December 31, 2016
	Amortized
(In thousands)	cost		Fair value
Within 1 year	$	—	$	—
After 1 but within 5 years		5,282		5,233
After 5 but within 10 years		5,097		5,141
After 10 years		1,000		1,001
Mortgage-backed securities-residential		6,985		7,038
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		146,666		145,559
Non-agency		4,121		4,035
Total available for sale debt securities		169,151		168,007
No contractual maturity		1,847		1,847
Total available for sale securities	$	170,998	$	169,854

Proceeds from the sales of AFS investments during the year ended December 31, 2016 and 2015 were $36.4 and $47.0 million, respectively. The following table summarizes gross realized gains and losses on the sale of securities recognized in earnings in the periods indicated:


	For the year ended
	December 31,
(In thousands)	2016		2015
Gross realized gains	$	1,475	$	925
Gross realized losses		(44)		(25)
Net realized gains	$	1,431	$	900

We recorded $190 thousand and $14 thousand in OTTI charges in 2016 and 2015, respectively, related to one private equity investment. There was no non-credit related impairment losses on debt securities held at December 31, 2016 or December 31, 2015 for which a portion of OTTI was recognized in other comprehensive income. As of December 31, 2016, investment securities with a market value of $74.8 million were pledged as collateral for borrowings.

The tables below indicate the length of time individual AFS securities have been in a continuous unrealized loss position at December 31, 2016 and December 31, 2015:


December 31, 2016	Less than 12 months					12 months or longer					Total
			Gross		Number			Gross		Number			Gross		Number
			unrealized		of			unrealized		of			unrealized		of
(In thousands)	Fair value		losses		positions	Fair value		losses		positions	Fair value		losses		positions
U.S. government agencies	$	966	$	(22)	1	$	—	$	—	—	$	966	$	(22)	1
Mortgage-backed securities-residential		4,237		(17)	2		—		—	—		4,237		(17)	2
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		73,864		(1,630)	31		12,045		(499)	4		85,909		(2,129)	35
Non-agency		4,035		(86)	3		—		—	—		4,035		(86)	3
Municipal bonds		1,678		(45)	3		2,314		(30)	3		3,992		(75)	6
Total available for sale	$	84,780	$	(1,800)	40	$	14,359	$	(529)	7	$	99,139	$	(2,329)	47


December 31, 2015	Less than 12 months					12 months or longer					Total
			Gross		Number			Gross		Number			Gross		Number
			unrealized		of			unrealized		of			unrealized		of
(In thousands)	Fair value		losses		positions	Fair value		losses		positions	Fair value		losses		positions
U.S. government agencies	$	6,681	$	(57)	2	$	18,882	$	(507)	6	$	25,563	$	(564)	8
Mortgage-backed securities-residential		5,140		(5)	2		2,574		(45)	1		7,714		(50)	3
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		87,020		(994)	31		15,644		(560)	5		102,664		(1,554)	36
Non-agency		1,101		(26)	1		—		—	—		1,101		(26)	1
Municipal bonds		6,080		(52)	7		—		—	—		6,080		(52)	7
Total available for sale	$	106,022	$	(1,134)	43	$	37,100	$	(1,112)	12	$	143,122	$	(2,246)	55

For all debt security types discussed below the fair value is based on prices provided by brokers and safekeeping custodians.

U.S. government-sponsored agencies (“U.S. Agency”): As of December 31, 2016, we had one U.S. Agency security with a fair value of $966 thousand and a gross unrealized loss of $22 thousand. The bond has been in an unrealized loss position for less than twelve months at December 31, 2016. Management believes that the unrealized loss on this debt security is a function of changes in investment spreads. Management expects to recover the entire amortized cost basis of this security. We do not intend to sell this security before recovery of its cost basis and have not determined that it is not more likely than not that it will be required to sell this security before recovery of its cost basis. Therefore, management has determined that this security is not other-than-temporarily impaired at December 31, 2016.

Mortgage-backed securities issued by U.S. government agencies and U.S. government sponsored enterprises: As of December 31, 2016, we had two mortgage-backed securities with a fair value of $4.2 million and gross unrealized losses of $17 thousand. Both of the mortgage-backed securities have been in an unrealized loss position for less than twelve months. The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. We do not intend to sell these securities before recovery of their cost basis and have not determined that it is not more likely than not that it will be required to sell these securities before recovery of their cost basis. Therefore, management has determined that these securities are not other-than-temporarily impaired at December 31, 2016.

U.S. government issued or sponsored collateralized mortgage obligations (“Agency CMOs”): As of December 31, 2016, we had 35 Agency CMOs with a fair value of $85.9 million and gross unrealized losses of $2.1 million. Four of the Agency CMOs had been in an unrealized loss position for twelve months or longer and the other 31 Agency CMOs had been in an unrealized loss position for less than twelve months. The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. We do not intend to sell these securities before recovery of their cost basis and have not determined that it is not more likely than not that it will be required to sell these securities before recovery of their cost basis. Therefore, management has determined that these securities are not other-than-temporarily impaired at December 31, 2016.

Non-agency collateralized mortgage obligations (“Non-agency CMOs”): As of December 31, 2016, we had three non-agency CMOs with a fair value of $4.0 million and gross unrealized losses of $86 thousand. The bonds have been in an unrealized loss position for less than twelve months. We do not intend to sell these securities before recovery of their cost basis, and it is not more likely than not we will be required to sell this security before recovery of its cost basis. Therefore, management has determined that this security is not other-than-temporarily impaired at December 31, 2016.

Municipal bonds: As of December 31, 2016, we had six municipal bonds with a fair value $4.0 million and gross unrealized losses of $75 thousand. Three of the municipal bonds had been in an unrealized loss position for less than twelve months and three of the municipal bonds had been in an unrealized loss position for twelve months or longer. Because we do not intend to sell the bonds and it is not more likely than not that the we will be required to sell the bond before recovery of its amortized cost basis, which may be maturity, we do not consider the bonds to be other-than-temporarily impaired at December 31, 2016.

Other securities: As of December 31, 2016, we had five investments in private equity funds which were predominantly invested in real estate. In determining whether or not OTTI exists, we review the funds’ financials, asset values, and near-term projections. During 2016, OTTI charges of $190 thousand were recorded on two of the private equity investments. Management concluded that the impairment on this investment was other-than-temporary.

We will continue to monitor these investments to determine if the discounted cash flow analysis, continued negative trends, market valuations or credit defaults result in impairment that is other than temporary.