Note 3. Securities

The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at June 30, 2015 and December 31, 2014 are as follows (in thousands):


	At June 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale:
Investment securities:
U.S. agency obligations	$	29,887	$	143	$	—		$	30,030

Held-to-maturity:
Investment securities:
U.S. agency obligations	$	65,467	$	135	$	(2	)	$	65,600
State and municipal obligations		10,967		15		(9	)		10,973
Corporate debt securities		55,000		—		(7,750	)		47,250

Total investment securities		131,434		150		(7,761	)		123,823

Mortgage-backed securities:
FHLMC		128,701		565		(1,280	)		127,986
FNMA		165,220		3,669		(931	)		167,958
GNMA		549		93		—			642

Total mortgage-backed securities		294,470		4,327		(2,211	)		296,586

Total held-to-maturity	$	425,904	$	4,477	$	(9,972	)	$	420,409

Total securities	$	455,791	$	4,620	$	(9,972	)	$	450,439


	At December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale:
Investment securities:
U.S. agency obligations	$	19,900	$	—	$	(96	)	$	19,804

Held-to-maturity:
Investment securities:
U.S. agency obligations	$	86,394	$	97	$	(50	)	$	86,441
State and municipal obligations		13,829		25		(8	)		13,846
Corporate debt securities		55,000		—		(9 750	)		45,250

Total investment securities		155,223		122		(9,808	)		145,537

Mortgage-backed securities:
FHLMC		141,494		609		(1,659	)		140,444
FNMA		184,003		4,674		(1,182	)		187,495
GNMA		620		119		—			739

Total mortgage-backed securities		326,117		5,402		(2,841	)		328,678

Total held-to-maturity	$	481,340	$	5,524	$	(12,649	)	$	474,215

Total securities	$	501,240	$	5,524	$	(12,745	)	$	494,019

During the third quarter 2013, the Bank transferred $536.0 million of previously designated available-for-sale securities to a held-to-maturity designation at estimated fair value. The securities transferred had an unrealized net loss of $13.3 million at the time of transfer which continues to be reflected in accumulated other comprehensive loss on the consolidated balance sheet, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of the held-to-maturity investment securities at June 30, 2015 and December 31, 2014 are as follows (in thousands):


	June 30, 2015			December 31, 2014
Amortized cost	$	425,904		$	481,340
Net loss on date of transfer from available-for-sale		(13,347	)		(13,347	)
Accretion of net unrealized loss on securities reclassified as held-to-maturity		2,068			1,424

Carrying value	$	414,625		$	469,417

There were no realized gains or losses on the sale of securities for the three and six months ended June 30, 2015. Net realized gains on the sale of securities for both the three and six months ended June 30, 2014 were $348,000.

The amortized cost and estimated fair value of investment securities at June 30, 2015 by contractual maturity are shown below (in thousands). Actual maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. At June 30, 2015, corporate debt securities with an amortized cost and estimated fair value of $55.0 million and $47.3 million, respectively, were callable prior to the maturity date.


June 30, 2015	Amortized Cost		Estimated Fair Value
Less than one year	$	34,038	$	34,076
Due after one year through five years		71,943		72,189
Due after five years through ten years		340		338
Due after ten years		55,000		47,250

	$	161,321	$	153,853

Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.

The estimated fair value and unrealized loss of securities available-for-sale and held-to-maturity at June 30, 2015 and December 31, 2014, segregated by the duration of the unrealized loss, are as follows (in thousands):


	At June 30, 2015
	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Held-to-maturity:
Investment securities:
U.S. agency obligations	$	—	$	—		$	5,059	$	(2	)	$	5,059	$	(2	)
State and municipal obligations		1,746		(5	)		1,029		(4	)		2,775		(9	)
Corporate debt securities		—		—			47,250		(7,750	)		47,250		(7,750	)

Total investment securities		1,746		(5	)		53,338		(7,756	)		55,084		(7,761	)

Mortgage-backed securities:
FHLMC		9,832		(10	)		74,779		(1,270	)		84,611		(1,280	)
FNMA		22,040		(119	)		38,438		(812	)		60,478		(931	)

Total mortgage-backed securities		31,872		(129	)		113,217		(2,082	)		145,089		(2,211	)

Total held-to-maturity	$	33,618	$	(134	)	$	166,555	$	(9,838	)	$	200,173	$	(9,972	)

Total securities	$	33,618	$	(134	)	$	166,555	$	(9,838	)	$	200,173	$	(9,972	)


	At December 31, 2014
	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Available-for-sale:
Investment securities:
U.S. agency obligations	$	19,804	$	(96	)	$	—	$	—		$	19,804	$	(96	)

Held-to-maturity:
Investment securities:
U.S. agency obligations	$	15,134	$	(9	)	$	25,409	$	(41	)	$	40,543	$	(50	)
State and municipal obligations		947		(1	)		1,827		(7	)		2,774		(8	)
Corporate debt securities		—		—			45,250		(9,750	)		45,250		(9,750	)

Total investment securities		16,081		(10	)		72,486		(9,798	)		88,567		(9,808	)

Mortgage-backed securities:
FHLMC		9,155		(34	)		96,975		(1,625	)		106,130		(1,659	)
FNMA		—		—			64,932		(1,182	)		64,932		(1,182	)

Total mortgage-backed securities		9,155		(34	)		161,907		(2,807	)		171,062		(2,841	)

Total held-to-maturity	$	25,236	$	(44	)	$	234,393	$	(12,605	)	$	259,629	$	(12,649	)

Total securities	$	45,040	$	(140	)	$	234,393	$	(12,605	)	$	279,433	$	(12,745	)

At June 30, 2015, the amortized cost, estimated fair value and credit rating of the individual corporate debt securities in an unrealized loss position for greater than one year are as follows (in thousands):


Security Description	Amortized Cost		Estimated Fair Value		Credit Rating Moody’s/S&P
BankAmerica Capital	$	15,000	$	13,006	Ba1/BB
Chase Capital		10,000		8,625	Baa2/BBB-
Wells Fargo Capital		5,000		4,344	A1/BBB+
Huntington Capital		5,000		4,025	Baa2/BB
Keycorp Capital		5,000		4,225	Baa2/BB+
PNC Capital		5,000		4,450	Baa1/BBB-
State Street Capital		5,000		4,338	A3/BBB
SunTrust Capital		5,000		4,237	Baa3/BB+

	$	55,000	$	47,250

At June 30, 2015, the estimated fair value of each corporate debt security was below cost. However, the estimated fair value of the corporate debt securities increased as compared to December 31, 2014. The corporate debt securities are issued by other financial institutions with credit ratings ranging from a high of A1 to a low of BB as rated by one of the internationally-recognized credit rating services. These floating-rate securities were purchased in 1998 and have paid coupon interest continuously since issuance. Floating-rate debt securities such as these pay a fixed interest rate spread over 90-day LIBOR. Following the purchase of these securities, the required spread increased for these types of securities causing a decline in the market price. The Company concluded that unrealized losses on corporate debt securities were only temporarily impaired at June 30, 2015. In concluding that the impairments were only temporary, the Company considered several factors in its analysis. The Company noted that each issuer made all the contractually due payments when required. There were no defaults on principal or interest payments and no interest payments were deferred. All of the financial institutions are also considered well-capitalized. Credit spreads have decreased for these types of securities and market prices have improved. Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security. Furthermore, the Company does not have the intent to sell these securities and it is more likely than not that the Company will not be required to sell the securities. The Company has held the securities continuously since 1998 and expects to receive its full principal at maturity in 2028 or prior if called by the issuer. The Company has historically not actively sold investment securities and has not utilized the securities portfolio as a source of liquidity. The Company’s long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.

The mortgage-backed securities are issued and guaranteed by either the Federal Home Loan Mortgage Corporation (“FHLMC”) or Federal National Mortgage Association (“FNMA”), corporations which are chartered by the United States Government and whose debt obligations are typically rated AA+ by one of the internationally recognized credit rating services. The Company considers the unrealized losses to be the result of changes in interest rates which over time can have both a positive and negative impact on the estimated fair value of the mortgage-backed securities. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost. As a result, the Company concluded that these securities were only temporarily impaired at June 30, 2015.