Note 4. Securities

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


	At September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale:
Investment securities:
U.S. agency obligations	$	29,897	$	211	$	—		$	30,108


Held-to-maturity:
Investment securities:
U.S. agency obligations	$	55,338	$	172	$	(2	)	$	55,508
State and municipal obligations		8,373		25		(3	)		8,395
Corporate debt securities		55,000		—		(6,928	)		48,072

Total investment securities		118,711		197		(6,933	)		111,975


Mortgage-backed securities:
FHLMC		126,187		867		(658	)		126,396
FNMA		158,417		3,913		(476	)		161,854
GNMA		523		104		—			627

Total mortgage-backed securities		285,127		4,884		(1,134	)		288,877


Total held-to-maturity	$	403,838	$	5,081	$	(8,067	)	$	400,852


Total securities	$	433,735	$	5,292	$	(8,067	)	$	430,960


	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 September 30, 2015 and December 31, 2014 are as follows (in thousands):


	September 30, 2015			December 31, 2014
Amortized cost	$	403,838		$	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		2,441			1,424

Carrying value	$	392,932		$	469,417

There were no realized gains or losses on the sale of securities for the three and nine months ended September 30, 2015. Net realized gains on the sale of securities for the three and nine months ended September 30, 2014 were $591,000 and $938,000, respectively.

The amortized cost and estimated fair value of investment securities at September 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 September 30, 2015, corporate debt securities with an amortized cost and estimated fair value of $55.0 million and $48.1 million, respectively, were callable prior to the maturity date.


September 30, 2015	Amortized Cost		Estimated Fair Value

Less than one year	$	45,234	$	45,281
Due after one year through five years		48,034		48,388
Due after five years through ten years		340		342
Due after ten years		55,000		48,072

	$	148,608	$	142,083

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 September 30, 2015 and December 31, 2014, segregated by the duration of the unrealized loss, are as follows (in thousands):


	At September 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	$	—	$	—		$	5,048	$	(2	)	$	5,048	$	(2	)
State and municipal obligations		852		(2	)		643		(1	)		1,495		(3	)
Corporate debt securities		—		—			48,072		(6,928	)		48,072		(6,928	)

Total investment securities		852		(2	)		53,763		(6,931	)		54,615		(6,933	)


Mortgage-backed securities:
FHLMC		3,601		(10	)		57,076		(648	)		60,677		(658	)
FNMA		—		—			24,777		(476	)		24,777		(476	)

Total mortgage-backed securities		3,601		(10	)		81,853		(1,124	)		85,454		(1,134	)


Total held-to-maturity	$	4,453	$	(12	)	$	135,616	$	(8,055	)	$	140,069	$	(8,067	)


Total securities	$	4,453	$	(12	)	$	135,616	$	(8,055	)	$	140,069	$	(8,067	)


	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 September 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	$	13,875	Ba1/BB+
Chase Capital		10,000		8,525	Baa2/BBB-
Wells Fargo Capital		5,000		4,282	A1/BBB+
Huntington Capital		5,000		4,188	Baa2/BB
Keycorp Capital		5,000		4,177	Baa2/BB+
PNC Capital		5,000		4,425	Baa1/BBB-
State Street Capital		5,000		4,350	A3/BBB
SunTrust Capital		5,000		4,250	Baa3/BB+

	$	55,000	$	48,072

At September 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 September 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 September 30, 2015.