(4) Investment Securities

The amortized cost of investment securities and the approximate fair value at March 31, 2017 and December 31, 2016 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2017
Available-for-sale:
U.S. Treasury securities	$	3,500	$	—	$	(3	)	$	3,497
U.S. Government agency mortgage-backed securities		254,895		459		(2,496	)		252,858
Trust preferred securities		12,024		—		(1,579	)		10,445
Collateralized loan obligations		31,474		8		(16	)		31,466
Other securities		1,261		—		(25	)		1,236
Total available-for-sale		303,154		467		(4,119	)		299,502
Held to maturity:
Other securities		250		—		—			250
Total held to maturity		250		—		—			250
Total investment securities	$	303,404	$	467	$	(4,119	)	$	299,752

December 31, 2016
Available-for-sale:
U.S. Treasury securities	$	2,498	$	—	$	—		$	2,498
U.S. Government agency mortgage-backed securities		246,650		583		(2,575	)		244,658
Trust preferred securities		12,023		—		(2,172	)		9,851
Collateralized loan obligations		37,471		8		(160	)		37,319
Other securities		1,386		—		(26	)		1,360
Total available-for-sale		300,028		591		(4,933	)		295,686
Held to maturity:
Other securities		250		—		—			250
Total held to maturity		250		—		—			250
Total investment securities	$	300,278	$	591	$	(4,933	)	$	295,936

During the three months ended March 31, 2017, the Company sold two securities prior to maturity for gross proceeds of $206 thousand and gross realized gains of $4 thousand. Additionally, the Bank called two securities with an aggregate par value of $6.0 million. The following table provides the gross unrealized losses and estimated fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at March 31, 2017 and December 31, 2016:

Gross Unrealized Losses by Investment Category

	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
March 31, 2017
U.S. Treasury securities	$	3,497	$	(3	)	$	—	$	—		$	3,497	$	(3	)
U.S. Government agency mortgage-backed securities		164,398		(2,061	)		11,196		(435	)		175,594		(2,496	)
Trust preferred securities		—		—			10,445		(1,579	)		10,445		(1,579	)
Collateralized loan obligations		21,986		(2	)		7,985		(14	)		29,971		(16	)
Other securities		975		(25	)		—		—			975		(25	)
Total	$	190,856	$	(2,091	)	$	29,626	$	(2,028	)	$	220,482	$	(4,119	)

December 31, 2016
U.S. Government agency mortgage-backed securities		108,070		(1,683	)		54,757		(892	)		162,827		(2,575	)
Trust preferred securities		—		—			9,851		(2,172	)		9,851		(2,172	)
Collateralized loan obligations		—		—			33,825		(160	)		33,825		(160	)
Other securities		975		(26	)		—		—			975		(26	)
Total	$	109,045	$	(1,709	)	$	98,433	$	(3,224	)	$	207,478	$	(4,933	)

The Company determines whether unrealized losses are temporary in accordance with FASB ASC 325-40, Investments – Other, when applicable, and FASB ASC 320-10, Investments – Overall (“FASB ASC 320-10”). The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of an OTTI condition. These include, but are not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer.

FASB ASC 320-10 requires the Company to assess if an OTTI exists by considering whether the Company has the intent to sell the security or it is more likely than not that it will be required to sell the security before recovery. If either of these situations applies, the guidance requires the Company to record an OTTI charge to earnings on debt securities for the difference between the amortized cost basis of the security and the fair value of the security. If neither of these situations applies, the Company is required to assess whether it is expected to recover the entire amortized cost basis of the security. If the Company is not expected to recover the entire amortized cost basis of the security, the guidance requires the Company to bifurcate the identified OTTI into a credit loss component and a component representing loss related to other factors. A discount rate is applied which equals the effective yield of the security. The difference between the present value of the expected cash flows and the amortized book value is considered a credit loss. When a market price is not readily available, the market value of the security is determined using the same expected cash flows; the discount rate is a rate the Company determines from open market and other sources as appropriate for the security. The difference between the market value and the present value of cash flows expected to be collected is recognized in accumulated other comprehensive loss on the unaudited condensed consolidated statements of financial condition. Application of this guidance resulted in no OTTI charges during the three months ended March 31, 2017 and 2016.

As of March 31, 2017, the Company’s cumulative OTTI balance was $1.2 million. There were no OTTI charges recognized in earnings as a result of credit losses on investments in the three months ended March 31, 2017 and 2016.

U.S. Treasury Securities. At March 31, 2017, the gross unrealized loss in the category of less than 12 months of $3 thousand consisted of two US treasury securities with an estimated fair value of $3.5 million. The Company monitors key credit metrics such as market rates and possible credit deterioration to determine if an OTTI exists. As of March 31, 2017, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

U.S. Government Agency Mortgage-Backed Securities. At March 31, 2017, the gross unrealized loss in the category of less than 12 months of $2.1 million consisted of 37 mortgage-backed securities with an estimated fair value of $164.4 million. The gross unrealized loss in the category of 12 months or longer of $435 thousand consisted of four mortgage-backed securities with an estimated fair value of $11.2 million issued and guaranteed by a U.S. Government sponsored agency. The Company monitors key credit metrics such as market rates and possible credit deterioration to determine if an OTTI exists. As of March 31, 2017, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities, before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

Collateralized Loan Obligations. At March 31, 2017, the gross unrealized loss in the category of collateralized loan obligations with a continuous loss position of less than 12 months was $2 thousand, which consisted of two AAA-rated security with a total estimated fair value of $22.0 million. The gross unrealized loss in the category of collateralized loan obligations with a continuous loss position of 12 months or longer was $14 thousand, which consisted of one AAA-rated collateralized loan obligation securities with a total estimated fair value of $8.0 million. The Company monitors key credit metrics such as delinquencies, defaults, cumulative losses and credit support levels to determine if an OTTI exists. As of March 31, 2017, management concluded that an OTTI did not exist on any of the aforementioned securities based upon its assessment. Management also concluded that it does not intend nor will it be required to sell the securities before their recovery, which may be maturity, and management expects to recover the entire amortized cost basis of these securities.

Trust Preferred Securities. At March 31, 2017, the gross unrealized loss in the category of trust preferred securities with a continuous loss position of 12 months or longer was $1.6 million, which consisted of two trust preferred securities. The trust preferred securities are comprised of one non-rated single issuer security with an amortized cost of $3.2 million and an estimated fair value of $3.2 million and one investment grade rated pooled security with an amortized cost of $8.8 million and an estimated fair value of $7.2 million.

For the pooled security, the Company monitors each issuer in the collateral pool with respect to financial performance using data from the issuer’s most recent regulatory reports as well as information on issuer deferrals and defaults. Also, the security structure is monitored with respect to collateral coverage and current levels of subordination. Expected future cash flows are projected assuming additional defaults and deferrals based on the performance of the collateral pool. The pooled security is in a senior position in the capital structure. The security had a 3.7 times principal coverage. As of the most recent reporting date, interest has been paid in accordance with the terms of the security. The Company reviews projected cash flow analysis for adverse changes in the present value of projected future cash flows that may result in an other-than-temporary credit impairment to be recognized through earnings. The most recent valuations assumed no recovery on any defaulted collateral, no recovery on any deferring collateral and an additional 3.6% of defaults or deferrals’ every three years with no recovery rate. As of March 31, 2017, management concluded that an OTTI did not exist on the aforementioned security based upon its assessment. Management also concluded that it does not intend to sell the security, and that it is not more likely than not it will be required to sell the security before its recovery, which may be maturity, and management expects to recover the entire amortized cost basis of this security.

The financial performance of the non-rated single issuer trust preferred security is monitored on a quarterly basis using data from the issuer’s most recent regulatory reports to assess the probability of cash flow impairment. Expected future cash flows are projected by incorporating the contractual cash flow of the security adjusted, if necessary, for potential changes in the amount or timing of cash flows due to the underlying creditworthiness of the issuer and covenants in the security.

During the three months ended March 31, 2017, the Company did not record an OTTI credit-related charge related to this single issuer trust preferred security. Based on the Company’s most recent evaluation, and based upon the receipt of all scheduled dividend payments since September 2014, the Company does not expect the issuer to default on the security based primarily on the issuer’s subsidiary bank reporting that it meets the minimum regulatory requirements to be considered a “well capitalized” institution. The cumulative OTTI on this security as of March 31, 2017 was $1.2 million. Based upon the current capital position of the issuer and recent improvements in the financial performance of the issuer, the Company concluded that an additional impairment charge was not warranted at March 31, 2017.

The amortized cost and estimated fair value of the investment securities, by contractual maturity, at March 31, 2017 and December 31, 2016 are shown below. Actual maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
March 31, 2017
Due in one year or less	$	3,513	$	3,510	$	250	$	250
Due after one year through five years		248		248		—		—
Due after five years through ten years		31,474		31,466		—		—
Due after ten years		13,024		11,420		—		—
Total investment securities, excluding mortgage- backed securities		48,259		46,644		250		250
U.S. Government agency mortgage-backed securities		254,895		252,858		—		—
Total investment securities	$	303,154	$	299,502	$	250	$	250

December 31, 2016
Due in one year or less	$	2,635	$	2,635	$	250	$	250
Due after one year through five years		248		248		—		—
Due after five years through ten years		37,471		37,319		—		—
Due after ten years		13,024		10,826		—		—
Total investment securities, excluding mortgage- backed securities		53,378		51,028		250		250
U.S. Government agency mortgage-backed securities		246,650		244,658		—		—
Total investment securities	$	300,028	$	295,686	$	250	$	250

At March 31, 2017, the Company had $12.9 million amortized cost and $12.9 million estimated fair value of investment securities pledged to secure public deposits. As of March 31, 2017, the Company had $63.7 million amortized cost and $63.5 million estimated fair value of investment securities pledged as collateral on secured borrowings.