(5) Investment Securities

The amortized cost and fair values of investment securities are as follows:


	Amortized		Gross Unrealized				Estimated
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
June 30, 2016:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	454,999	$	18,313	$	(246)	$	473,066
Trust preferred securities		992		—		—		992
Total	$	455,991	$	18,313	$	(246)	$	474,058

December 31, 2015:
Held to maturity:
U.S. government-sponsored mortgage-backed securities	$	492,143	$	11,092	$	(6,169)	$	497,066
Trust preferred securities		916		—		—		916
Total	$	493,059	$	11,092	$	(6,169)	$	497,982

The amortized cost and estimated fair value of investment securities at June 30, 2016 are shown below. Incorporated in the maturity schedule are mortgage-backed and trust preferred securities, which are allocated using the contractual maturity as a basis. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized		Estimated
(Dollars in thousands)	Cost		Fair Value
Held to maturity:
Due within 5 years	$	30	$	31
Due after 5 years through 10 years		—		—
Due after 10 years		455,961		474,027
Total	$	455,991	$	474,058

Realized gains and losses and the proceeds from sales of securities held to maturity and trading are shown in the table below. All sales of securities were U.S. government-sponsored mortgage-backed securities.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2016		2015		2016		2015
Proceeds from sales	$	3,122	$	2,503	$	3,122	$	5,083
Gross gains		190		240		190		476
Gross losses		—		—		—		—

During the three months ended June 30, 2016 and 2015, the Company received proceeds of $3.1 million and $2.4 million, respectively, from the sale of $2.9 million and $2.3 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $190,000 and $179,000, respectively. During the six months ended June 30, 2016 and 2015, the Company received proceeds of $3.1 million and $5.0 million, respectively, from the sale of $2.9 million and $4.6 million, respectively, of held-to-maturity mortgage-backed securities, resulting in gross realized gains of $190,000 and $415,000, respectively. The sale of these mortgage-backed securities, for which the Company had already collected a substantial portion of the outstanding purchased principal (at least 85%), is in accordance with the Investments – Debt and Equity Securities topic of the FASB ASC and does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.

During the three months ended June 30, 2015, the Company received proceeds of $61,000 from the sale of one of the trust preferred securities the Company owned, PreTSL XXIV. The Company previously wrote off the entire book value of this security when it incurred an other-than-temporary impairment charge in prior years. The trust preferred security sold was classified in the held-to-maturity portfolio. Since the credit rating of this security was downgraded, in accordance with the Investments – Debt and Equity Securities topic of the FASB ASC, the sale of this security does not taint management’s assertion of intent to hold remaining securities in the held-to-maturity portfolio to maturity.

Investment securities with amortized costs of $235.2 million and $241.4 million at June 30, 2016 and December 31, 2015, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and transaction clearing accounts.

Provided below is a summary of investment securities which were in an unrealized loss position at June 30, 2016 and December 31, 2015. The Company does not intend to sell these securities until such time as the value recovers or the securities mature and it is not more likely than not that the Company will be required to sell the securities prior to recovery of value or the securities mature.


	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized		Number of			Unrealized
Description of securities	Fair Value		Losses		Fair Value		Losses		Securities	Fair Value		Losses
(Dollars in thousands)
June 30, 2016
Mortgage-backed securities	$	1,421	$	1	$	33,499	$	245	13	$	34,920	$	246
December 31, 2015
Mortgage-backed securities	$	142,810	$	3,939	$	53,142	$	2,230	43	$	195,952	$	6,169

Mortgage-Backed Securities. The unrealized losses on the Company’s investment in mortgage-backed securities were caused by increases in market interest rates subsequent to purchase. All of the mortgage-backed securities are guaranteed by Freddie Mac or Fannie Mae, which are U.S. government-sponsored enterprises, or Ginnie Mae, which is a U.S. government agency. Since the decline in market value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell these investments until maturity and it is not more likely than not that the Company will be required to sell such investments prior to recovery of its cost basis, the Company does not consider these investments to be other-than-temporarily impaired as of June 30, 2016 and December 31, 2015.

Trust Preferred Securities. At June 30, 2016, the Company owned one trust preferred security, PreTSL XXIII. The trust preferred security represents an investment in a pool of debt obligations issued primarily by holding companies for Federal Deposit Insurance Corporation-insured financial institutions. This security is classified in the Company’s held-to-maturity investment portfolio.

The trust preferred securities market is considered to be inactive as only six transactions have occurred over the past 54 months in the same tranche of securities that we own and no new issues of pooled trust preferred securities have occurred since 2007. We used a discounted cash flow model to determine whether this security is other-than-temporarily impaired. The assumptions used in preparing the discounted cash flow model include the following: estimated discount rates, estimated deferral and default rates on collateral, and estimated cash flows.

Based on the Company’s review, the Company’s investment in PreTSL XXIII did not incur additional impairment during the six months ended June 30, 2016.

PreTSL XXIII has an amortized cost of $992,000 at June 30, 2016. The difference between the amortized cost of $992,000 and the remaining cost basis of $1.1 million is reported as accumulated other comprehensive loss and is related to noncredit factors.

It is reasonably possible that the fair value of the trust preferred security could decline in the near term if the overall economy and the financial condition of some of the issuers deteriorate further and the liquidity of this security remains low. As a result, there is a risk that the Company’s remaining cost basis of $1.1 million on the trust preferred security could be credit-related other-than-temporarily impaired in the near term. The impairment, if any, could be material to the Company’s consolidated statements of income.

The table below provides a cumulative roll forward of credit losses recognized in earnings for debt securities held and not intended to be sold:


(Dollars in thousands)	2016		2015
Balance at January 1,	$	2,403	$	5,885
Credit losses on debt securities for which other-than-temporary impairment was not previously recognized		—		—
Credit losses on debt securities which were sold		—		(3,482)
Balance at June 30,	$	2,403	$	2,403

The table below shows the components of accumulated other comprehensive loss, net of taxes, resulting from other-than-temporarily impaired securities:


	June 30,
(Dollars in thousands)	2016		2015
Noncredit losses on other-than-temporarily impaired securities, net of taxes	$	101	$	176