3. INVESTMENT SECURITIES

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

Investment securities available for sale:

AT DECEMBER 31, 2015

COST
BASIS

GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
LOSSES

FAIR
VALUE

(IN THOUSANDS)

U.S. Agency

2,900

—

(19

)

2,881

Corporate bonds

18,541

(307

)

18,252

U.S. Agency mortgage-backed securities

96,801

1,975

(442

)

98,334

Total

118,242

1,993

(768

)

119,467

Investment securities held to maturity:

AT DECEMBER 31, 2015

COST
BASIS

GROSS
UNREALIZED
GAINS

GROSS
UNREALIZED
LOSSES

FAIR
VALUE

(IN THOUSANDS)

U.S. Agency mortgage-backed securities

10,827

247

(53

)

11,021

Taxable municipal

5,592

(65

)

5,594

Corporate bonds and other securities

5,000

(85

)

4,918

Total

21,419

317

(203

)

21,533

Investment securities available for sale:


	AT DECEMBER 31, 2014
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency	$	5,931	$	21	$	(46	)	$	5,906
Corporate bonds		15,497		61		(122	)		15,436
U.S. Agency mortgage-backed securities		102,888		3,197		(317	)		105,768
Total	$	124,316	$	3,279	$	(485	)	$	127,110

Investment securities held to maturity:


	AT DECEMBER 31, 2014
	COST BASIS		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES			FAIR VALUE
	(IN THOUSANDS)
U.S. Agency mortgage-backed securities	$	12,481	$	395	$	(50	)	$	12,826
Taxable municipal		3,364		74		(24	)		3,414
Corporate bonds and other securities		3,995		6		(28	)		3,973
Total	$	19,840	$	475	$	(102	)	$	20,213

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investors Service or Standard & Poor’s rating of A. At December 31, 2015, 79.1% of the portfolio was rated AAA as compared to 84.1% at December 31, 2014. 5.7% of the portfolio was rated below A or unrated on December 31, 2015. The Company and its subsidiaries, collectively, did not hold securities of any single issuer, excluding U.S. Treasury and U.S. Agencies, that exceeded 10% of shareholders’ equity at December 31, 2015.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits, and certain Federal Home Loan Bank borrowings was $87,096,000 at December 31, 2015 and $104,780,000 at December 31, 2014.

The Company realized $107,000 of gross investment security gains and $36,000 of gross investment security losses in 2015 and $182,000 of gross investment security gains and $5,000 of investment security losses in 2014, and $289,000 of gross investment gains and $85,000 of gross investment security losses in 2013. On a net basis, the realized gain for 2015 was $47,000 after factoring in tax expense of $24,000 and the realized gain for 2014 was $117,000 after factoring in tax expense of $60,000, and the realized gain for 2013 was $135,000 after factoring in tax expense of $69,000. Proceeds from sales of investment securities available for sale were $3.6 million for 2015, $5.2 million for 2014, and $11.2 million during 2013.

The following table sets forth the contractual maturity distribution of the investment securities, cost basis and fair market values, and the weighted average yield for each type and range of maturity as of December 31, 2015. Yields are not presented on a tax-equivalent basis, but are based upon the cost basis and are weighted for the scheduled maturity. The Company’s consolidated investment securities portfolio had an effective duration of approximately 2.85 years. The weighted average expected maturity for available for sale securities at December 31, 2015 for U.S. Agency, U.S. Agency Mortgage-Backed and Corporate Bond securities was 2.34, 4.43 and 4.47 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2015 for U.S. Agency Mortgage-Backed and Corporate Bonds/Taxable Municipals and other securities were 5.33 and 6.02 years.

Investment securities available for sale:

AT DECEMBER 31, 2015

U.S. AGENCY

U.S. AGENCY MORTGAGE-BACKED SECURITIES

CORPORATE BONDS

TOTAL INVESTMENT SECURITIES AVAILABLE
FOR SALE

(IN THOUSANDS, EXCEPT YIELDS)

COST BASIS

Within 1 year

—

—%

—

—%

1,000

2.31

1,000

2.31

After 1 year but within 5 years

2,400

1.27

1,206

4.39

8,000

1.82

11,606

1.98

After 5 years but within 10 years

500

1.97

16,807

3.01

9,541

2.64

26,848

2.86

After 10 years but within 15 years

—

41,448

2.45

—

41,448

2.45

Over 15 years

—

37,340

2.37

—

37,340

2.37

Total

2,900

1.39

96,801

2.54

18,541

2.27

118,242

2.47

FAIR VALUE

Within 1 year

—

999

After 1 year but within 5 years

2,385

1,253

7,977

11,615

After 5 years but within 10 years

496

17,351

9,276

27,123

After 10 years but within 15 years

—

41,834

—

41,834

Over 15 years

—

37,896

—

37,896

Total

2,881

98,334

18,252

119,467

Investment securities held to maturity:

AT DECEMBER 31, 2015

U.S. AGENCY
MORTGAGE-BACKED
SECURITIES

CORPORATE BONDS
AND OTHER

TOTAL INVESTMENT
SECURITIES HELD TO
MATURITY

(IN THOUSANDS, EXCEPT YIELDS)

COST BASIS

Within 1 year

—

—%

1,000

1.67

1,000

1.67

After 1 year but within 5 years

—

2,000

1.78

2,000

1.78

After 5 years but within 10 years

2,898

2.40

4,719

4.05

7,617

3.42

After 10 years but within 15 years

—

2,115

3.85

2,115

3.85

Over 15 years

7,929

3.30

758

4.97

8,687

3.45

Total

10,827

3.06

10,592

3.42

21,419

3.24

FAIR VALUE

Within 1 year

—

995

After 1 year but within 5 years

—

1,930

After 5 years but within 10 years

2,857

4,710

7,567

After 10 years but within 15 years

—

2,081

Over 15 years

8,164

796

8,960

Total

11,021

10,512

21,533

The following tables present information concerning investments with unrealized losses as of December 31, 2015 (in thousands):

Total investment securities:

LESS THAN 12 MONTHS

12 MONTHS OR LONGER

TOTAL

FAIR
VALUE

UNREALIZED
LOSSES

FAIR
VALUE

UNREALIZED
LOSSES

FAIR
VALUE

UNREALIZED
LOSSES

U.S. Agency

1,486

(14

)

395

(5)

1,881

(19

)

U.S. Agency mortgage-backed securities

33,359

(245

)

9,088

(250

)

42,447

(495

)

Taxable municipal

3,617

(65

)

—

3,617

(65

)

Corporate bonds and other securities

8,884

(160

)

7,766

(232

)

16,650

(392

)

Total

47,346

(484

)

17,249

(487

)

64,595

(971

)

The following tables present information concerning investments with unrealized losses as of December 31, 2014 (in thousands):


Total investment securities:	LESS THAN 12 MONTHS					12 MONTHS OR LONGER					TOTAL
Total investment securities:	FAIR VALUE		UNREALIZED LOSSES			FAIR VALUE		UNREALIZED LOSSES			FAIR VALUE		UNREALIZED LOSSES
U.S. Agency	$	996	$	(4	)	$	2,858	$	(42	)	$	3,854	$	(46	)
U.S. Agency mortgage-backed securities		2,826		(13	)		20,408		(354	)		23,234		(367	)
Taxable municipal		150		(1	)		988		(23	)		1,138		(24	)
Corporate bonds and other securities		2,960		(43	)		8,891		(107	)		11,851		(150	)
Total	$	6,932	$	(61	)	$	33,145	$	(526	)	$	40,077	$	(587	)

The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are 64 positions that are considered temporarily impaired at December 31, 2015. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.