NOTE 2. SECURITIES

Year-end securities consisted of the following:

	December 31, 2016
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available for sale:
U.S. government agencies	$	8,247	$	33	$	319	$	7,961
Mortgage-backed securities		2,844		16		68		2,792
Total securities available for sale	$	11,091	$	49	$	387	$	10,753

Securities held to maturity:
Property assessed clean energy	$	9,668	$	-	$	-	$	9,668

Securities, restricted:
Other	$	1,054	$	-	$	-	$	1,054

	December 31, 2015
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available for sale:
U.S. government agencies	$	9,155	$	70	$	63	$	9,162
Mortgage-backed securities		3,284		30		24		3,290
Total securities available for sale	$	12,439	$	100	$	87	$	12,452

Securities, restricted:
Other	$	1,046	$	-	$	-	$	1,046

All mortgage-backed securities included in the above table were issued by U.S. government agencies, or by U.S. government-sponsored agencies. Securities, restricted consists of FRB and FHLB stock which are carried at cost.

Securities with a fair value of $787,000 and $982,000 at December 31, 2016 and 2015, respectively, were pledged against trust deposit balances held at the Company’s insured depository subsidiary, T Bank, N.A. (the “Bank”). Securities with a fair value of $567,000 and $699,000 at December 31, 2016 and 2015, respectively, were pledged to the FRB. Securities with a fair value of $9.4 million and $10.8 million at December 31, 2016 and 2015, respectively, were pledged to secure borrowings at the FHLB.

The Bank held Federal Reserve Bank of Dallas stock in the amount of $570,000 at December 31, 2016 and December 31, 2015. The Bank also held Federal Home Loan Bank of Dallas stock in the amount of $484,000 and $476,000 at December 31, 2016 and December 31, 2015, respectively.

Certain investments in debt securities are reported in the financial statement at an amount less than their historical cost. The table below indicates the length of time individual investment securities have been in a continuous loss position as of December 31, 2016 and 2015:

	December 31, 2016
	Less than 12 months				12 months or longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	5,601	$	310	$	363	$	9	$	5,964	$	319
Mortgage-backed securities		2,175		68		-		-		2,175		68
Total	$	7,776	$	378	$	363	$	9	$	8,139	$	387

	December 31, 2015
	Less than 12 months				12 months or longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	5,005	$	32	$	970	$	31	$	5,975	$	63
Mortgage-backed securities		1,981		24		-		-		1,981		24
Total	$	6,986	$	56	$	970	$	31	$	7,956	$	87

The number of investment positions in this unrealized loss position totaled nine at December 31, 2016. The Company does not believe these unrealized losses are “other than temporary” as (i) it does not have the intent to sell the securities prior to recovery and/or maturity and, (ii) it is more likely than not that the Company will not have to sell the securities prior to recovery and/or maturity. In making this determination, the Company also considers the length of time and extent to which fair value has been less than cost and the financial condition of the issuer. The unrealized losses noted are primarily interest rate related due to the level of interest rates at December 31, 2016 compared to the time of purchase. The Company has reviewed the ratings of the issuers and has not identified any issues related to the ultimate repayment of principal as a result of credit concerns on these securities. The Company’s mortgage related securities are backed by GNMA and FNMA or are collateralized by securities backed by these agencies.

As of December 31, 2016, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of amortized cost. Any unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of December 31, 2016, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in the Company’s consolidated statements of income.

Sale of securities available-for-sale were as follows:

(In thousands)	2016		2015
Proceeds from sales	$	-	$	190,000

Gross realized losses		-		(1	)

The amortized cost and estimated fair value of securities at December 31, 2016 are presented below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage backed securities are shown separately since they are not due at a single maturity date.

	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due after one year through five years	$	1,019	$	1,015	$	370	$	370
Due after five years through ten years		6,686		6,379		4,522		4,522
Due after ten years		542		567		4,776		4,776
Mortgage-backed securities		2,844		2,792		-		-
Total	$	11,091	$	10,753	$	9,668	$	9,668

T Bancshares, Inc. 10-K