Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT SECURITIES

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INVESTMENT SECURITIES
9 Months Ended
Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
INVESTMENT SECURITIES
NOTE 2 – INVESTMENT SECURITIES
Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale and
held-to-maturity were as follows:
September 30, 2017 December 31, 2016
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gain Losses Value
Available for Sale
U.S. Government Treasury $ 257,635 $ 32 $ 869 $ 256,798 $ 286,867 $ 262 $ 851 $ 286,278
U.S. Government Agency 147,550 729 290 147,989 131,489 495 344 131,640
States and Political Subdivisions 95,869 175 54 95,990 95,197 23 381 94,839
Mortgage-Backed Securities 1,218 114 - 1,332 1,312 118 - 1,430
Equity Securities(1) 8,737 - - 8,737 8,547 - - 8,547
Total $ 511,009 $ 1,050 $ 1,213 $ 510,846 $ 523,412 $ 898 $ 1,576 $ 522,734
Held to Maturity
U.S. Government Treasury $ 93,309 $ 2 $ 183 $ 93,128 $ 119,131 $ 107 $ 81 $ 119,157
States and Political Subdivisions 7,051 31 2 7,080 8,175 1 38 8,138
Mortgage-Backed Securities 83,902 55 642 83,315 50,059 29 637 49,451
Total $ 184,262 $ 88 $ 827 $ 183,523 $ 177,365 $ 137 $ 756 $ 176,746
Total Investment Securities $ 695,271 $ 1,138 $ 2,040 $ 694,369 $ 700,777 $ 1,035 $ 2,332 $ 699,480

(1) Includes Federal Home Loan Bank, Federal Reserve Bank, and FNBB, Inc. stock recorded at cost of $3.2 million, $4.8 million, and $0.8 million, respectively, at September 30, 2017 and $3.3 million, $4.8 million, and $0.5 million, respectively, at December 31, 2016.

Securities with an amortized cost of $214.3 million and $332.7 million at September 30, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes.

The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required to own capital stock in the FHLB based generally upon the balances of residential and commercial real estate loans, and FHLB advances.  FHLB stock which is included in equity securities is pledged to secure FHLB advances.  No ready market exists for this stock, and it has no quoted market value; however, redemption of this stock has historically been at par value.

As a member of the Federal Reserve Bank of Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta based on a specified ratio relative to the Bank’s capital. Federal Reserve Bank stock is carried at cost.

Maturity Distribution. At September 30, 2017, the Company's investment securities had the following maturity distribution based on contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. Mortgage-backed securities and certain amortizing U.S. government agency securities are shown separately because they are not due at a certain maturity date.

Available for Sale Held to Maturity
(Dollars in Thousands) Amortized Cost Market Value Amortized Cost Market Value
Due in one year or less $ 138,454   $ 138,421   $ 63,439   $ 63,370
Due after one through five years   253,590     252,720     36,922     36,838
Mortgage-Backed Securities 1,217 1,332 83,901 83,315
U.S. Government Agency   109,011     109,636     -     -
Equity Securities   8,737     8,737     -     -
Total $ 511,009   $ 510,846   $ 184,262   $ 183,523

Unrealized Losses on Investment Securities. The following table summarizes the investment securities with unrealized losses aggregated by major security type and length of time in a continuous unrealized loss position:

  Less Than Greater Than
12 Months 12 Months Total
Market Unrealized Market Unrealized Market Unrealized
(Dollars in Thousands) Value Losses Value Losses Value Losses
September 30, 2017
Available for Sale
U.S. Government Treasury $ 191,720   $ 759   $ 9,981   $ 110   $ 201,701   $ 869
U.S. Government Agency 34,775 126 17,853 164 52,628 290
States and Political Subdivisions 23,031   22   5,129   32   28,160   54
Total 249,526   907   32,963   306   282,489   1,213
Held to Maturity
U.S. Government Treasury   83,173   183   -   -   83,173     183
States and Political Subdivisions 504 2 - - 504 2
Mortgage-Backed Securities   47,159     579     4,373     63     51,532     642
Total $ 130,836   $ 764   $ 4,373   $ 63   $ 135,209   $ 827
December 31, 2016
Available for Sale 
U.S. Government Treasury $ 116,704   $ 851   $ -   $ -   $ 116,704   $ 851
U.S. Government Agency 48,520 310 6,699 34 55,219 344
States and Political Subdivisions   81,521     380     294     1     81,815     381
Mortgage-Backed Securities 3 - - - 3 -
Total 246,748   1,541   6,993   35   253,741   1,576
Held to Maturity
U.S. Government Treasury   35,210     81     -     -     35,210     81
States and Political Subdivisions 7,491 38 - - 7,491 38
Mortgage-Backed Securities 36,710 599 4,010 38 40,720 637
Total $ 79,411   $ 718   $ 4,010   $ 38   $ 83,421   $ 756

Management evaluates securities for other than temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Declines in the fair value of available-for-sale (“AFS”) and held-to-maturity (“HTM”)securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, the Company considers, (i) whether it has decided to sell the security, (ii) whether it is more likely than not that the Company will have to sell the security before its market value recovers, and (iii) whether the present value of expected cash flows is sufficient to recover the entire amortized cost basis. When assessing a security’s expected cash flows, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost and (ii) the financial condition and near-term prospects of the issuer. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by rating agencies have occurred, regulatory issues, and analysts’ reports.

At September 30, 2017, there were 266 positions (combined AFS and HTM) with unrealized losses totaling $2.0 million. 58 of these positions were U.S. government treasury securities guaranteed by the U.S. government. 103 of these positions were U.S. government agency and mortgage-backed securities issued by U.S. government sponsored entities. Because the declines in the market value of these securities are attributable to changes in interest rates and not credit quality and because the Company has the present ability and intent to hold these investments until there is a recovery in fair value, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2017.