Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT SECURITIES

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INVESTMENT SECURITIES
9 Months Ended
Sep. 30, 2018
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, 2018 December 31, 2017
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gain Losses Value
Available for Sale
U.S. Government Treasury $ 272,335 $ - $ 4,222 $ 268,113 $ 237,505 $ - $ 2,164 $ 235,341
U.S. Government Agency 153,087 625 621 153,091 144,324 727 407 144,644
States and Political Subdivisions 54,115 - 276 53,839 91,533 2 378 91,157
Mortgage-Backed Securities 922 50 - 972 1,102 83 - 1,185
Equity Securities(1) 8,228 - - 8,228 8,584 - - 8,584
Total $ 488,687 $ 675 $ 5,119 $ 484,243 $ 483,048 $ 812 $ 2,949 $ 480,911
Held to Maturity
U.S. Government Treasury $ 35,103 $ - $ 702 $ 34,401 $ 98,256 $ - $ 441 $ 97,815
States and Political Subdivisions 6,566 - 45 6,521 6,996 - 41 6,955
Mortgage-Backed Securities 186,254 207 3,852 182,609 111,427 22 1,212 110,237
Total $ 227,923 $ 207 $ 4,599 $ 223,531 $ 216,679 $ 22 $ 1,694 $ 215,007
Total Investment Securities $ 716,610 $ 882 $ 9,718 $ 707,774 $ 699,727 $ 834 $ 4,643 $ 695,918

(1) Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded at cost of $3.4 million, $4.8 million, respectively, at September 30, 2018 and includes Federal Home Loan Bank, Federal Reserve Bank and FNBB Inc. stock recorded at cost of $3.1 million, $4.8 million, and $0.8 million, respectively, at December 31, 2017.

Securities with an amortized cost of $234.5 million and $328.1 million at September 30, 2018 and December 31, 2017, 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, 2018, 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 $ 120,134   $ 119,269   $ 13,099   $ 12,963
Due after one year through five years   232,224     228,353     28,570     27,959
Mortgage-Backed Securities 922 972 186,254 182,609
U.S. Government Agency   127,179     127,421     -     -
Equity Securities   8,228     8,228     -     -
Total $ 488,687   $ 484,243   $ 227,923   $ 223,531

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, 2018
Available for Sale
U.S. Government Treasury $ 92,259   $ 1,005   $ 175,854   $ 3,217   $ 268,113   $ 4,222
U.S. Government Agency 63,475 351 29,223 270 92,698 621
States and Political Subdivisions 34,928   164   14,831   112   49,759   276
Mortgage-Backed Securities   10     -     2     -     12     -
Total 190,672   1,520   219,910   3,599   410,582   5,119
Held to Maturity
U.S. Government Treasury   4,900   112   29,501   590   34,401     702
States and Political Subdivisions 6,026 38 495 7 6,521 45
Mortgage-Backed Securities   90,516     1,498     55,089     2,354     145,605     3,852
Total $ 101,442   $ 1,648   $ 85,085   $ 2,951   $ 186,527   $ 4,599
December 31, 2017
Available for Sale 
U.S. Government Treasury $ 155,443   $ 963   $ 79,900   $ 1,201   $ 235,343   $ 2,164
U.S. Government Agency 45,737 150 25,757 257 71,494 407
States and Political Subdivisions   82,999     320     5,549     58     88,548     378
Mortgage-Backed Securities 2 - - - 2 -
Total 284,181   1,433   111,206   1,516   395,387   2,949
Held to Maturity
U.S. Government Treasury   77,861     298     14,939     143     92,800     441
States and Political Subdivisions 6,955 41 - - 6,955 41
Mortgage-Backed Securities 56,030 469 30,216 743 86,246 1,212
Total $ 140,846   $ 808   $ 45,155   $ 886   $ 186,001   $ 1,694

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, 2018, there were 541 positions (combined AFS and HTM) with unrealized losses totaling $9.7 million, of which 63 of these positions were U.S. government treasury securities guaranteed by the U.S. government and 309 of these positions were U.S. government agency and mortgage-backed securities issued by U.S. government sponsored entities, with the remaining 169 positions being municipal securities. 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, 2018.