Annual report pursuant to Section 13 and 15(d)

INVESTMENT SECURITIES

v3.3.1.900
INVESTMENT SECURITIES
12 Months Ended
Dec. 31, 2015
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 at December 31 were as follows:

 

    2015     2014  
    Amortized     Unrealized     Unrealized     Market     Amortized     Unrealized     Unrealized     Market  
    Cost     Gains     Losses     Value     Cost     Gain     Losses     Value  
Available for Sale                                                                
U.S. Government Treasury   $ 250,458     $ 101     $ 213     $ 250,346     $ 185,830     $ 220     $ 19     $ 186,031  
U.S. Government Agency     101,730       357       263       101,824       95,950       289       142       96,097  
States and Political
Subdivisions
    88,358       103       99       88,362       48,405       65       82       48,388  
Mortgage-Backed Securities     1,742       159       —       1,901       2,094       193       —       2,287  
Equity Securities(1)     8,595       —       —       8,595       8,745       —       —       8,745  
Total   $ 450,883     $ 720     $ 575     $ 451,028     $ 341,024     $ 767     $ 243     $ 341,548  
                                                                 
Held to Maturity                                                                
U.S. Government Treasury   $ 134,554     $ 45     $ 160     $ 134,439     $ 76,179     $ 144     $ 6     $ 76,317  
U.S. Government Agency     10,043       7       5       10,045       19,807       29       19       19,817  
States and Political
Subdivisions
    15,693       38       7       15,724       26,717       36       6       26,747  
Mortgage-Backed Securities     27,602       4       407       27,199       40,878       33       380       40,531  
Total   $ 187,892     $ 94     $ 579     $ 187,407     $ 163,581     $ 242     $ 411     $ 163,412  
                                                                 
Total Investment Securities   $ 638,775     $ 814     $ 1,154     $ 638,435     $ 504,605     $ 1,009     $ 654     $ 504,960  

 

  (1) Includes Federal Home Loan Bank, Federal Reserve Bank and FNBB Inc. stock recorded at cost of $3.6 million and $4.8 and $0.2 million, respectively, at December 31, 2015 and Federal Home Loan Bank and Federal Reserve Bank stock at $3.9 million and $4.8 million, respectively, at December 31, 2014.

 

During the third quarter of 2013, the Company transferred certain securities from available for sale to held to maturity. Transfers of securities into the held to maturity categories from available for sale are made at fair value on the date of the transfer. The securities had an aggregate fair value of $63.0 million with an aggregate net unrealized loss of $523,000 on the date of the transfer. The net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive income in the accompanying balance sheet as of December 31, 2015 totaled $352,000. This amount will be amortized out of accumulated other comprehensive income over the remaining life of the underlying securities as an adjustment of the yield on those securities.

 

Securities with an amortized cost of $370.1 million and $337.9 million at December 31, 2015 and December 31, 2014, 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 other 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.

 

Investment Sales. The total proceeds from the sale of investment securities and the gross realized gains and losses from the sale of such securities for each of the last three years are as follows:

 

(Dollars in Thousands)     Year     Total
Proceeds
    Gross
Realized Gains
    Gross
Realized Losses
 
      2015     $ —     $ —     $ —  
      2014       —       —       —  
      2013     $ 7,506     $ 3     $ —  

Maturity Distribution. As of December 31, 2015, 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 since 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   $ 90,331     $ 90,261     $ 44,267     $ 44,270  
Due after one through five years     280,264       280,116       116,023       115,938  
Mortgage-Backed Securities     1,742       1,901       27,602       27,199  
U.S. Government Agency     69,951       70,155       —       —  
Equity Securities     8,595       8,595       —       —  
Total   $ 450,883     $ 451,028     $ 187,892     $ 187,407  

 

Other Than Temporarily Impaired Securities. The following table summarizes the investment securities with unrealized losses at December 31, aggregated by major security type and length of time in a continuous unrealized loss position:

 

    Less Than
12 Months
    Greater Than
12 Months
    Total  
(Dollars in Thousands)   Market
Value
    Unrealized
Losses
    Market
Value
    Unrealized
Losses
    Market
Value
    Unrealized
Losses
 
2015                                                
Available for Sale                                                
U.S. Government Treasury   $ 150,061     $ 213     $ —     $ —     $ 150,061     $ 213  
U.S. Government Agency     43,508       200       9,644       63       53,152       263  
States and Political Subdivisions     39,608       86       5,066       13       44,674       99  
Total     233,177       499       14,710       76       247,887       575  
                                                 
Held to Maturity                                                
U.S. Government Treasury     92,339       160       —       —       92,339       160  
U.S. Government Agency     5,006       5       —       —       5,006       5  
States and Political Subdivisions     3,791       7       —       —       3,791       7  
Mortgage-Backed Securities     13,267       185       11,889       222       25,156       407  
Total   $ 114,403     $ 357     $ 11,889     $ 222     $ 126,292     $ 579  
                                                 
2014                                                
Available for Sale                                                
U.S. Government Treasury   $ 35,838     $ 19     $ —     $ —     $ 35,838     $ 19  
U.S. Government Agency     18,160       54       18,468       88       36,628       142  
States and Political Subdivisions     16,497       77       505       5       17,002       82  
Total     70,495       150       18,973       93       89,468       243  
                                                 
Held to Maturity                                                
U.S. Government Treasury     15,046       6       —       —       15,046       6  
U.S. Government Agency     10,002       19       —       —       10,002       19  
States and Political Subdivisions     3,788       6       —       —       3,788       6  
Mortgage-Backed Securities     15,066       149       18,155       231       33,221       380  
Total   $ 43,902     $ 180     $ 18,155     $ 231     $ 62,057     $ 411  

 

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 held-to-maturity and available-for-sale 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 December 31, 2015, there were 295 positions (combined AFS and HTM) with unrealized losses totaling $1.2 million. Of the 295 positions, 134 were Ginnie Mae mortgage-backed securities (GNMA), U.S. Treasuries, or SBA securities, all of which carry the full faith and credit guarantee of the U.S. Government. Of these 134 positions, there were 22 GNMA positions and 22 SBA positions in an unrealized loss position for longer than 12 months. There were 141 municipal bonds in an unrealized loss position that were pre-refunded, or rated “AA-“or better. Fourteen of these positions were in an unrealized loss position for longer than 12 months. The remaining 20 securities were government agency bonds, which have been in an unrealized loss position for less than 12 months. All of these debt securities are in a loss position because they were acquired when the general level of interest rates was lower than that on December 31, 2015. The Company believes that the unrealized losses in these debt securities are temporary in nature and that the full principal will be collected as anticipated. Because the declines in the market value of these investments 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 December 31, 2015.