Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT SECURITIES

v3.19.3
INVESTMENT SECURITIES
9 Months Ended
Sep. 30, 2019
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, 2019 December 31, 2018
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gain Losses Value
Available for Sale
U.S. Government Treasury $ 216,707 $ 858 $ 300 $ 217,265 $ 264,298 $ 167 $ 2,616 $ 261,849
U.S. Government Agency 137,798 572 332 138,038 133,201 520 515 133,206
States and Political Subdivisions 13,041 6 3 13,044 42,509 - 144 42,365
Mortgage-Backed Securities 708 79 - 787 903 40 - 943
Equity Securities(1) 7,847 - - 7,847 7,794 - - 7,794
Total $ 376,101 $ 1,515 $ 635 $ 376,981 $ 448,705 $ 727 $ 3,275 $ 446,157
Held to Maturity
U.S. Government Treasury $ 25,050 $ 10 $ 46 $ 25,014 $ 35,088 $ - $ 477 $ 34,611
States and Political Subdivisions 3,356 - 1 3,355 6,512 - 26 6,486
Mortgage-Backed Securities 211,897 1,856 235 213,518 175,720 220 2,624 173,316
Total $ 240,303 $ 1,866 $ 282 $ 241,887 $ 217,320 $ 220 $ 3,127 $ 214,413
Total Investment Securities $ 616,404 $ 3,381 $ 917 $ 618,868 $ 666,025 $ 947 $ 6,402 $ 660,570

(1) Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded at cost of $3.1 million, $4.8 million, respectively, at September 30, 2019 and includes Federal Home Loan Bank and Federal Reserve Bank stock recorded at cost of $3.0 million and $4.8 million, respectively, at December 31, 2018.

Securities with an amortized cost of $262.8 million and $319.6 million at September 30, 2019 and December 31, 2018, 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, 2019, 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 $ 141,609   $ 141,370   $ 13,354   $ 13,331
Due after one year through five years   90,139     90,937     15,052     15,038
Mortgage-Backed Securities 708 787 211,897 213,518
U.S. Government Agency   135,798     136,040     -     -
Equity Securities   7,847     7,847     -     -
Total $ 376,101   $ 376,981   $ 240,303   $ 241,887

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, 2019
Available for Sale
U.S. Government Treasury $ 4,973   $ 8   $ 128,152   $ 292   $ 133,125   $ 300
U.S. Government Agency 29,698 179 28,524 153 58,222 332
States and Political Subdivisions 5,428   3   -   -   5,428   3
Total 40,099   190   156,676   445   196,775   635
Held to Maturity
U.S. Government Treasury   -   -   19,996   46   19,996     46
States and Political Subdivisions 1,794 1 500 - 2,294 1
Mortgage-Backed Securities   29,466     78     16,318     157     45,784     235
Total $ 31,260   $ 79   $ 36,814   $ 203   $ 68,074   $ 282
December 31, 2018
Available for Sale 
U.S. Government Treasury $ 28,420   $ 80   $ 193,501   $ 2,536   $ 221,921   $ 2,616
U.S. Government Agency 53,237 271 28,735 244 81,972 515
States and Political Subdivisions   8,243     12     31,417     132     39,660     144
Mortgage-Backed Securities 10 - - - 10 -
Total 89,910   363   253,653   2,912   343,563   3,275
Held to Maturity
U.S. Government Treasury   -     -     34,612     477     34,612     477
States and Political Subdivisions 204 - 6,281 26 6,485 26
Mortgage-Backed Securities 51,327 389 84,705 2,235 136,032 2,624
Total $ 51,531   $ 389   $ 125,598   $ 2,738   $ 177,129   $ 3,127

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, 2019, there were 242 positions (combined AFS and HTM) with unrealized losses totaling $0.9 million. 31 of these positions were U.S. government treasury securities guaranteed by the U.S. government. 187 of these positions were U.S. government agency and mortgage-backed securities issued by U.S. government sponsored entities. The remaining 24 positions were municipal securities. Because the declines in the market value of these securities were attributable to changes in interest rates and not credit quality, and because the Company had the ability and intent to hold these investments until there is a recovery in fair value, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2019.