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SECURITIES
9 Months Ended
Sep. 30, 2016
Securities [Abstract]  
SECURITIES
NOTE 2. SECURITIES

Information related to the fair value and amortized cost of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is provided in the tables below.

 
 
 
Gross
 
Gross
 
 
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
(dollars in thousands)
Cost
 
Gain
 
Losses
 
Value
September 30, 2016
 
 
 
 
 
 
 
  U.S. Treasury securities
 $989
 
 $50
 
 $0
 
 $1,039
  U.S. government sponsored agencies
6,586
 
108
 
0
 
6,694
  Agency residential mortgage-backed securities
345,135
 
10,026
 
(199)
 
354,962
  State and municipal securities
135,028
 
4,755
 
(255)
 
139,528
    Total
 $487,738
 
 $14,939
 
 $(454)
 
 $502,223
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
  U.S. Treasury securities
 $988
 
 $15
 
 $0
 
 $1,003
  U.S. government sponsored agencies
7,178
 
19
 
(77)
 
7,120
  Agency residential mortgage-backed securities
357,984
 
5,087
 
(2,399)
 
360,672
  State and municipal securities
105,753
 
3,773
 
(250)
 
109,276
    Total
 $471,903
 
 $8,894
 
 $(2,726)
 
 $478,071

Information regarding the fair value and amortized cost of available for sale debt securities by maturity as of September 30, 2016 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty. 
 
Amortized
 
Fair
(dollars in thousands)
Cost
 
Value
Due in one year or less
 $3,160
 
 $3,194
Due after one year through five years
20,518
 
21,235
Due after five years through ten years
47,890
 
50,469
Due after ten years
71,035
 
72,363
 
142,603
 
147,261
Mortgage-backed securities
345,135
 
354,962
  Total debt securities
 $487,738
 
 $502,223

Securities proceeds, gross gains and gross losses are presented below.
 
 
Nine months ended September 30,
(dollars in thousands)
2016
 
2015
Sales of securities available for sale
 
 
 
  Proceeds
 $6,929
 
 $7,787
  Gross gains
65
 
42
  Gross losses
13
 
0


The Company sold four securities with a total book value of $6.9 million and a total fair value of $7.0 million during the first nine months of 2016.  The Company sold two securities with a total book value of $7.7 million and a total fair value of $7.8 million during the first nine months of 2015.

Purchase premiums or discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

Securities with carrying values of $182.5 million and $122.7 million were pledged as of September 30, 2016 and December 31, 2015, respectively, as collateral for securities sold under agreements to repurchase, borrowings from the Federal Home Loan Bank and for other purposes as permitted or required by law.

Information regarding securities with unrealized losses as of September 30, 2016 and December 31, 2015 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.

 
Less than 12 months
 
12 months or more
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
(dollars in thousands)
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Agency residential mortgage-backed
 
 
 
 
 
 
 
 
 
 
 
  securities
 $12,252
 
 $(31)
 
 $7,532
 
 $(168)
 
 $19,784
 
 $(199)
State and municipal securities
17,270
 
(153)
 
2,409
 
(102)
 
19,679
 
(255)
  Total temporarily impaired
 $29,522
 
 $(184)
 
 $9,941
 
 $(270)
 
 $39,463
 
 $(454)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
U.S. government sponsored agencies
 $0
 
 $0
 
 $3,895
 
 $(77)
 
 $3,895
 
 $(77)
Agency residential mortgage-backed
 
 
 
 
 
 
 
 
 
 
 
  securities
151,792
 
(1,521)
 
30,116
 
(878)
 
181,908
 
(2,399)
State and municipal securities
11,364
 
(78)
 
8,326
 
(172)
 
19,690
 
(250)
  Total temporarily impaired
 $163,156
 
 $(1,599)
 
 $42,337
 
 $(1,127)
 
 $205,493
 
 $(2,726)
 
The total number of securities with unrealized losses as of September 30, 2016 and December 31, 2015 is presented below.
 
 
Less than
 
12 months
 
 
 
12 months
 
or more
 
Total
September 30, 2016
 
 
 
 
 
Agency residential mortgage-backed securities
5
 
3
 
8
State and municipal securities
22
 
4
 
26
  Total temporarily impaired
27
 
7
 
34
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
U.S. government sponsored agencies
0
 
1
 
1
Agency residential mortgage-backed securities
46
 
9
 
55
State and municipal securities
21
 
12
 
33
  Total temporarily impaired
67
 
22
 
89

The following factors are considered in determining whether or not the impairment of these securities is other-than-temporary. In making this determination, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer, as well as the underlying fundamentals of the relevant market and the outlook for such market in the near future.  Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings. As of September 30, 2016 and December 31, 2015, ninety-nine percent of the securities in the Company's portfolio are backed by the U.S. government, government agencies, government sponsored agencies or are A-rated or better, except for certain non-local or local municipal securities, which are not rated. For the government, government-sponsored agency and municipal securities, management did not believe that there would be credit losses or that full principal would not be received. Management considered the unrealized losses on these securities to be primarily interest rate driven and does not expect material losses given current market conditions unless the securities are sold. However, at this time management does not have the intent to sell, and it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost basis.