SECURITIES

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

SECURITIES

NOTE D — SECURITIES

The amortized cost and fair value of securities available for sale and held for investment at September 30, 2016 and December 31, 2015 are summarized as follows:

	September 30, 2016
	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations
of U.S. Government Sponsored Entities	$	12,485	$	333	$	0	$	12,818
Mortgage-backed securities of U.S.
Government Sponsored Entities		165,802		3,268		(96)		168,974
Collateralized mortgage obligations of
U.S. Government Sponsored Entities		251,419		2,043		(979)		252,483
Private mortgage backed securities		32,720		0		(688)		32,032
Private collateralized mortgage obligations		73,371		617		(860)		73,128
Collateralized loan obligations		124,663		437		(676)		124,424
Obligations of state and political subdivisions		61,798		2,688		(52)		64,434
Corporate and other debt securities		75,552		1,125		(39)		76,638
Commercial mortgage backed securities		60,624		1,301		(243)		61,682
	$	858,434	$	11,812	$	(3,633)	$	866,613
SECURITIES HELD FOR INVESTMENT
Mortgage-backed securities of
U.S. Government Sponsored Entities	$	183,507	$	4,306	$	0	$	187,813
Collateralized mortgage obligations of
U.S. Government Sponsored Entities		160,377		1,618		(405)		161,590
Collateralized loan obligations		41,494		183		(465)		41,212
Private collateralized mortgage obligations		6,760		1		(112)		6,649
	$	392,138	$	6,108	$	(982)	$	397,264

	December 31, 2015
	Gross		Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations
of U.S. Government Sponsored Entities	$	3,833	$	78	$	0	$	3,911
Mortgage-backed securities of U.S.
Government Sponsored Entities		192,224		847		(1,322)		191,749
Collateralized mortgage obligations of
U.S. Government Sponsored Entities		242,620		470		(4,900)		238,190
Private mortgage backed securities		32,558		0		(766)		31,792
Private collateralized mortgage obligations		77,965		700		(708)		77,957
Collateralized loan obligations		124,477		0		(1,894)		122,583
Obligations of state and political subdivisions		39,119		882		(110)		39,891
Corporate and other debt securities		44,652		37		(416)		44,273
Commercial mortgage backed securities		41,127		13		(720)		40,420
	$	798,575	$	3,027	$	(10,836)	$	790,766
SECURITIES HELD FOR INVESTMENT
Mortgage-backed securities of
U.S. Government Sponsored Entities	$	64,993	$	574	$	(16)	$	65,551
Collateralized mortgage obligations of
U.S. Government Sponsored Entities		89,265		581		(406)		89,440
Collateralized loan obligations		41,300		0		(1,360)		39,940
Private collateralized mortgage obligations		7,967		0		(85)		7,882
	$	203,525	$	1,155	$	(1,867)	$	202,813

Proceeds from sales of securities during the nine month period ended September 30, 2016 were $39.4 million, with gross gains of $448,000 and gross losses of $87,000. Proceeds from sales of securities during the nine month period ended September 30, 2015 were $60.3 million, with gross gains of $632,000 and gross losses of $472,000.

In 2014, approximately $158.8 million of investment securities available for sale were transferred into held for investment. The unrealized holding losses at the date of transfer totaled $3.1 million. For the securities transferred into the held for investment category from available for sale, unrealized holding losses at the date of the transfer will continue to be reported in other comprehensive income, and will be amortized over the remaining life of these securities as an adjustment of yield in a manner consistent with the amortization of a discount. The amortization of unrealized holding losses reported in equity will offset the effect on interest income of the amortization of the discount. At September 30, 2016, the remaining unrealized holding losses totaled $1.9 million.

 

Securities at September 30, 2016 with a carrying and fair value of $161.0 were pledged as collateral for United States Treasury deposits, other public deposits and trust deposits. Securities with both a carrying value and fair value of $167.7 million were pledged as collateral for repurchase agreements.

The amortized cost and fair value of securities at September 30, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may occur, due to the right to call or repay obligations with or without call or prepayment penalties.

	Held for Investment				Available for Sale
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Due in less than one year	$	0	$	0	$	7,760	$	7,934
Due after one year through
five years		0		0		83,490		84,017
Due after five years
through ten years		41,494		41,212		139,005		140,811
Due after ten years		0		0		33,131		34,422
		41,494		41,212		263,386		267,184
Mortgage-backed
securities of U.S. Government
Sponsored Entities		183,507		187,813		165,802		168,974
Collateralized mortgage
obligations of U.S. Government
Sponsored Entities		160,377		161,590		251,419		252,483
Private mortgage backed securities		0		0		32,720		32,032
Private collateralized mortgage
obligations		6,760		6,649		73,371		73,128
Other debt securities		0		0		11,112		11,130
Commercial mortgage
backed securities		0		0		60,624		61,682
	$	392,138	$	397,264	$	858,434	$	866,613

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data where available. The tables below indicate the amount of securities with unrealized losses and period of time for which these losses were outstanding at September 30, 2016 and December 31, 2015, respectively.

	September 30, 2016
	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities of
U.S. Government Sponsored Entities	$	5,241	$	(9)	$	5,735	$	(87)	$	10,976	$	(96)
Collateralized mortgage obligations of
U.S. Government Sponsored Entities		96,741		(492)		72,794		(892)		169,535		(1,384)
Private mortgage backed securities		15,007		(520)		17,025		(168)		32,032		(688)
Private collateralized mortgage obligations		3,588		(141)		43,918		(831)		47,506		(972)
Collateralized loan obligations		0		0		51,460		(1,141)		51,460		(1,141)
Obligations of state and political subdivisions		3,692		(52)		0		0		3,692		(52)
Corporate and other debt securities		8,192		(35)		1,996		(4)		10,188		(39)
Commercial mortgage backed securities		2,951		(10)		11,810		(233)		14,761		(243)
Total temporarily impaired securities	$	135,412	$	(1,259)	$	204,738	$	(3,356)	$	340,150	$	(4,615)

	December 31, 2015
	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities of
U.S. Government Sponsored Entities	$	112,236	$	(1,082)	$	14,508	$	(256)	$	126,744	$	(1,338)
Collateralized mortgage obligations of
U.S. Government Sponsored Entities		97,512		(973)		147,266		(4,333)		244,778		(5,306)
Private mortgage backed securities		31,792		(766)		0		0		31,792		(766)
Private collateralized mortgage obligations		19,939		(321)		31,533		(472)		51,472		(793)
Collateralized loan obligations		101,601		(1,642)		60,922		(1,612)		162,523		(3,254)
Obligations of state and political subdivisions		11,570		(110)		0		0		11,570		(110)
Corporate and other debt securities		31,342		(416)		0		0		31,342		(416)
Commercial mortgage backed securities		37,838		(720)		0		0		37,838		(720)
Total temporarily impaired securities	$	443,830	$	(6,030)	$	254,229	$	(6,673)	$	698,059	$	(12,703)

The tables above include securities held for investment that were transferred from available for sale into held for investment during 2014. Those securities had unrealized losses of $3.1 million at the date of transfer. None of these securities had a fair value with an unrealized loss for less than twelve months at September 30, 2016. At December 31, 2015, the fair value of those securities in an unrealized loss position for less than twelve months was $38.9 million, and the unrealized losses on those securities in an unrealized loss position for less than twelve months was $0.4 million. None of these securities were in an unrealized loss position for more than twelve months at September 30, 2016 and December 31, 2015, respectively.

At September 30, 2016, private label securities with a fair value of $79.5 million secured by collateral originated in 2005 and prior were in an unrealized loss position. Their unrealized loss position of approximately $1.7 million is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The collateral underlying these mortgage investments are 30- and 15-year fixed and 10/1 adjustable rate mortgage loans with low loan to values, subordination and all historically have had minimal foreclosures. Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2016, the Company also had $1.5 million of unrealized losses on collateralized mortgage obligations and mortgage backed securities of government sponsored entities having a fair value of $180.5 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on our assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2016, the Company also had $1.1 million of unrealized losses on collateralized loan obligations having a fair value of $51.5 million that were attributable to a combination of factors, including relative changes in interest rates, spreads and interest movements since the time of purchase. Based on our assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At September 30, 2016, $28.7 million of remaining securities categories had unrealized losses of $0.3 million. Management believes that unrealized losses on these debt security holdings are a function of changes in investment spreads and interest movements and not change in credit quality.

As of September 30, 2016, management does not intend to sell securities that are in unrealized loss positions and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis. Therefore, management does not consider any investment to be other-than-temporarily impaired at September 30, 2016.

Included in other assets is $30.9 million of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value. At September 30, 2016, the Company has not identified events or changes in circumstances which may have a significant adverse effect on the carrying value of the $30.9 million of cost method investment securities.

The Company also holds 11,330 shares of Visa Class B stock, which following resolution of Visa litigation will be converted to Visa Class A shares (the conversion rate was 1.6483 shares of Class A stock for each share of Class B stock) for a total of 18,675 shares of Visa Class A stock with a value of $1.5 million. Our ownership is related to prior ownership in Visa’s network, while Visa operated as a cooperative. This ownership is recorded on our financial records at a zero basis.