XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
SECURITIES
 9 Months Ended
Sep. 30, 2018
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE 3
—
SECURITIES
 
The Corporation classifies its securities as either “Held-to-Maturity” or “Available-for-Sale” at the time of purchase. Securities are accounted for on a trade date basis. Debt securities are classified as Held-to-Maturity when the Corporation has the ability and positive intent to hold the securities to maturity. Securities classified as Held-to-Maturity are carried at cost adjusted for amortization of premium and accretion of discount to maturity.
 
Debt securities not classified as Held-to-Maturity are included in the Available-for-Sale category and are carried at fair value. The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive (loss) income (AOCI) in the Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity. Management’s decision to sell Available-for-Sale securities is based on changes in economic conditions, controlling the sources and applications of funds, terms, availability of and yield of alternative investments, interest rate risk and the need for liquidity.
 
Beginning January 1, 2018, upon adoption of ASU 2016-01, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in income. For periods prior to January 1, 2018, equity securities were classified as available-for-sale and stated at fair value with unrealized gains and losses reported as a separate component of AOCI, net of tax. Equity securities without readily determinable fair values are recorded at cost less impairment, if any.
 
The cost of debt securities classified as Held-to-Maturity or Available-for-Sale is adjusted for amortization of premiums and accretion of discounts to expected maturity. Such amortization and accretion, as well as interest and dividends, are included in interest and dividend income from investment securities. Realized gains and losses are included in net securities gains and losses. The cost of securities sold, redeemed or matured is based on the specific identification method.
 
The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as “Available-For-Sale” were as follows at September 30, 2018 and December 31, 2017:
 
 
 
Debt Securities Available-for-Sale
 
 
 
 
 
 
Gross
 
 
Gross
 
 
 
 
 
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Fair
 
(Dollars in thousands)
 
Cost
 
 
Gains
 
 
Losses
 
 
Value
 
September 30, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
5,294
 
 
$
—
 
 
$
(23
)
 
$
5,271
 
Obligations of U.S. Government Corporations and Agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed
 
 
68,259
 
 
 
2
 
 
 
(2,097
)
 
 
66,164
 
Other
 
 
19,809
 
 
 
22
 
 
 
(655
)
 
 
19,176
 
Obligations of state and political subdivisions
 
 
193,602
 
 
 
1,043
 
 
 
(3,809
)
 
 
190,836
 
Asset backed securities
 
 
14,632
 
 
 
1
 
 
 
(70
)
 
 
14,563
 
Corporate debt securities
 
 
28,877
 
 
 
1
 
 
 
(1,302
)
 
 
27,576
 
Total
 
$
330,473
 
 
$
1,069
 
 
$
(7,956
)
 
$
323,586
 
 
 
 
Debt Securities Available-for-Sale
 
 
 
 
 
 
Gross
 
 
Gross
 
 
 
 
 
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Fair
 
(Dollars in thousands)
 
Cost
 
 
Gains
 
 
Losses
 
 
Value
 
December 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
Obligations of U.S. Government Corporations and Agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed
 
 
82,825
 
 
 
210
 
 
 
(1,175
)
 
 
81,860
 
Other
 
 
22,409
 
 
 
132
 
 
 
(308
)
 
 
22,233
 
Obligations of state and political subdivisions
 
 
211,743
 
 
 
4,690
 
 
 
(911
)
 
 
215,522
 
Asset backed securities
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
Corporate debt securities
 
 
29,645
 
 
 
90
 
 
 
(764
)
 
 
28,971
 
Total
 
$
346,622
 
 
$
5,122
 
 
$
(3,158
)
 
$
348,586
 
 
Securities Available-for-Sale with an aggregate fair value of $173,729,000 at September 30, 2018 and $290,104,000 at December 31, 2017, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase, debtor in possession funds and the Federal Discount Window aggregating $136,669,000 at September 30, 2018 and $224,659,000 at December 31, 2017.
 
The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at September 30, 2018. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
 
September 30, 2018
 
 
 
Debt Securities Available-For-Sale
 
 
 
 
 
 
U.S. Government
 
 
Obligations
 
 
 
 
 
 
 
 
 
 
 
 
Corporations &
 
 
of State
 
 
Asset
 
 
Corporate
 
 
 
U.S. Treasury
 
 
Agencies
 
 
& Political
 
 
Backed
 
 
Debt
 
(Dollars in thousands)
 
Securities
 
 
Obligations
1
 
 
Subdivisions
 
 
Securities
 
 
Securities
 
Within 1 Year:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
$
—
 
 
$
―
 
 
$
1,598
 
 
$
—
 
 
$
—
 
Fair value
 
 
—
 
 
 
―
 
 
 
1,601
 
 
 
—
 
 
 
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 - 5 Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
 
5,294
 
 
 
17,259
 
 
 
26,654
 
 
 
—
 
 
 
16,339
 
Fair value
 
 
5,271
 
 
 
16,654
 
 
 
26,221
 
 
 
—
 
 
 
15,777
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 - 10 Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
 
―
 
 
 
30,564
 
 
 
63,098
 
 
 
10,050
 
 
 
12,538
 
Fair value
 
 
―
 
 
 
28,926
 
 
 
61,759
 
 
 
10,000
 
 
 
11,799
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
After 10 Years:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
 
―
 
 
 
40,245
 
 
 
102,252
 
 
 
4,582
 
 
 
—
 
Fair value
 
 
―
 
 
 
39,760
 
 
 
101,255
 
 
 
4,563
 
 
 
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortized cost
 
$
5,294
 
 
$
88,068
 
 
$
193,602
 
 
$
14,632
 
 
$
28,877
 
Fair value
 
 
5,271
 
 
 
85,340
 
 
 
190,836
 
 
 
14,563
 
 
 
27,576
 
 
 
1
Mortgage-backed securities are allocated for maturity reporting at their original maturity date.
 
There were no aggregate securities with a single issuer (excluding the U.S. Government and U.S. Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at September 30, 2018. The quality rating of the obligations of state and political subdivisions are generally investment grade, as rated by Moody’s, Standard and Poor’s or Fitch. The typical exceptions are local issues which are not rated, but are secured by the full faith and credit obligations of the communities that issued these securities.
 
Proceeds from sales of investments in Available-for-Sale debt securities for the three months ended September 30, 2018 and 2017 were $19,236,000 and $25,718,000, respectively. Gross gains realized on these sales were $49,000 and $414,000, respectively. Gross losses realized on these sales were $62,000 and $0, respectively. There were no impairment losses realized on Available-for-Sale debt securities during the three months ended September 30, 2018 or 2017.
 
Proceeds from sales of investments in Available-for-Sale debt securities for the nine months ended September 30, 2018 and 2017 were $33,274,000 and $77,710,000, respectively. Gross gains realized on these sales were $99,000 and $949,000, respectively. Gross losses realized on these sales were $96,000 and $63,000, respectively. There were no impairment losses realized on Available-for-Sale debt securities during the nine months ended September 30, 2018 or 2017.
 
At September 30, 2018 and December 31, 2017, the Corporation had $1,684,000 and $1,632,000, respectively, in equity securities recorded at fair value. Prior to January 1, 2018, equity securities were stated at fair value with unrealized gains and losses reported as a separate component of AOCI, net of tax. At December 31, 2017, net unrealized gains net of tax of $634,000 had been recognized in AOCI. On January 1, 2018, these unrealized gains and losses were reclassified out of AOCI and into retained earnings with subsequent changes in fair value being recognized in net income. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the nine months ended September 30, 2018:
 
 
 
Nine months ended
 
(Dollars in thousands)
 
September 30, 2018
 
Net gains and (losses) recognized during the period on equity securities
 
$
52
 
Less: Net gains and (losses) recognized during the period on equity securities sold during the period
 
 
—
 
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date
 
$
52
 
 
There were no proceeds from sales of investments in Held-to-Maturity debt securities during the first nine months of 2018 or 2017. Therefore, there were no gains or losses realized during these periods.
 
Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Securities classified as Available-for-Sale or Held-to-Maturity are generally evaluated for OTTI under FASB ASC 320,
Investments - Debt and Equity Securities
. In determining OTTI under the FASB ASC 320 model, management considers many factors, including (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
 
When other-than-temporary impairment occurs on debt securities, the amount of the other-than-temporary impairment recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the other-than-temporary impairment shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is determined based on the present value of cash flows expected to be collected, and the realized loss is recognized as impairment charges on securities on the Consolidated Statements of Income. The amount of the total other-than-temporary impairment related to the other factors shall be recognized in other comprehensive income (loss), net of applicable taxes. The previous amortized cost basis less the other-than-temporary impairment recognized in earnings becomes the new amortized cost basis of the investment.
 
The Corporation and its investment advisors monitor the entire portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months. Based on the factors described above, management did not consider any securities to be other-than-temporarily impaired at September 30, 2018 or December 31, 2017.
 
In accordance with disclosures required by FASB ASC 320-10-50,
Investments – Debt and Equity Securities
, the summary below shows the gross unrealized losses and fair value of the Corporation’s debt securities. Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of September 30, 2018 and December 31, 2017:
 
September 30, 2018
 
 
 
Less Than 12 Months
 
 
12 Months or More
 
 
Total
 
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
(Dollars in thousands)
 
Value
 
 
Loss
 
 
Value
 
 
Loss
 
 
Value
 
 
Loss
 
Debt Securities Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
5,271
 
 
$
(23
)
 
$
―
 
 
$
―
 
 
$
5,271
 
 
$
(23
)
Obligations of U.S. Government Corporations and Agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed
 
 
4,230
 
 
 
(97
)
 
 
56,232
 
 
 
(2,000
)
 
 
60,462
 
 
 
(2,097
)
Other
 
 
8,418
 
 
 
(71
)
 
 
6,901
 
 
 
(584
)
 
 
15,319
 
 
 
(655
)
Obligations of state and political subdivisions
 
 
81,246
 
 
 
(1,266
)
 
 
49,676
 
 
 
(2,543
)
 
 
130,922
 
 
 
(3,809
)
Asset backed securities
 
 
8,970
 
 
 
(341
)
 
 
15,105
 
 
 
(961
)
 
 
24,075
 
 
 
(1,302
)
Corporate debt securities
 
 
9,543
 
 
 
(70
)
 
 
—
 
 
 
—
 
 
 
9,543
 
 
 
(70
)
 
 
$
117,678
 
 
$
(1,868
)
 
$
127,914
 
 
$
(6,088
)
 
$
245,592
 
 
$
(7,956
)
 
December 31, 2017
 
 
 
Less Than 12 Months
 
 
12 Months or More
 
 
Total
 
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
(Dollars in thousands)
 
Value
 
 
Loss
 
 
Value
 
 
Loss
 
 
Value
 
 
Loss
 
Debt Securities Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
Obligations of U.S. Government Corporations and Agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed
 
 
30,555
 
 
 
(300
)
 
 
33,943
 
 
 
(875
)
 
 
64,498
 
 
 
(1,175
)
Other
 
 
2,905
 
 
 
(4
)
 
 
7,179
 
 
 
(304
)
 
 
10,084
 
 
 
(308
)
Obligations of state and political subdivisions
 
 
36,149
 
 
 
(329
)
 
 
22,566
 
 
 
(582
)
 
 
58,715
 
 
 
(911
)
Asset backed securities
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
Corporate debt securities
 
 
6,746
 
 
 
(24
)
 
 
15,174
 
 
 
(740
)
 
 
21,920
 
 
 
(764
)
 
 
$
76,355
 
 
$
(657
)
 
$
78,862
 
 
$
(2,501
)
 
$
155,217
 
 
$
(3,158
)
 
The Corporation invests in various forms of agency debt including mortgage-backed securities and callable debt. The mortgage-backed securities are issued by FHLMC (“Federal Home Loan Mortgage Corporation”), FNMA (“Federal National Mortgage Association”) or GNMA (“Government National Mortgage Association”). The municipal securities consist of general obligations and revenue bonds. The fair market value of the above securities is influenced by market interest rates, prepayment speeds on mortgage securities, bid-offer spreads in the market place and credit premiums for various types of agency debt. These factors change continuously and therefore the market value of these securities may be higher or lower than the Corporation’s carrying value at any measurement date. Management does not believe any of their 94 debt securities with a less than one year unrealized loss position, or any of their 84 debt securities with a one year or greater unrealized loss position as of September 30, 2018, represent an other-than-temporary impairment, as the unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.