Investment Securities |
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Investment Securities | Note 3—Investment Securities The following is the amortized cost and fair value of investment securities held to maturity:
The following is the amortized cost and fair value of investment securities available for sale:
* The Company’s government-sponsored entities holdings are comprised of debt securities offered by Federal Home Loan Mortgage Corporation (“FHLMC”) or Freddie Mac, Federal National Mortgage Association (“FNMA”) or Fannie Mae, FHLB, and Federal Farm Credit Banks (“FFCB”). Also included in the Company’s government-sponsored entities are debt securities offered by the Small Business Administration (“SBA”), which have the full faith and credit backing of the United States Government. ** All of the mortgage-backed securities are issued by government-sponsored entities; there are no private-label holdings.
The following is the amortized cost and fair value of other investment securities:
The Company has determined that the investment in Federal Home Loan Bank stock is not other than temporarily impaired as of December 31, 2016 and ultimate recoverability of the par value of these investments is probable. The amortized cost and fair value of debt and equity securities at December 31, 2016 by contractual maturity are detailed below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. Equity securities have no set maturity dates and are classified as “Due after ten years”.
The following table summarizes information with respect to sales of available‑for‑sale and held-to-maturity securities:
In April of 2014, the Company sold a security classified as held to maturity. Based on management’s assessment of the security and the deteriorating credit quality of the underlying issuer, this sale did not taint the classification of the remaining securities in the held to maturity portfolio.
The Company had 129 securities with gross unrealized losses at December 31, 2016. Information pertaining to securities with gross unrealized losses at December 31, 2016 and 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:
The loss position in 2016 increased from the unrealized loss position in 2015. This change was primarily related to the mortgage-backed securities classifications, and was the result of the increase in interest rates during the fourth quarter of the year. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. The Company does not currently intend to sell the securities within the portfolio and it is not more-likely-than-not that the Company will be required to sell the debt securities; therefore, management does not consider these investments to be other-than-temporarily impaired at December 31, 2016. During the fourth quarter of 2015, the Company recorded an other-than-temporary impairment charge of $489,000 related to an equity security due to the length of time that the security had been in an unrealized loss position. Management continues to monitor all of these securities with a high degree of scrutiny. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities may be sold or are other than temporarily impaired, which would require a charge to earnings in such periods. Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the financial condition and near-term prospects of the issuer, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that the Company will be required to sell the debt security prior to recovering its fair value, and (5) the anticipated outlook for changes in the general level of interest rates. As part of the Company’s evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. At December 31, 2016 and 2015, investment securities with a carrying value of $295.2 million and $307.4 million, respectively, were pledged to secure public funds deposits and for other purposes required and permitted by law. At December 31, 2016 and 2015, the carrying amount of the securities pledged to collateralize repurchase agreements was $238.3 million and $219.9 million, respectively. |