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Securities
 9 Months Ended
Sep. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
SECURITIES
SECURITIES
Trading Securities

As of September 30, 2015, the Company had trading securities of $454,000. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s non-qualified 401(k) Restoration Plan and non-qualified deferred compensation plan.
Available for Sale and Held to Maturity Securities
The following table presents a summary of the amortized cost, gross unrealized holding gains and losses, other-than-temporary impairment recorded in other comprehensive income and fair value of securities available for sale and securities held to maturity for the periods below:
 
September 30, 2015
 
December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
(Dollars in thousands)
Available for sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency securities
$
36,895

 
$
692

 
$
—

 
$
37,587

 
$
41,369

 
$
139

 
$
(22
)
 
$
41,486

Agency mortgage-backed securities
206,778

 
6,247

 
(104
)
 
212,921

 
211,168

 
7,203

 
(693
)
 
217,678

Agency collateralized mortgage obligations
51,868

 
611

 
(404
)
 
52,075

 
63,059

 
599

 
(623
)
 
63,035

State, county, and municipal securities
4,557

 
114

 
—

 
4,671

 
5,106

 
117

 
—

 
5,223

Single issuer trust preferred securities issued by banks
2,877

 
9

 
(45
)
 
2,841

 
2,913

 
12

 
(16
)
 
2,909

Pooled trust preferred securities issued by banks and insurers (1)
2,226

 
—

 
(640
)
 
1,586

 
7,906

 
195

 
(1,780
)
 
6,321

Small business administration pooled securities

41,018

 
155

 
(17
)
 
41,156

 
—

 
—

 
—

 
—

Equity securities
13,200

 
245

 
(490
)
 
12,955

 
11,572

 
567

 
(237
)
 
11,902

Total available for sale securities
$
359,419

 
$
8,073

 
$
(1,700
)
 
$
365,792

 
$
343,093

 
$
8,832

 
$
(3,371
)
 
$
348,554

Held to maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
1,009

 
$
75

 
$
—

 
$
1,084

 
$
1,010

 
$
63

 
$
—

 
$
1,073

Agency mortgage-backed securities
172,684

 
5,718

 
—

 
178,402

 
159,522

 
5,422

 
—

 
164,944

Agency collateralized mortgage obligations
230,820

 
2,769

 
(1,679
)
 
231,910

 
198,220

 
1,842

 
(3,478
)
 
196,584

State, county, and municipal securities
225

 
4

 
—

 
229

 
424

 
4

 
—

 
428

Single issuer trust preferred securities issued by banks
1,500

 
—

 
(4
)
 
1,496

 
1,500

 
—

 
(23
)
 
1,477

Small business administration pooled securities

36,901

 
712

 
—

 
37,613

 
9,775

 
299

 
—

 
10,074

Corporate debt securities
5,000

 
42

 
—

 
5,042

 
5,002

 
117

 
—

 
5,119

Total held to maturity securities
$
448,139

 
$
9,320

 
$
(1,683
)
 
$
455,776

 
$
375,453

 
$
7,747

 
$
(3,501
)
 
$
379,699

Total
$
807,558

 
$
17,393

 
$
(3,383
)
 
$
821,568

 
$
718,546

 
$
16,579

 
$
(6,872
)
 
$
728,253


(1)    Gross unrealized gains and gross unrealized losses include $230,000 of a net loss on non-credit related other-than-temporary impairment ("OTTI") at December 31, 2014. There was no non-credit related OTTI at September 30, 2015.







When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale.
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands)
Equity securities classified as available for sale:
 
 
 
 
 
 
 
Gross realized gains
$
—

 
$
67

 
$
19

 
$
138

Gross realized losses
—

 
—

 
(8
)
 
—

Net realized gain on equity securities
$
—

 
$
67

 
$
11

 
$
138

Fixed income securities classified as available for sale:
 
 
 
 
 
 
 
Gross realized gains
$
—

 
$
—

 
$
798

 
$
—

Gross realized losses
—

 
—

 
(1,124
)
 
—

Net realized loss on fixed income securities
$
—

 
$
—

 
$
(326
)
 
$
—


 
The actual maturities of certain securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of securities available for sale and securities held to maturity as of September 30, 2015 is presented below:

 
Available for Sale
 
Held to Maturity
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(Dollars in thousands)
Due in one year or less
$
—

 
$
—

 
$
5,225

 
$
5,271

Due after one year to five years
42,709

 
43,495

 
118

 
120

Due after five to ten years
81,841

 
83,361

 
29,013

 
29,954

Due after ten years
221,669

 
225,981

 
413,783

 
420,431

Total debt securities
$
346,219

 
$
352,837

 
$
448,139

 
$
455,776

Equity securities
$
13,200

 
$
12,955

 
$
—

 
$
—

Total
$
359,419

 
$
365,792

 
$
448,139

 
$
455,776


Inclusive in the table above is $25.1 million of callable securities in the Company’s investment portfolio at September 30, 2015.
The carrying value of securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law, was $322.6 million and $340.0 million at September 30, 2015 and December 31, 2014, respectively.
At September 30, 2015 and December 31, 2014, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of stockholders’ equity.
Other-Than-Temporary Impairment ("OTTI")
The Company continually reviews investment securities for the existence of OTTI, taking into consideration current market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, the credit worthiness of the obligor of the security, volatility of earnings, current analysts’ evaluations, the Company’s intent to sell the security, or whether it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery, as well as other qualitative factors. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.
The following tables show the gross unrealized losses and fair value of the Company’s investments in an unrealized loss position, which the Company has not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
 
September 30, 2015
 
 
 
Less than 12 months
 
12 months or longer
 
Total
 
# of holdings
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(Dollars in thousands)
Agency mortgage-backed securities
8

 
$
6,886

 
$
(18
)
 
$
4,515

 
$
(86
)
 
$
11,401

 
$
(104
)
Agency collateralized mortgage obligations
12

 
16,667

 
(135
)
 
85,255

 
(1,948
)
 
101,922

 
(2,083
)
Single issuer trust preferred securities issued by banks and insurers
3

 
2,541

 
(15
)
 
1,039

 
(34
)
 
3,580

 
(49
)
Pooled trust preferred securities issued by banks and insurers
1

 
—

 
—

 
1,586

 
(640
)
 
1,586

 
(640
)
Small business administration pooled securities
1

 
11,982

 
(17
)
 
—

 
—

 
11,982

 
(17
)
Equity securities
33

 
2,627

 
(178
)
 
5,018

 
(312
)
 
7,645

 
(490
)
Total temporarily impaired securities
58

 
$
40,703

 
$
(363
)
 
$
97,413

 
$
(3,020
)
 
$
138,116

 
$
(3,383
)

 
December 31, 2014
 
 
 
Less than 12 months
 
12 months or longer
 
Total
 
# of holdings
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(Dollars in thousands)
U.S.government agency securities
22

 
$
21,950

 
$
(22
)
 
$
—

 
$
—

 
$
21,950

 
$
(22
)
Agency mortgage-backed securities
17

 
3,471

 
(1
)
 
42,222

 
(692
)
 
45,693

 
(693
)
Agency collateralized mortgage obligations
14

 
35,083

 
(331
)
 
94,974

 
(3,770
)
 
130,057

 
(4,101
)
Single issuer trust preferred securities issued by banks and insurers
2

 
2,553

 
(39
)
 
—

 
—

 
2,553

 
(39
)
Pooled trust preferred securities issued by banks and insurers
2

 
—

 
—

 
2,681

 
(1,356
)
 
2,681

 
(1,356
)
Equity securities
23

 
1,480

 
(74
)
 
4,072

 
(163
)
 
5,552

 
(237
)
Total temporarily impaired securities
80

 
$
64,537

 
$
(467
)
 
$
143,949

 
$
(5,981
)
 
$
208,486

 
$
(6,448
)

The Company does not intend to sell these investments and has determined based upon available evidence that it is more likely than not that the Company will not be required to sell the security before the recovery of its amortized cost basis. As a result, the Company does not consider these investments to be OTTI. The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.
As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category are as follows at September 30, 2015:
•
Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities carry the implicitly or, in some cases the explicit guarantee of the U.S. Government or one of its agencies.
•
Single Issuer Trust Preferred Securities: This portfolio consists of three securities, one of which is below investment grade. The unrealized loss on these securities is attributable to the illiquid nature of the trust preferred market in the current economic environment. Management evaluates various financial metrics for the issuers, including regulatory capital ratios of the issuers.


•
Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market and the significant risk premiums required in the current economic environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.
•
Equity Securities: This portfolio consists of mutual funds and other equity investments. During some periods, the mutual funds in the Company’s investment portfolio may have unrealized losses resulting from market fluctuations as well as the risk premium associated with that particular asset class. For example, emerging market equities tend to trade at a higher risk premium than U.S. government bonds and thus, will fluctuate to a greater degree on both the upside and the downside. In the context of a well-diversified portfolio, however, the correlation amongst the various asset classes represented by the funds serves to minimize downside risk. The Company evaluates each mutual fund in the portfolio regularly and measures performance on both an absolute and relative basis. A reasonable recovery period for positions with an unrealized loss is based on management’s assessment of general economic data, trends within a particular asset class, valuations, earnings forecasts and bond durations.
The following table shows the total OTTI that the Company recorded for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands)
Gross change in OTTI recorded on certain investments
$
—

 
$
235

 
$
84

 
$
1,264

Portion of OTTI recognized in OCI
—

 
(235
)
 
(84
)
 
(1,264
)
Total credit related OTTI recognized in earnings
$
—

 
$
—

 
$
—

 
$
—


The following table shows the cumulative credit related component of OTTI for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands)
Balance at beginning of period
$
—

 
$
(9,997
)
 
$
(9,997
)
 
$
(9,997
)
Add
 
 
 
 
 
 
 
Incurred on securities not previously impaired
—

 
—

 
—

 
—

Incurred on securities previously impaired
—

 
—

 
—

 
—

Less
 
 
 
 
 
 
 
Securities sold during the period
—

 
—

 
9,997

 
—

Reclassification due to changes in Company's intent
—

 
—

 
—

 
—

Increases in cash flow expected to be collected
—

 
—

 
—

 
—

Balance at end of period
$
—

 
$
(9,997
)
 
$
—

 
$
(9,997
)