Note 6: Investment Securities

3 Months Ended

Mar. 31, 2014

Notes

Note 6: Investment Securities

NOTE 6: INVESTMENT SECURITIES

	March 31, 2014
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$20,000	$--	$2,026	$17,974	2.00%
Mortgage-backed securities	340,127	4,913	1,726	343,314	1.98
Small Business Administration
loan pools	39,959	1,031	--	40,990	0.67
States and political subdivisions	123,030	4,481	644	126,867	5.43
Equity securities	847	2,118	--	2,965	--
	$523,963	$12,543	$4,396	$532,110	2.69%

	December 31, 2013
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
(In Thousands)
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$20,000	$--	$2,745	$17,255	2.00%
Mortgage-backed securities	365,020	4,824	2,266	367,578	2.04
Small Business Administration
loan pools	43,461	1,394	--	44,855	1.34
States and political subdivisions	122,113	2,549	1,938	122,724	5.47
Equity securities	847	2,022	--	2,869	--
	$551,441	$10,789	$6,949	$555,281	2.74%

	March 31, 2014
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
(In Thousands)
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$805	$109	$--	$914	7.37%

	December 31, 2013
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
(In Thousands)
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$805	$107	$--	$912	7.37%

The amortized cost and fair value of available-for-sale securities at March 31, 2014, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized	Fair
	Cost	Value
(In Thousands)
One year or less	$110	$112
After one through five years	793	791
After five through ten years	9,475	9,737
After ten years	172,611	175,191
Securities not due on a single maturity date	340,127	343,314
Equity securities	847	2,965
	$523,963	$532,110

The held-to-maturity securities at March 31, 2014, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized	Fair
	Cost	Value
(In Thousands)
After one through five years	$805	$914

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2014 and December 31, 2013, respectively, was approximately $175.5 million and $237.6 million, which is approximately 32.9% and 42.7% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively.

Based on an evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary at March 31, 2014.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2014 and December 31, 2013:

	March 31, 2014
	Less than 12 Months		12 Months or More		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Description of Securities	Value	Losses	Value	Losses	Value	Losses
(In Thousands)
U.S. government agencies	$20,000	$(2,026)	$--	$--	$20,000	$(2,026)
Mortgage-backed securities	61,365	(878)	65,295	(848)	126,660	(1,726)
State and political
subdivisions	28,858	(644)	--	--	28,858	(644)
	$110,223	$(3,548)	$65,295	$(848)	$175,518	$(4,396)

	December 31, 2013
	Less than 12 Months		12 Months or More		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Description of Securities	Value	Losses	Value	Losses	Value	Losses
(In Thousands)
U.S. government agencies	$20,000	$(2,745)	$--	$--	$20,000	$(2,745)
Mortgage-backed securities	127,901	(1,871)	39,255	(395)	167,156	(2,266)
State and political
subdivisions	50,401	(1,938)	--	--	50,401	(1,938)
	$198,302	$(6,554)	$39,255	$(395)	$237,557	$(6,949)

Gross gains of $75,000 and $34,000 and gross losses of $2,000 and $0 resulting from sales of available-for-sale securities were realized for the three months ended March 31, 2014 and 2013, respectively.  Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment.  Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities.  For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model.  The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets.

The Company routinely conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred.  The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors.  If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary.  The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange.  For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other-than-temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss.  The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows.  If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

During the three months ended March 31, 2014, no securities were determined to have impairment that was other than temporary. 

Credit Losses Recognized on Investments.  Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired. 

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.

	Accumulated
	Credit Losses
(In Thousands)
Credit losses on debt securities held
January 1, 2014	$0
Additions related to other-than-temporary losses not previously recognized	0
Additions related to increases in credit losses on debt securities for which
other-than-temporary impairment losses were previously recognized	0
Reductions due to final principal payments	0
March 31, 2014	$0

	Accumulated
	Credit Losses
(In Thousands)
Credit losses on debt securities held
January 1, 2013	$4,176
Additions related to other-than-temporary losses not previously recognized	0
Additions related to increases in credit losses on debt securities for which
other-than-temporary impairment losses were previously recognized	0
Reductions due to sales	0
March 31, 2013	$4,176

Amounts Reclassified Out of Accumulated Other Comprehensive Income.  Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three months ended March 31, 2014 and 2013, were as follows: 

	Amounts Reclassified from Other Comprehensive Income Three Months Ended March 31,		Affected Line Item in the Statements of Income
	2014	2013
(In Thousands)
Unrealized gains (losses) on available-			Net realized gains on available-
for-sale securities	$73	$34	for-sale securities
			(Total reclassified amount before tax)
Income Taxes	(26)	(12)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$47	$22