Note 6: Investment Securities

3 Months Ended

Mar. 31, 2015

Notes

Note 6: Investment Securities

NOTE 6: INVESTMENT SECURITIES

	March 31, 2015
		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	$—	$414	$19,586	2.00%
Mortgage-backed securities	237,505	3,908	422	240,991	1.89
States and political subdivisions	74,753	5,551	6	80,298	5.72
Equity securities	847	2,362	—	3,209	—
	$333,105	$11,821	$842	$344,084	2.75%

	December 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	$—	$486	$19,514	2.00%
Mortgage-backed securities	254,294	4,325	821	257,798	1.97
States and political subdivisions	79,237	5,810	7	85,040	5.76
Equity securities	847	2,307	—	3,154	—
	$354,378	$12,442	$1,314	$365,506	2.82%

	March 31, 2015
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
(In Thousands)
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$450	$52	$—	$502	7.37%

	December 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	$450	$49	$—	$499	7.37%

The amortized cost and fair value of available-for-sale securities at March 31, 2015, 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	$—	$—
After one through five years	254	269
After five through ten years	3,633	3,869
After ten years	90,866	95,746
Securities not due on a single maturity date	237,505	240,991
Equity securities	847	3,209
	$333,105	$344,084

The held-to-maturity securities at March 31, 2015, 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	$450	$502

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, 2015 and December 31, 2014, respectively, was approximately $72.9 million and $106.0 million, which is approximately 21.2% and 29.0% 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, 2015.

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, 2015 and December 31, 2014:

	March 31, 2015
	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	$(414)	$20,000	$(414)
Mortgage-backed securities	2,869	(13)	49,093	(409)	51,962	(422)
State and political
subdivisions	—	—	921	(6)	921	(6)
	$2,869	$(13)	$70,014	$(829)	$72,883	$(842)

	December 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	$(486)	$20,000	$(486)
Mortgage-backed securities	40,042	(328)	45,056	(493)	85,098	(821)
State and political
subdivisions	—	—	925	(7)	925	(7)
	$40,042	$(328)	$65,981	$(986)	$106,023	$(1,314)

Gross gains of $0 and $75,000 and gross losses of $0 and $2,000 resulting from sales of available-for-sale securities were realized for the three months ended March 31, 2015 and 2014, 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.  Where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  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, 2015, no securities were determined to have impairment that was other than temporary. 

Credit Losses Recognized on Investments.  There were no debt securities that 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. 

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, 2015 and 2014, were as follows: 

	Amounts Reclassified from Other
	Comprehensive Income
	Three Months Ended March 31,		Affected Line Item in the Statements
	2015	2014	of Income
(In Thousands)
Unrealized gains (losses) on available-			Net realized gains on available-
for-sale securities	$—	$73	for-sale securities
			(Total reclassified amount before tax)
Income Taxes	—	(26)	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$—	$47