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Securities
 3 Months Ended
Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Securities
Note 4. Securities
The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at March 31, 2017 and December 31, 2016 are as follows (in thousands):
 
 
At March 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Available-for-sale:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
U.S. agency obligations
$
47,312

 
$
81

 
$
(289
)
 
$
47,104

Held-to-maturity:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
U.S. agency obligations
$
19,962

 
$
70

 
$
—

 
$
20,032

State and municipal obligations
80,993

 
121

 
(564
)
 
80,550

Corporate debt securities
76,049

 
218

 
(5,964
)
 
70,303

Other investments
8,820

 
—

 
(232
)
 
8,588

Total investment securities
185,824

 
409

 
(6,760
)
 
179,473

Mortgage-backed securities:
 
 
 
 
 
 
 
FHLMC
181,310

 
246

 
(2,301
)
 
179,255

FNMA
241,800

 
1,982

 
(2,283
)
 
241,499

GNMA
87,301

 
88

 
(611
)
 
86,778

SBA
8,532

 
27

 
—

 
8,559

Total mortgage-backed securities
518,943

 
2,343

 
(5,195
)
 
516,091

Total held-to-maturity
$
704,767

 
$
2,752

 
$
(11,955
)
 
$
695,564

Total securities
$
752,079

 
$
2,833

 
$
(12,244
)
 
$
742,668

 
At December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Available-for-sale:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
U.S. agency obligations
$
12,542

 
$
—

 
$
(318
)
 
$
12,224

Held-to-maturity:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
U.S. agency obligations
$
19,960

 
$
69

 
$
—

 
$
20,029

State and municipal obligations
39,155

 
10

 
(856
)
 
38,309

Corporate debt securities
77,057

 
85

 
(6,001
)
 
71,141

Other investments
8,778

 
—

 
(228
)
 
8,550

Total investment securities
144,950

 
164

 
(7,085
)
 
138,029

Mortgage-backed securities:
 
 
 
 
 
 
 
FHLMC
144,016

 
195

 
(2,457
)
 
141,754

FNMA
217,445

 
2,175

 
(2,524
)
 
217,096

GNMA
92,475

 
119

 
(364
)
 
92,230

SBA
8,947

 
28

 
—

 
8,975

Total mortgage-backed securities
462,883

 
2,517

 
(5,345
)
 
460,055

Total held-to-maturity
$
607,833

 
$
2,681

 
$
(12,430
)
 
$
598,084

Total securities
$
620,375

 
$
2,681

 
$
(12,748
)
 
$
610,308



During the third quarter 2013, the Bank transferred $536.0 million of previously designated available-for-sale securities to a held-to-maturity designation at estimated fair value. The securities transferred had an unrealized net loss of $13.3 million at the time of transfer which continues to be reflected in accumulated other comprehensive loss on the consolidated balance sheet, net of subsequent amortization, which is being recognized over the life of the securities. The carrying value of the held-to-maturity investment securities at March 31, 2017 and December 31, 2016 are as follows (in thousands):
 
 
March 31, 2017
 
December 31, 2016
Amortized cost
$
704,767

 
$
607,833

Net loss on date of transfer from available-for-sale
(13,347
)
 
(13,347
)
Accretion of net unrealized loss on securities reclassified as held-to-maturity
4,498

 
4,205

Carrying value
$
695,918

 
$
598,691


There were no realized gains or losses on the sale of securities for the three months ended March 31, 2017 and March 31, 2016.
The amortized cost and estimated fair value of investment securities at March 31, 2017 by contractual maturity are shown below (in thousands). Actual maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. At March 31, 2017, corporate debt securities with an amortized cost of $60.5 million and estimated fair value of $54.6 million were callable prior to the maturity date.
 
March 31, 2017
Amortized
Cost
 
Estimated
Fair Value
Less than one year
$
14,026

 
$
14,020

Due after one year through five years
118,831

 
118,606

Due after five years through ten years
61,459

 
58,813

Due after ten years
30,000

 
26,550

 
$
224,316

 
$
217,989


Other investments which consist of two open-end funds are excluded from the above table since there are no contractual maturity dates. Mortgage-backed securities are excluded from the above table since their effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.
The estimated fair value and unrealized loss of securities available-for-sale and held-to-maturity at March 31, 2017 and December 31, 2016, segregated by the duration of the unrealized loss, are as follows (in thousands):

 
At March 31, 2017
 
Less than 12 months
 
12 months or longer
 
Total
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government & agency obligations
$
12,251

 
$
(289
)
 
$
—

 
$
—

 
$
12,251

 
$
(289
)
Held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
State and municipal obligations
43,496

 
(564
)
 
—

 
—

 
43,496

 
(564
)
Corporate debt securities
8,503

 
(82
)
 
49,118

 
(5,882
)
 
57,621

 
(5,964
)
Other investments
8,588

 
(232
)
 
—

 
—

 
8,588

 
(232
)
Total investment securities
60,587

 
(878
)
 
49,118

 
(5,882
)
 
109,705

 
(6,760
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
FHLMC
131,346

 
(1,545
)
 
25,548

 
(756
)
 
156,894

 
(2,301
)
FNMA
155,073

 
(1,980
)
 
8,524

 
(303
)
 
163,597

 
(2,283
)
GNMA
81,768

 
(611
)
 
—

 
—

 
81,768

 
(611
)
Total mortgage-backed securities
368,187

 
(4,136
)
 
34,072

 
(1,059
)
 
402,259

 
(5,195
)
Total held-to-maturity
428,774

 
(5,014
)
 
83,190

 
(6,941
)
 
511,964

 
(11,955
)
Total securities
$
441,025

 
$
(5,303
)
 
$
83,190

 
$
(6,941
)
 
$
524,215

 
$
(12,244
)
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2016
 
Less than 12 months
 
12 months or longer
 
Total
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. government & agency obligations
$
12,224

 
$
(318
)
 
$
—

 
$
—

 
$
12,224

 
$
(318
)
Held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
State and municipal obligations
32,995

 
(856
)
 
—

 
—

 
32,995

 
(856
)
Corporate debt securities
12,450

 
(120
)
 
49,119

 
(5,881
)
 
61,569

 
(6,001
)
Other Investments
8,551

 
(228
)
 
—

 
—

 
8,551

 
(228
)
Total investment securities
53,996

 
(1,204
)
 
49,119

 
(5,881
)
 
103,115

 
(7,085
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
FHLMC
102,461

 
(1,665
)
 
26,898

 
(792
)
 
129,359

 
(2,457
)
FNMA
124,403

 
(2,185
)
 
8,925

 
(339
)
 
133,328

 
(2,524
)
GNMA
79,116

 
(364
)
 
—

 
—

 
79,116

 
(364
)
Total mortgage-backed securities
305,980

 
(4,214
)
 
35,823

 
(1,131
)
 
341,803

 
(5,345
)
Total held-to-maturity
359,976

 
(5,418
)
 
84,942

 
(7,012
)
 
444,918

 
(12,430
)
Total securities
$
372,200

 
$
(5,736
)
 
$
84,942

 
$
(7,012
)
 
$
457,142

 
$
(12,748
)

At March 31, 2017, the amortized cost, estimated fair value and credit rating of the individual corporate debt securities in an unrealized loss position for greater than one year are as follows (in thousands):
 
Security Description
Amortized
Cost
 
Estimated
Fair Value
 
Credit Rating
Moody’s/
S&P
BankAmerica Capital
$
15,000

 
$
13,513

 
Ba1/BB+
Chase Capital
10,000

 
9,055

 
Baa2/BBB-
Wells Fargo Capital
5,000

 
4,513

 
A1/BBB+
Huntington Capital
5,000

 
4,225

 
Baa2/BB
Keycorp Capital
5,000

 
4,425

 
Baa2/BB+
PNC Capital
5,000

 
4,525

 
Baa1/BBB-
State Street Capital
5,000

 
4,500

 
A3/BBB
SunTrust Capital
5,000

 
4,362

 
Not Rated/BB+
 
$
55,000

 
$
49,118

 
 

 
At March 31, 2017, the estimated fair value of each of the above corporate debt securities was below cost. However, the estimated fair value of these corporate debt securities has steadily increased over the past several years. These corporate debt securities are issued by other financial institutions with credit ratings ranging from a high of A1 to a low of BB as rated by one of the internationally-recognized credit rating services. These floating-rate corporate debt securities were purchased in 1998 and have paid coupon interest continuously since issuance. Floating-rate corporate debt securities such as these pay a fixed interest rate spread over 90-day LIBOR. Following the purchase of these securities, the required interest rate spread increased for these types of securities causing a decline in the market price. The Company concluded that these corporate debt securities were only temporarily impaired at March 31, 2017. In concluding that the impairments were only temporary, the Company considered several factors in its analysis. The Company noted that each issuer made all the contractually due payments when required. There were no defaults on principal or interest payments and no interest payments were deferred. All of the financial institutions are also considered well-capitalized. Credit spreads have now decreased for these types of securities and market prices have improved. Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security. Furthermore, the Company does not have the intent to sell these corporate debt securities and it is more likely than not that the Company will not be required to sell the securities. The Company has held the securities continuously since 1998 and expects to receive its full principal at maturity in 2028 or prior if called by the issuer. Historically, the Company has not utilized securities sales as a source of liquidity. The Company’s long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.
The mortgage-backed securities are issued and guaranteed by either the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association ("GNMA"), or the Small Business Administration ("SBA") corporations which are chartered by the United States Government and whose debt obligations are typically rated AA+ by one of the internationally-recognized credit rating services. The Company considers the unrealized losses to be the result of changes in interest rates which over time can have both a positive and negative impact on the estimated fair value of the mortgage-backed securities. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost. As a result, the Company concluded that these securities were only temporarily impaired at March 31, 2017.