Securities

The following tables provide the amortized costs and fair values of securities held-to-maturity at September 30, 2017 and December 31, 2016. Held-to-maturity securities are carried at amortized cost, which reflects historical cost, adjusted for amortization of premium and accretion of discounts.



	September 30, 2017
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Held-to-maturity
U.S. Government agencies	$	5,000	$	18	$	—		$	5,018
Municipals	10,778		642		(22		)	11,398
Total	$	15,778	$	660	$	(22	)	$	16,416



	December 31, 2016
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Held-to-maturity
U.S. Government agencies	$	5,000	$	46	$	—		$	5,046
Municipals	4,200		66		(19		)	4,247
Total	$	9,200	$	112	$	(19	)	$	9,293

The amortized cost and fair value of securities held-to-maturity as of September 30, 2017 and December 31, 2016 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because some of the securities may be called or prepaid without any penalties.



	September 30, 2017				December 31, 2016
(In Thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Held-to-maturity
U.S. Government agencies:
Due after one year through five years	$	5,000	$	5,018	$	5,000	$	5,046
Municipals:
Due after one year through five years	1,996		2,032		2,028		2,062
Due after five years through ten years	1,609		1,637		1,617		1,649
Due after ten years through fifteen years	553		530		555		536
Due after fifteen years	6,620		7,199		—		—
Total	$	15,778	$	16,416	$	9,200	$	9,293

The following tables provide the amortized costs and fair values of securities available-for-sale. Available-for-sale securities are carried at estimated fair value with net unrealized gains or losses reported on an after tax basis as a component of accumulated other comprehensive income in shareholders' equity. The estimated fair value of available-for-sale securities is impacted by interest rates, credit spreads, market volatility, and liquidity.



	September 30, 2017
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale
U.S. Government agencies	$	26,262	$	—	$	(203	)	$	26,059
Municipals	101,037		1,208		(836		)	101,409
Mortgage backed securities	248,702		158		(1,945		)	246,915
Asset backed securities	8,892		4		(173		)	8,723
Corporate bonds	8,527		25		(1		)	8,551
Certificates of deposit	1,976		17		—			1,993
CRA mutual fund	1,500		—		(110		)	1,390
Total	$	396,896	$	1,412	$	(3,268	)	$	395,040



	December 31, 2016
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale
U.S. Government agencies	$	5,106	$	—	$	(112	)	$	4,994
Municipals	45,392		172		(1,205		)	44,359
Mortgage backed securities	120,794		177		(1,164		)	119,807
Asset backed securities	13,105		17		(258		)	12,864
Corporate bonds	8,631		35		—			8,666
Certificates of deposit	1,976		33		—			2,009
CRA mutual fund	1,500		—		(109		)	1,391
Total	$	196,504	$	434	$	(2,848	)	$	194,090

The amortized cost and fair value of securities available-for-sale as of September 30, 2017 and December 31, 2016 by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because some of the securities may be called or prepaid without any penalties.



	September 30, 2017				December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In Thousands)
Available-for-sale:
U.S. Government agencies:
Due in one year or less	$	50	$	50	$	—	$	—
Due after one year through five years	5,165		5,140		5,106		4,994
Due after ten years through fifteen years	7,049		6,945		—		—
Due after fifteen years	13,998		13,924		—		—
Municipals:
Due in one year or less	691		698		—		—
Due after one year through five years	7,788		7,714		3,442		3,500
Due after five years through ten years	8,693		8,657		5,025		4,888
Due after ten years through fifteen years	26,234		26,629		20,463		20,300
Due after fifteen years	57,631		57,711		16,462		15,671
Mortgage backed securities:
Due after one year through five years	53,961		54,058		24,959		24,916
Due after five years through ten years	89,120		88,501		24,996		24,895
Due after ten years through fifteen years	7,433		7,292		12,861		12,555
Due after fifteen years	98,188		97,064		57,978		57,441
Asset backed securities:
Due after five years through ten years	3,067		3,071		3,080		3,001
Due after fifteen years	5,825		5,652		10,025		9,863
Corporate bonds:
Due in one year or less	4,001		4,000		4,141		4,144
Due after one year through five years	4,526		4,551		4,490		4,522
Certificates of deposit:
Due after one year through five years	1,976		1,993		1,976		2,009
CRA mutual fund	1,500		1,390		1,500		1,391
Total	$	396,896	$	395,040	$	196,504	$	194,090

The estimated fair value of securities pledged to secure public funds, securities sold under agreements to repurchase, credit lines with the Federal Reserve Bank ("FRB"), and debtor-in-possession accounts amounted to $352.7 million and $178.7 million at September 30, 2017 and December 31, 2016, respectively.

Securities available-for-sale and held-to-maturity that had an unrealized loss position at September 30, 2017 and December 31, 2016 are as follow:



(In Thousands)	Less than Twelve Months					Twelve Months or Greater					Total
September 30, 2017	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
Held-to-maturity
Municipals	$	—	$	—		$	530	$	(22	)	$	530	$	(22	)

Available-for-sale
U.S. Government agencies	$	23,545	$	(152	)	$	2,390	$	(51	)	$	25,935	$	(203	)
Municipals	19,115		(239		)	14,228		(597		)	33,343		(836		)
Mortgage backed securities	180,423		(1,017		)	33,370		(928		)	213,793		(1,945		)
Asset backed securities	—		—			5,652		(173		)	5,652		(173		)
CRA mutual funds	—		—			1,390		(110		)	1,390		(110		)
Corporate bonds	4,000		(1		)	—		—			4,000		(1		)
Total	$	227,083	$	(1,409	)	$	57,030	$	(1,859	)	$	284,113	$	(3,268	)



(In Thousands)	Less than Twelve Months					Twelve Months or Greater					Total
December 31, 2016	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
Held-to-maturity
Municipals	$	536	$	(19	)	$	—	$	—		$	536	$	(19	)

Available-for-sale
U.S. Government agencies	$	4,994	$	(112	)	$	—	$	—		$	4,994	$	(112	)
Municipals	28,147		(1,205		)	—		—			28,147		(1,205		)
Mortgage backed securities	62,145		(541		)	19,768		(623		)	81,913		(1,164		)
Asset backed securities	1,286		(37		)	7,077		(221		)	8,363		(258		)
CRA mutual fund	—		—			1,391		(109		)	1,391		(109		)
Total	$	96,572	$	(1,895	)	$	28,236	$	(953	)	$	124,808	$	(2,848	)

The Corporation evaluates securities for other-than-temporary impairment ("OTTI") on a quarterly basis and more frequently when economic or market conditions warrant such evaluation. Consideration is given to various factors in determining whether the Corporation anticipates a recovery in fair value such as: the length of time and extent to which the fair value has been less than cost, and the financial condition and underlying credit quality for the issuer. When analyzing an issuer's financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, the sector or industry trends affecting the issuer, and whether any recent downgrades by bond rating agencies have occurred.

At September 30, 2017, there were 93 available-for-sale securities with unrealized losses totaling $3.268 million and one held-to-maturity security with an unrealized loss of $22 thousand. The Corporation evaluated the investment portfolio for possible other-than-temporary impairment losses and concluded the unrealized losses were caused by interest rate fluctuations with no adverse change in cash flows noted. Based on this analysis and because the Corporation does not intend to sell securities in an unrealized loss position and it is more likely than not the Corporation will not be required to sell any securities before recovery of amortized cost basis, which may be at maturity, the Corporation does not consider any portfolio securities to be other-than-temporarily impaired.

Restricted stock

The Corporation’s investment in the Federal Home Loan Bank of Atlanta ("FHLB") stock totaled $6.0 million and $9.1 million at September 30, 2017 and December 31, 2016, respectively. FHLB stock is generally viewed as a long-term investment and as a restricted security which is carried at cost because there is no market for the stock other than the FHLB or member institutions. Therefore, when evaluating FHLB stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Corporation does not consider this investment to be other-than-temporarily impaired at September 30, 2017, and no impairment has been recognized. FHLB stock is shown in restricted stock on the consolidated balance sheets.

The Corporation also has an investment in FRB stock which totaled $8.4 million and $1.0 million at September 30, 2017 and December 31, 2016, respectively. The investment in FRB stock is a required investment and is carried at cost since there is no ready market. The Corporation does not consider this investment to be other-than-temporarily impaired at September 30, 2017, and no impairment has been recognized. FRB stock is shown in restricted stock on the consolidated balance sheets.

Securities Sold Under Agreements to Repurchase (Repurchase Agreements)

The Corporation enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Corporation may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Corporation to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is classified as a short-term borrowing in the Corporation’s consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Corporation does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.

The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Corporation be in default (e.g., fails to make an interest payment to the counterparty). The collateral is held by a third-party financial institution in the Corporation’s custodial account. The Corporation has the right to sell or re-pledge the investment securities. The risks and rewards associated with the investment securities pledged as collateral (e.g. a decline or rise in the fair value of the investments) remains with the Corporation. As of September 30, 2017 and December 31, 2016, the obligations outstanding under these repurchase agreements totaled $54.6 million and $17.0 million, respectively, and were comprised of overnight sweep accounts. The fair value of the securities pledged in connection with these repurchase agreements at September 30, 2017 was $72.5 million in total and consisted of $20.2 million in municipal securities, $45.0 million in mortgage backed securities, $1.7 million in corporate bonds, $1.2 million in certificates of deposit, $3.0 million in U.S. Government agencies, and $1.4 million in the CRA mutual fund. The fair value of the securities pledged in connection with these repurchase agreements at December 31, 2016 was $21.4 million in total and consisted of $4.7 million in municipal securities, $6.9 million in mortgage backed securities, $5.9 million in corporate bonds, $2.5 million in asset backed securities and $1.4 million in the CRA mutual fund.