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Securities
 9 Months Ended
Sep. 30, 2017
SECURITIES  
SECURITIES

 

6. SECURITIES

The amortized cost and fair value of securities as of the dates set forth were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

SBA guaranteed securities

 

$

106,284

 

$

252

 

$

(350)

 

$

106,186

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

 

259,045

 

 

1,197

 

 

(307)

 

 

259,935

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: commercial

 

 

66,069

 

 

 -

 

 

(611)

 

 

65,458

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

214,898

 

 

 -

 

 

(2,921)

 

 

211,977

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: commercial

 

 

31,138

 

 

 -

 

 

(30)

 

 

31,108

Corporate debt securities

 

 

1,788

 

 

 3

 

 

 -

 

 

1,791

Obligations of municipal subdivisions

 

 

6,686

 

 

 7

 

 

 -

 

 

6,693

CRA qualified investment fund

 

 

11,337

 

 

 -

 

 

(226)

 

 

11,111

Total

 

$

697,245

 

$

1,459

 

$

(4,445)

 

$

694,259

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

$

11,103

 

$

97

 

$

(131)

 

$

11,069

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

2,627

 

 

 5

 

 

 -

 

 

2,632

Total

 

$

13,730

 

$

102

 

$

(131)

 

$

13,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

    

$

118,272

    

$

17

    

$

(403)

    

$

117,886

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

 

99,876

 

 

452

 

 

(430)

 

 

99,898

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

42,379

 

 

96

 

 

(563)

 

 

41,912

Corporate debt securities

 

 

3,788

 

 

 1

 

 

(14)

 

 

3,775

Obligations of municipal subdivisions

 

 

236

 

 

 -

 

 

(1)

 

 

235

CRA qualified investment fund

 

 

11,183

 

 

 -

 

 

(270)

 

 

10,913

Total

 

$

275,734

 

$

566

 

$

(1,681)

 

$

274,619

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

$

14,358

 

$

140

 

$

(267)

 

$

14,231

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

21,147

 

 

 2

 

 

(536)

 

 

20,613

Total

 

$

35,505

 

$

142

 

$

(803)

 

$

34,844

Expected maturities of securities will differ from contractual maturities because the underlying borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.  The following table sets forth, as of the date indicated, contractual maturities of securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

 

Available-for-sale

 

Held-to-maturity

 

 

Amortized Cost

 

Fair Value

 

Amortized Cost

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

    

$

1,788

    

$

1,791

    

$

 -

    

$

 -

Due after one year through five years

 

 

106,284

 

 

106,186

 

 

 -

 

 

 -

Due after five years through ten years

 

 

236

 

 

243

 

 

 -

 

 

 -

Due after ten years

 

 

6,450

 

 

6,450

 

 

 

 

 

 

 

 

 

114,758

 

 

114,670

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities and collateralized mortgage obligations

 

 

571,150

 

 

568,478

 

 

13,730

 

 

13,701

CRA qualified investment fund

 

 

11,337

 

 

11,111

 

 

 -

 

 

 -

Total

 

$

697,245

 

$

694,259

 

$

13,730

 

$

13,701

During the nine months ended of September 30, 2017, proceeds of $349.4 million were received from sales of securities classified as available-for-sale.  The sales resulted in a net loss of $38  thousand, which is comprised of $910 thousand in gross realized gains, offset by $948 thousand in gross realized losses. There were no sales of securities during the three or nine months ended September 30, 2016.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available-for-sale or held-to-maturity are evaluated for OTTI under FASB ASC 320, Investments—Debt and Equity Securities.

In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the other-than-temporary impairment recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.

As of September 30, 2017, the Company does not intend to sell any debt securities classified as held-to-maturity and management believes that the Company more likely than not will not be required to sell any debt securities that are in a loss position before their anticipated recovery, at which time the Company will receive full value for the securities. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of September 30, 2017, management believes any impairment in the Company’s securities is temporary and no impairment loss has been realized in the Company’s consolidated statements of income.

Declines in the fair value of individual securities below their cost that are other-than-temporary would result in writedowns, as a realized loss, to their fair value. In evaluating other-than-temporary impairment losses, management considers several factors including the severity and the duration that the fair value has been less than cost, the credit quality of the issuer, and whether it is more likely than not that the Company will be required to sell the security before a recovery in value. The Company has not realized any losses due to other-than-temporary impairment of securities as of September 30, 2017.

Securities with unrealized losses segregated by length of continuous unrealized loss position as of the dates set forth were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

 

Less than 12 Months

 

12 Months or More

 

 

Amortized Cost

 

Gross Unrealized Losses

 

Fair Value

 

Amortized Cost

 

Gross Unrealized Losses

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBA guaranteed securities

 

$

73,878

 

$

(350)

 

$

73,528

 

$

 -

 

$

 -

 

$

 -

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

 

70,052

 

 

(253)

 

 

69,799

 

 

5,127

 

 

(54)

 

 

5,073

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: commercial

 

 

66,069

 

 

(611)

 

 

65,458

 

 

 -

 

 

 -

 

 

 -

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

200,902

 

 

(2,873)

 

 

198,029

 

 

2,429

 

 

(48)

 

 

2,381

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: commercial

 

 

31,138

 

 

(30)

 

 

31,108

 

 

 -

 

 

 -

 

 

 -

CRA qualified investment fund

 

 

 -

 

 

 -

 

 

 -

 

 

11,337

 

 

(226)

 

 

11,111

Total

 

$

442,039

 

$

(4,117)

 

$

437,922

 

$

18,893

 

$

(328)

 

$

18,565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

$

2,437

 

$

(27)

 

$

2,410

 

$

3,872

 

$

(104)

 

$

3,768

Total

 

$

2,437

 

$

(27)

 

$

2,410

 

$

3,872

 

$

(104)

 

$

3,768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

Less than 12 Months

 

12 Months or More

 

 

Amortized Cost

 

Gross Unrealized Losses

 

Fair Value

 

Amortized Cost

 

Gross Unrealized Losses

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

            

 

 

 

 

 

            

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

    

$

100,517

 

$

(403)

    

$

100,114

    

$

 -

    

$

 -

    

$

 -

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

 

60,233

 

 

(405)

 

 

59,828

 

 

4,121

 

 

(25)

 

 

4,096

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

29,916

 

 

(492)

 

 

29,424

 

 

2,874

 

 

(71)

 

 

2,803

Corporate debt securities

 

 

1,785

 

 

(14)

 

 

1,771

 

 

 -

 

 

 -

 

 

 -

Obligations of municipal subdivisions

 

 

236

 

 

(1)

 

 

235

 

 

 -

 

 

 -

 

 

 -

CRA qualified investment fund

 

 

11,183

 

 

(270)

 

 

10,913

 

 

 -

 

 

 -

 

 

 -

Total

 

$

203,870

 

$

(1,585)

 

$

202,285

 

$

6,995

 

$

(96)

 

$

6,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises: residential

 

$

8,551

 

$

(234)

 

$

8,317

 

$

860

 

$

(33)

 

$

827

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises: residential

 

 

12,141

 

 

(191)

 

 

11,950

 

 

7,644

 

 

(345)

 

 

7,299

Total

 

$

20,692

 

$

(425)

 

$

20,267

 

$

8,504

 

$

(378)

 

$

8,126

The average loss on securities in an unrealized loss position was 0.98% and 1.04% of the amortized cost basis at September 30, 2017 and December 31, 2016, respectively. There were nine securities in an unrealized loss position of greater than 12 months at both September 30, 2017 and December 31, 2016.

The Company did not own securities of any one issuer (other than the U.S. government and its agencies or sponsored enterprises) for which the aggregate adjusted cost exceeds 10% of the consolidated shareholders’ equity at September 30, 2017 or December 31, 2016.

Securities with an amortized cost of $6.6 million and $12.2 million and fair value of $6.6 million and $12.2 million were pledged and available to be sold under repurchase agreements at September 30, 2017 and December 31, 2016, respectively. Securities with an amortized cost of $52.4 million and $73.0 million and fair value of $52.4 million and $72.6 million were pledged to various Federal Reserve Districts related to deposits of bankruptcy trustees at September 30, 2017 and December 31, 2016, respectively. Securities with an amortization cost and fair value of $1.3 million at December 31, 2016 were pledged to collateralize public deposits.  In addition, securities with an amortized cost of $3.4 million and $5.2 million and fair value of $3.3 million and $5.2 million were pledged as collateral for the Company’s derivative instruments at September 30, 2017 and December 31, 2016, respectively.