NOTE 3 – INVESTMENT SECURITIES

The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government-sponsored mortgage-backed securities and state, county and municipal securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

The amortized cost and estimated fair value of investment securities available for sale, along with unrealized gains and losses, are summarized as follows:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

June 30, 2017
U.S. government sponsored agencies	$	1,000	$	9	$	-	$	1,009
State, county and municipal securities		142,028		3,166		(86)		145,108
Corporate debt securities		47,252		552		(192)		47,612
Mortgage-backed securities		626,400		2,828		(4,264)		624,964

Total debt securities	$	816,680	$	6,555	$	(4,542)	$	818,693

December 31, 2016
U.S. government sponsored agencies	$	999	$	21	$	-	$	1,020
State, county and municipal securities		149,899		2,605		(469)		152,035
Corporate debt securities		32,375		167		(370)		32,172
Mortgage-backed securities		641,362		2,700		(6,554)		637,508

Total debt securities	$	824,635	$	5,493	$	(7,393)	$	822,735

The amortized cost and fair value of available-for-sale securities at June 30, 2017 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.

			Estimated
	Amortized		Fair
(dollars in thousands)	Cost		Value
Due in one year or less	$	15,505	$	15,660
Due from one year to five years		56,978		57,730
Due from five to ten years		73,838		75,578
Due after ten years		43,959		44,761
Mortgage-backed securities		626,400		624,964

	$	816,680	$	818,693

Securities with a carrying value of approximately $531.8 million serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law at June 30, 2017, compared with $618.2 million at December 31, 2016.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at June 30, 2017 and December 31, 2016.

	Less Than 12 Months				12 Months or More				Total
	Estimated				Estimated				Estimated
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Losses		Value		Losses		Value		Losses

June 30, 2017
U.S. government sponsored agencies	$	-	$	-	$	-	$	-	$	-	$	-
State, county and municipal securities		13,920		(86)		-		-		13,920		(86)
Corporate debt securities		18,966		(182)		490		(10)		19,456		(192)
Mortgage-backed securities		356,690		(3,696)		26,082		(568)		382,772		(4,264)

Total debt securities	$	389,576	$	(3,964)	$	26,572	$	(578)	$	416,148	$	(4,542)

December 31, 2016
U.S. government sponsored agencies	$	-	$	-	$	-	$	-	$	-	$	-
State, county and municipal securities		47,647		(469)		-		-		47,647		(469)
Corporate debt securities		18,377		(363)		493		(7)		18,870		(370)
Mortgage-backed securities		414,300		(6,177)		11,791		(377)		426,091		(6,554)

Total debt securities	$	480,324	$	(7,009)	$	12,284	$	(384)	$	492,608	$	(7,393)

As of June 30, 2017, the Company’s securities portfolio consisted of 418 securities, 160 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed securities, as discussed below.

At June 30, 2017, the Company held 139 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2017.

At June 30, 2017, the Company held 11 state, county and municipal securities and 10 corporate debt securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2017.

The Company’s investments in subordinated debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at June 30, 2017 or December 31, 2016.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at June 30, 2017, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at June 30, 2017, these investments are not considered impaired on an other-than-temporary basis.

At June 30, 2017 and December 31, 2016, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the six months ended June 30, 2017 and 2016:

	June 30,		June 30,
(dollars in thousands)	2017		2016
Gross gains on sales of securities	$	38	$	313
Gross losses on sales of securities		(1)		(219)
Net realized gains on sales of securities available for sale	$	37	$	94

Sales proceeds	$	3,090	$	46,731