NOTE 3 - SECURITIES

The amortized cost and fair value of securities available for sale and related unrealized gains/losses recognized in accumulated other comprehensive income was as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
As of September 30, 2016
Available for Sale
U. S. government agency	$	426	$	10	$	—	$	436
State and municipal		339,261		20,529		(93)		359,697
Mortgage-backed securities-residential (Government Sponsored Entity)		446,989		9,478		(3)		456,464
Collateralized mortgage obligations (Government Sponsored Entity)		192,100		3,664		(145)		195,619
Equity securities		6,233		—		—		6,233
Other securities		6,529		70		—		6,599
Total available for sale	$	991,538	$	33,751	$	(241)	$	1,025,048

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
As of December 31, 2015
Available for Sale
U. S. government agency	$	499	$	5	$	—	$	504
State and municipal		332,999		17,802		(68)		350,733
Mortgage-backed securities-residential (Government Sponsored Entity)		332,525		2,199		(644)		334,080
Collateralized mortgage obligations (Government Sponsored Entity)		228,621		1,966		(1,838)		228,749
Equity securities		4,689		—		—		4,689
Other securities		6,524		—		—		6,524
Total available for sale	$	905,857	$	21,972	$	(2,550)	$	925,279

The amortized cost and fair value of the investment securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity or with no maturity are shown separately.


	Available for Sale
	Amortized Cost		Fair Value
Within one year	$	11,347	$	11,456
One through five years		70,884		74,840
Six through ten years		112,190		119,436
After ten years		151,795		161,000
Mortgage-backed securities-residential (Government Sponsored Entity)		446,989		456,464
Collateralized mortgage obligations (Government Sponsored Entity)		192,100		195,619
Equity securities		6,233		6,233
Total available for sale securities	$	991,538	$	1,025,048

Proceeds from sales of securities available for sale were $85,738 and $139,547 for the nine months ended September 30, 2016 and 2015, respectively. Gross gains of $144 and $1,515 and gross losses of $0 and $1,155 were realized on these sales during 2016 and 2015, respectively. Income taxes on these net gains were $50 and $126 in 2016 and 2015.

Proceeds from sales of securities available for sale were $7,615 and $57,208 for the three months ended September 30, 2016 and 2015, respectively. Gross gains of $23 and $203 and gross losses of $0 and $158 were realized on these sales during 2016 and 2015, respectively. Income taxes on these net gains were $8 and $16 in 2016 and 2015.

Below is a summary of securities with unrealized losses as of September 30, 2016 and December 31, 2015 presented by length of time the securities have been in a continuous unrealized loss position.


	Less than 12 months				12 months or longer				Total
September 30, 2016			Unrealized				Unrealized				Unrealized
Description of securities	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U. S. government agency	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal		10,825		(93)		—		—		10,825		(93)
Mortgage-backed securities-residential (Government Sponsored Entity)		10,175		(3)		—		—		10,175		(3)
Collateralized mortgage obligations (Government Sponsored Entity)		17,568		(77)		9,068		(68)		26,636		(145)
Other securities		—		—		—		—		—		—
Total temporarily impaired	$	38,568	$	(173)	$	9,068	$	(68)	$	47,636	$	(241)


	Less than 12 months				12 months or longer				Total
December 31, 2015			Unrealized				Unrealized				Unrealized
Description of securities	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U. S. government agency	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal		4,802		(33)		1,367		(35)		6,169		(68)
Mortgage-backed securities-residential (Government Sponsored Entity)		168,950		(644)		—		—		168,950		(644)
Collateralized mortgage obligations (Government Sponsored Entity)		53,324		(591)		52,061		(1,247)		105,385		(1,838)
Other securities		—		—		—		—		—		—
Total temporarily impaired	$	227,076	$	(1,268)	$	53,428	$	(1,282)	$	280,504	$	(2,550)

Other-Than-Temporary-Impairment

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 are generally evaluated for OTTI under ASC 320. However, certain purchased beneficial interests, including non-agency mortgage-backed securities, asset-backed securities, and collateralized debt obligations that had credit ratings at the time of purchase of below AA are evaluated using the model outlined in ASC 325-10.

In determining OTTI under ASC 320, 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 under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of September 30, 2016, the Company’s securities portfolio consisted of 938 securities, 28 of which were in an unrealized loss position. Unrealized losses on state and municipal securities of $93 have not been recognized into income because management has the ability to hold for a period of time sufficient to allow for any anticipated recovery in fair value and it is unlikely that management will be required to sell the securities before their anticipated recovery. The decline in value is primarily attributable to changes in interest rates. The Company monitors the financial condition of these issuers. The fair value of these debt securities is expected to recover as the securities approach their maturity date.

At September 30, 2016, almost all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value of approximately $3 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 September 30, 2016.

The Company’s collateralized mortgage obligation securities portfolio includes agency collateralized mortgage obligations with a market value of $26,636 which had unrealized losses of approximately $145 at September 30, 2016. As noted above, the decline in fair value is attributable to changes in interest rates and illiquidity and not credit quality. The Company monitors to insure it has adequate credit support and as of September 30, 2016, the Company believes there is no OTTI and 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. All securities are investment grade.