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INVESTMENT SECURITIES
 3 Months Ended
Mar. 31, 2017
INVESTMENT SECURITIES  
INVESTMENT SECURITIES

 

 

NOTE 4: INVESTMENT SECURITIES

 

Investments in securities are classified as available for sale or held to maturity as of March 31, 2017 and December 31, 2016. The amortized cost and fair values of the securities classified as available for sale and held to maturity as of March 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Gross

    

Gross

    

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations

 

$

10,089

 

$

75

 

$

 —

 

$

10,164

 

U.S. Government Sponsored Enterprises ("U.S. GSEs")

 

 

83,916

 

 

127

 

 

(531)

 

 

83,512

 

Federal Home Loan Bank ("FHLB") Obligations

 

 

67,302

 

 

101

 

 

(353)

 

 

67,050

 

Residential Real Estate Mortgage-backed Securities ("Agency MBSs")

 

 

63,919

 

 

762

 

 

(404)

 

 

64,277

 

Agency Commercial Mortgage Backed Securities ("Agency CMBSs")

 

 

23,784

 

 

 —

 

 

(414)

 

 

23,370

 

Agency Collateralized Mortgage Obligations ("Agency CMOs")

 

 

39,871

 

 

32

 

 

(287)

 

 

39,616

 

Total Available for Sale

 

$

288,881

 

$

1,097

 

$

(1,989)

 

$

287,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Gross

    

Gross

    

 

 

 

 

 

Amortized

 

Unrecognized

 

Unrecognized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Held to Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Agency Obligations

 

$

16,864

 

$

121

 

$

(6)

 

$

16,979

 

Agency MBSs

 

 

5,548

 

 

101

 

 

 —

 

 

5,649

 

Agency CMOs

 

 

58,579

 

 

211

 

 

(330)

 

 

58,460

 

Total Held to Maturity

 

$

80,991

 

$

433

 

$

(336)

 

$

81,088

 

 

The amortized cost and fair values of the securities classified as available for sale and held to maturity as of December 31, 2016 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Gross

    

Gross

    

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations

 

$

25,079

 

$

104

 

$

 —

 

$

25,183

 

U.S. GSEs

 

 

93,883

 

 

106

 

 

(636)

 

 

93,353

 

FHLB Obligations

 

 

67,362

 

 

100

 

 

(456)

 

 

67,006

 

Agency MBSs

 

 

74,573

 

 

1,101

 

 

(465)

 

 

75,209

 

Agency CMBSs

 

 

23,972

 

 

 —

 

 

(364)

 

 

23,608

 

Agency CMOs

 

 

49,694

 

 

46

 

 

(407)

 

 

49,333

 

ABSs

 

 

283

 

 

23

 

 

 —

 

 

306

 

Total Available for Sale

 

$

334,846

 

$

1,480

 

$

(2,328)

 

$

333,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Gross

    

Gross

    

    

 

 

 

 

Amortized

 

Unrecognized

 

Unrecognized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Held to Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Agency Obligations

 

$

17,849

 

$

119

 

$

(33)

 

$

17,935

 

Agency MBSs

 

 

5,787

 

 

92

 

 

 —

 

 

5,879

 

Agency CMOs

 

 

62,058

 

 

208

 

 

(331)

 

 

61,935

 

Total Held to Maturity

 

$

85,694

 

$

419

 

$

(364)

 

$

85,749

 

 

The contractual final maturity distribution of the debt securities classified as available for sale as of March 31, 2017, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

 

 

 

 

 

    

    

 

Securities

 

    

 

 

 

 

 

 

 

After One

    

After Five

 

 

 

 

not due

 

 

 

 

 

 

Within

 

But Within

 

But Within

 

After Ten

 

at a Single

 

 

 

 

(In thousands)

 

One Year

 

Five Years

 

Ten Years

 

Years

 

Maturity

 

Total

 

Available for Sale (at fair value):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations

 

$

100

 

$

10,064

 

$

 —

 

$

 —

 

$

N/A

 

$

10,164

 

U.S. GSEs

 

 

 —

 

 

83,512

 

 

 —

 

 

 —

 

 

N/A

 

 

83,512

 

FHLB Obligations

 

 

 —

 

 

61,054

 

 

5,996

 

 

 —

 

 

N/A

 

 

67,050

 

Agency MBSs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

64,277

 

 

64,277

 

Agency CMBSs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

23,370

 

 

23,370

 

Agency CMOs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

39,616

 

 

39,616

 

Total Available for Sale

 

$

100

 

$

154,630

 

$

5,996

 

$

 —

 

$

127,263

 

$

287,989

 

Available for Sale (at amortized cost):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations

 

$

100

 

$

9,989

 

$

 —

 

$

 —

 

$

N/A

 

$

10,089

 

U.S. GSEs

 

 

 —

 

 

83,916

 

 

 —

 

 

 —

 

 

N/A

 

 

83,916

 

FHLB Obligations

 

 

 —

 

 

61,376

 

 

5,926

 

 

 —

 

 

N/A

 

 

67,302

 

Agency MBSs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

63,919

 

 

63,919

 

Agency CMBSs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

23,784

 

 

23,784

 

Agency CMOs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

39,871

 

 

39,871

 

Total Available for Sale

 

$

100

 

$

155,281

 

$

5,926

 

$

 —

 

$

127,574

 

$

288,881

 

 

The contractual final maturity distribution of the debt securities classified as held to maturity as of March 31, 2017, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

 

 

 

 

 

    

    

 

Securities

    

    

 

 

 

 

 

 

 

After One

 

After Five

 

 

 

 

not due

 

 

 

 

 

 

Within

 

But Within

 

But Within

 

After Ten

 

at a Single

 

 

 

 

(In thousands)

 

One Year

 

Five Years

 

Ten Years

 

Years

 

Maturity

 

Total

 

Held to Maturity (at fair value):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Agency Obligations

 

$

 —

 

$

 —

 

$

 —

 

$

16,979

 

$

N/A

 

$

16,979

 

Agency MBSs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

5,649

 

 

5,649

 

Agency CMOs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

58,460

 

 

58,460

 

Total Held to Maturity

 

$

 —

 

$

 —

 

$

 —

 

$

16,979

 

$

64,109

 

$

81,088

 

Held to Maturity (at amortized cost):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Agency Obligations

 

$

 —

 

$

 —

 

$

 —

 

$

16,864

 

$

N/A

 

$

16,864

 

Agency MBSs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

5,548

 

 

5,548

 

Agency CMOs

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

58,579

 

 

58,579

 

Total Held to Maturity

 

$

 —

 

$

 —

 

$

 —

 

$

16,864

 

$

64,127

 

$

80,991

 

 

Actual maturities will differ from contractual maturities because borrowers may have rights to call or prepay obligations.

 

The following table presents the proceeds, gross gains and gross losses on available for sale securities for the three months ended March 31, 2017 and 2016.

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

 

 

March 31,

 

(In thousands)

    

2017

    

2016

 

Proceeds

 

$

38,635

 

$

 —

 

Gross gains

 

 

278

 

 

 —

 

Gross losses

 

 

(23)

 

 

 —

 

Net gains

 

$

255

 

$

 —

 

 

Securities with a carrying value of $328.27 million and $370.81 million at March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required by law.

 

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at March 31, 2017, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Than 12 Months

 

12 Months or More

 

Total

 

 

 

Number

 

Fair

 

 

 

 

Number

 

Fair

 

 

 

 

Number

 

Fair

 

 

 

 

(In thousands)

    

of Issues

 

Value

    

Loss

    

of Issues

 

Value

    

Loss

    

of Issues

 

Value

    

Loss

 

Available for Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. GSEs

 

 7

 

$

37,599

 

$

(531)

 

 —

 

$

 —

 

$

 —

 

 7

 

$

37,599

 

$

(531)

 

FHLB Obligations

 

 7

 

 

35,858

 

 

(353)

 

 —

 

 

 —

 

 

 —

 

 7

 

 

35,858

 

 

(353)

 

Agency MBSs

 

15

 

 

45,753

 

 

(404)

 

 —

 

 

 —

 

 

 —

 

15

 

 

45,753

 

 

(404)

 

Agency CMBSs

 

 6

 

 

23,370

 

 

(414)

 

 —

 

 

 —

 

 

 —

 

 6

 

 

23,370

 

 

(414)

 

Agency CMOs

 

13

 

 

28,433

 

 

(287)

 

 —

 

 

 —

 

 

 —

 

13

 

 

28,433

 

 

(287)

 

Total Available for Sale

 

48

 

$

171,013

 

$

(1,989)

 

 —

 

$

 —

 

$

 —

 

48

 

$

171,013

 

$

(1,989)

 

Held to Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Agency Obligations

 

 1

 

$

6,856

 

$

(6)

 

 —

 

$

 —

 

$

 —

 

 1

 

$

6,856

 

$

(6)

 

Agency CMOs

 

16

 

 

33,371

 

 

(215)

 

 1

 

 

3,027

 

 

(115)

 

17

 

 

36,398

 

 

(330)

 

Total Held to Maturity

 

17

 

$

40,227

 

$

(221)

 

 1

 

$

3,027

 

$

(115)

 

18

 

$

43,254

 

$

(336)

 

 

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at December 31, 2016, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Than 12 Months

 

12 Months or More

 

Total

 

 

 

Number

 

Fair

 

 

 

 

Number

 

Fair

 

 

 

 

Number

 

Fair

 

 

 

 

(In thousands)

    

of Issues

 

Value

    

Loss

    

of Issues

 

Value

    

Loss

    

of Issues

 

Value

    

Loss

 

Available for Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. GSEs

 

 8

 

$

42,404

 

$

(636)

 

 —

 

$

 —

 

$

 —

 

 8

 

$

42,404

 

$

(636)

 

FHLB Obligations

 

 9

 

 

45,870

 

 

(456)

 

 —

 

 

 —

 

 

 —

 

 9

 

 

45,870

 

 

(456)

 

Agency MBSs

 

16

 

 

48,777

 

 

(465)

 

 —

 

 

 —

 

 

 —

 

16

 

 

48,777

 

 

(465)

 

Agency CMBSs

 

 6

 

 

23,608

 

 

(364)

 

 —

 

 

 —

 

 

 —

 

 6

 

 

23,608

 

 

(364)

 

Agency CMOs

 

15

 

 

33,935

 

 

(332)

 

 2

 

 

2,227

 

 

(75)

 

17

 

 

36,162

 

 

(407)

 

Total Available for Sale

 

54

 

$

194,594

 

$

(2,253)

 

 2

 

$

2,227

 

$

(75)

 

56

 

$

196,821

 

$

(2,328)

 

Held to Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Agency Obligations

 

 1

 

$

7,230

 

$

(33)

 

 —

 

$

 —

 

$

 —

 

 1

 

$

7,230

 

$

(33)

 

Agency CMOs

 

13

 

 

26,480

 

 

(212)

 

 1

 

 

3,162

 

 

(119)

 

14

 

 

29,642

 

 

(331)

 

Total Held to Maturity

 

14

 

$

33,710

 

$

(245)

 

 1

 

$

3,162

 

$

(119)

 

15

 

$

36,872

 

$

(364)

 

 

 

There were no securities classified as trading at March 31, 2017 or December 31, 2016.

 

Unrealized losses on investment securities result from the cost basis of the security being higher than its current fair value. These differences generally occur because of changes in interest rates since the time of purchase, or because the credit quality of the issuer has deteriorated. We perform a quarterly analysis of each security in our portfolio to determine if impairment exists, and if it does, whether that impairment is other-than-temporary.

 

At March 31, 2017, all of our MBSs and CMOs held were issued by U.S. government-sponsored entities and agencies, primarily the Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”), institutions which the government has affirmed its commitment to support.  As the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because we do not have the intent to sell these securities and it is not likely that we will be required to sell the securities before their anticipated recovery, we do not consider these securities to be other-than-temporarily impaired at March 31, 2017.

 

Agency MBSs and Agency CMOs consist of pools of residential mortgages which are guaranteed by FNMA, FHLMC, or Government National Mortgage Association (“GNMA”) with various origination dates and maturities.  Agency CMBS consists of bonds backed by commercial real estate which are guaranteed by FNMA and GNMA.

 

During 2014 and 2013, securities were transferred from available for sale to held to maturity. The amortization of the unamortized net holding loss reported in accumulated other comprehensive income offsets the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net losses for the securities transferred from available for sale to held to maturity was $1.99 million or $1.30 million, net of tax, at March 31, 2017.