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Investments
9 Months Ended
Sep. 30, 2016
Investments [Abstract]  
Investments
Investments

The amortized cost and estimated fair values of the Company's securities are shown in the following table (in thousands):
 
September 30, 2016
December 31, 2015
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasuries and U.S.
 
 
 
 
 
 
 
 
government agencies
$
4

$

$

$
4

$
5

$

$

$
5

Obligations of states and
 
 
 
 

 

 

 

 

political subdivisions
62,845

1,669

79

64,435

49,725

979

7

50,697

Mortgage-backed securities:
 
 
 
 

 

 

 

 

U.S. government agencies
327,608

5,896

302

333,202

287,933

2,285

2,021

288,197

Private label
1,000

2


1,002

1,222

9


1,231

Trust preferred securities
6,049

1,206

844

6,411

6,550

463

1,155

5,858

Corporate securities
23,927

613

126

24,414

18,793

221

321

18,693

Total Debt Securities
421,433

9,386

1,351

429,468

364,228

3,957

3,504

364,681

Marketable equity  securities
2,136

1,577


3,713

2,131

1,142


3,273

Investment funds
1,525

11


1,536

1,525


13

1,512

Total Securities
 

 

 

 

 

 

 

 

Available-for-Sale
$
425,094

$
10,974

$
1,351

$
434,717

$
367,884

$
5,099

$
3,517

$
369,466


 
 
September 30, 2016
December 31, 2015
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Securities held-to-maturity:
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
 
 
 
 
 
 
 
U.S. government agencies
$
75,499

$
3,494

$

$
78,993

$
84,937

$
1,949

$
76

$
86,810

Trust preferred securities
4,000



4,000

4,000



4,000

Total Securities
 

 

 

 

 

 

 

 

Held-to-Maturity
$
79,499

$
3,494

$

$
82,993

$
88,937

$
1,949

$
76

$
90,810

 
 
 
 
 
 
 
 
 
Other investment securities:
 

 

 

 

 

 

 

 

Non-marketable equity securities
$
11,895

$

$

$
11,895

$
12,915

$

$

$
12,915

Total Other Investment
 

 

 

 

 

 

 

 

   Securities
$
11,895

$

$

$
11,895

$
12,915

$

$

$
12,915


 
Marketable equity securities consist of investments made by the Company in equity positions of various regional community banks. Included within this portfolio are ownership positions in the following community bank holding companies: First National Corporation (FXNC) (4%) and Eagle Financial Services, Inc. (EFSI) (1.5%). Securities with limited marketability, such as stock in the Federal Reserve Bank ("Federal Reserve") and the Federal Home Loan Bank ("FHLB"), are carried at cost and are reported as non-marketable equity securities in the table above.

Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities).  The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
 
September 30, 2016
Less Than Twelve Months
Twelve Months or Greater
Total
Estimated Fair Value
Unrealized Loss
Estimated Fair Value
Unrealized Loss
Estimated Fair Value
Unrealized Loss
Securities available-for-sale:
 
 
 
 
 
 
Obligations of states and political subdivisions
$
12,879

$
79

$

$

$
12,879

$
79

Mortgage-backed securities:
 
 
 
 
 

 

U.S. Government agencies
70,593

146

9,237

156

79,830

302

Trust preferred securities


4,678

844

4,678

844

Corporate securities
2,273

126



2,273

126

Total
$
85,745

$
351

$
13,915

$
1,000

$
99,660

$
1,351



 
December 31, 2015
Less Than Twelve Months
Twelve Months or Greater
Total
Estimated Fair Value
Unrealized Loss
Estimated Fair Value
Unrealized Loss
Estimated Fair Value
Unrealized Loss
Securities available-for-sale:
 
 
 
 
 
 
Obligations of states and political subdivisions
$
2,406

$
5

$
128

$
2

$
2,534

$
7

Mortgage-backed securities:
 
 
 
 
 

 

U.S. Government agencies
129,612

688

34,044

1,333

163,656

2,021

Trust preferred securities


4,769

1,155

4,769

1,155

Corporate securities
10,856

174

2,231

147

13,087

321

Investment funds


1,488

13

1,488

13

Total
$
142,874

$
867

$
42,660

$
2,650

$
185,534

$
3,517




During the nine months ended September 30, 2016, the Company had $0.4 million in investment impairment losses. For the nine months ended September 30, 2015 and the year ended December 31, 2015, the Company had no investment impairment losses. At September 30, 2016, the cumulative amount of credit-related investment impairment losses that have been recognized by the Company on investments that remain in the Company's investment portfolio as of that date was $10.5 million ($8.9 million related to the Company's debt securities and $1.6 million related to the Company's equity securities).

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary would be reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things (i) the length of time and the extent to which the fair value has been less than cost; (ii) the financial condition, capital strength, and near-term (within 12 months) prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; (iii) the historical volatility in the market value of the investment and/or the liquidity or illiquidity of the investment; (iv) adverse conditions specifically related to the security, an industry, or a geographic area; and (v) the intent to sell the investment security and if it’s more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, management also employs a continuous monitoring process in regards to its marketable equity securities, specifically its portfolio of regional community bank holdings. Although the regional community bank stocks that are owned by the Company are publicly traded, the trading activity for these stocks is minimal, with trading volumes of less than 0.2% of each respective company being traded on a daily basis. As part of management’s review process for these securities, management reviews the financial condition of each respective regional community bank for any indications of financial weakness.

Management has the ability and intent to hold the securities classified as held-to-maturity until they mature, at which time the Company expects to receive full value for the securities. Furthermore, as of September 30, 2016, management generally does not intend to sell an impaired security and it is not more than likely that it will be required to sell the security before the recovery of its amortized cost basis. The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations on agency-issued mortgage related securities, general financial market uncertainty and unprecedented market volatility. These conditions should not prohibit the Company from receiving its contractual principal and interest payments on its debt securities. The fair value is expected to recover as the securities approach their maturity date or repricing date. As of September 30, 2016, management believes the unrealized losses detailed in the table above are temporary and no additional impairment loss has been recognized in the Company’s consolidated income statement. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss will be recognized in net income in the period the other-than-temporary impairment is identified, while any noncredit loss will be recognized in other comprehensive income.

The amortized cost and estimated fair value of debt securities at September 30, 2016, by contractual maturity, are shown in the following table (in thousands).  Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.  Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.
 
Amortized Cost
Estimated Fair Value
Securities Available-for-Sale
 
 
Due in one year or less
$
3,640

$
3,662

Due after one year through five years
25,215

17,395

Due after five years through ten years
59,193

68,514

Due after ten years
333,385

339,897

 
$
421,433

$
429,468

Securities Held-to-Maturity
 

 

Due in one year or less
$

$

Due after one year through five years


Due after five years through ten years


Due after ten years
79,499

82,993

 
$
79,499

$
82,993



Gross gains and gross losses realized by the Company from investment security transactions are summarized in the table below (in thousands).
 
Three months ended September 30,
Nine months ended September 30,
 
2016
2015
2016
2015
 
 
 
 
 
Gross realized gains
$
2,722

$

$
3,978

$
2,130

Gross realized losses
(54
)

(465
)

Net investment security gains
$
2,668

$

$
3,513

$
2,130


    
The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $285 million and $273 million at September 30, 2016 and December 31, 2015, respectively.