SECURITIES

Trading Securities

The Company had trading securities of $1.6 million and $1.3 million as of June 30, 2018 and December 31, 2017, respectively. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s nonqualified 401(k) Restoration Plan and Nonqualified Deferred Compensation Plan.

Equity Securities

The Company had equity securities of $20.1 million as of June 30, 2018. These securities consist primarily of mutual funds held in a rabbi trust and will be used for future payments associated with the Company’s supplemental executive retirement plans. These securities were previously classified as available for sale and were reclassified as equity securities due to a change in accounting guidance effective January 1, 2018. The equity securities had a fair value of $20.6 million as of December 31, 2017 and are reflected accordingly as available for sale in the table below.

Available for Sale and Held to Maturity Securities

The following table presents a summary of the amortized cost, gross unrealized gains and losses and fair value of securities available for sale and securities held to maturity for the periods indicated:



	June 30, 2018									December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
Available for sale securities
U.S. government agency securities	$	33,479	$	—	$	(760	)	$	32,719	$	35,475	$	86	$	(131	)	$	35,430
Agency mortgage-backed securities	219,409		1,019		(5,439		)	214,989		214,934		1,897		(1,067		)	215,764
Agency collateralized mortgage obligations	150,122		90		(5,065		)	145,147		124,098		78		(2,164		)	122,012
State, county, and municipal securities	1,977		19		—			1,996		2,237		37		—			2,274
Single issuer trust preferred securities issued by banks	1,320		9		—			1,329		2,012		4		—			2,016
Pooled trust preferred securities issued by banks and insurers	2,166		—		(415		)	1,751		2,179		—		(539		)	1,640
Small business administration pooled securities	46,102		—		(1,104		)	44,998		47,852		44		(118		)	47,778
Equity securities	—		—		—			—		19,432		1,594		(442		)	20,584
Total available for sale securities	$	454,575	$	1,137	$	(12,783	)	$	442,929	$	448,219	$	3,740	$	(4,461	)	$	447,498
Held to maturity securities
U.S. Treasury securities	$	1,005	$	9	$	—		$	1,014	$	1,006	$	29	$	—		$	1,035
Agency mortgage-backed securities	186,299		286		(4,585		)	182,000		204,768		1,791		(736		)	205,823
Agency collateralized mortgage obligations	323,746		151		(10,555		)	313,342		262,998		397		(4,987		)	258,408
Single issuer trust preferred securities issued by banks	1,500		23		—			1,523		1,500		29		—			1,529
Small business administration pooled securities	25,711		51		(353		)	25,409		27,416		183		(200		)	27,399
Total held to maturity securities	$	538,261	$	520	$	(15,493	)	$	523,288	$	497,688	$	2,429	$	(5,923	)	$	494,194
Total	$	992,836	$	1,657	$	(28,276	)	$	966,217	$	945,907	$	6,169	$	(10,384	)	$	941,692

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale.

The actual maturities of certain securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of securities available for sale and securities held to maturity as of June 30, 2018 is presented below:



	Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale securities
U.S. government agency securities	$	999	$	998	$	20,014	$	19,781	$	12,466	$	11,940	$	—	$	—	$	33,479	$	32,719
Agency mortgage-backed securities	520		524		43,223		42,216		95,410		93,245		80,256		79,004		219,409		214,989
Agency collateralized mortgage obligations	—		—		—		—		—		—		150,122		145,147		150,122		145,147
State, county, and municipal securities	—		—		1,024		1,026		953		970		—		—		1,977		1,996
Single issuer trust preferred securities issued by banks	—		—		—		—		—		—		1,320		1,329		1,320		1,329
Pooled trust preferred securities issued by banks and insurers	—		—		—		—		—		—		2,166		1,751		2,166		1,751
Small business administration pooled securities	—		—		—		—		—		—		46,102		44,998		46,102		44,998
Total available for sale securities	$	1,519	$	1,522	$	64,261	$	63,023	$	108,829	$	106,155	$	279,966	$	272,229	$	454,575	$	442,929
Held to maturity securities
U.S. Treasury securities	$	—	$	—	$	1,005	$	1,014	$	—	$	—	$	—	$	—	$	1,005	$	1,014
Agency mortgage-backed securities	—		—		8,998		8,846		29,911		29,380		147,390		143,774		186,299		182,000
Agency collateralized mortgage obligations	—		—		—		—		1,179		1,175		322,567		312,167		323,746		313,342
Single issuer trust preferred securities issued by banks	—		—		—		—		1,500		1,523		—		—		1,500		1,523
Small business administration pooled securities	—		—		—		—		—		—		25,711		25,409		25,711		25,409
Total held to maturity securities	$	—	$	—	$	10,003	$	9,860	$	32,590	$	32,078	$	495,668	$	481,350	$	538,261	$	523,288

Inclusive in the table above is $6.6 million of callable securities at June 30, 2018.

The carrying value of securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law, was $545.4 million and $547.2 million at June 30, 2018 and December 31, 2017, respectively.

At June 30, 2018 and December 31, 2017, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of stockholders’ equity.

Other-Than-Temporary Impairment ("OTTI")

The Company continually reviews investment securities for the existence of OTTI, taking into consideration current market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, the credit worthiness of the obligor of the security, volatility of earnings, current analysts’ evaluations, the Company’s intent to sell the security, whether it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery, as well as other qualitative factors. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.

The following tables show the gross unrealized losses and fair value of the Company’s investments in an unrealized loss position, which the Company has not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:



	June 30, 2018
		Less than 12 months					12 months or longer					Total
	# of holdings	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. government agency securities	4	$	32,719	$	(760	)	$	—	$	—		$	32,719	$	(760	)
Agency mortgage-backed securities	151	341,018		(9,349		)	14,003		(675		)	355,021		(10,024		)
Agency collateralized mortgage obligations	52	274,293		(7,235		)	137,912		(8,385		)	412,205		(15,620		)
Pooled trust preferred securities issued by banks and insurers	1	—		—			1,751		(415		)	1,751		(415		)
Small business administration pooled securities	6	54,637		(1,264		)	8,947		(193		)	63,584		(1,457		)
Total temporarily impaired securities	214	$	702,667	$	(18,608	)	$	162,613	$	(9,668	)	$	865,280	$	(28,276	)



	December 31, 2017
		Less than 12 months					12 months or longer					Total
	# of holdings	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S.government agency securities	4	$	24,343	$	(131	)	$	—	$	—		$	24,343	$	(131	)
Agency mortgage-backed securities	84	235,411		(1,493		)	14,886		(310		)	250,297		(1,803		)
Agency collateralized mortgage obligations	42	178,142		(1,579		)	159,506		(5,572		)	337,648		(7,151		)
Pooled trust preferred securities issued by banks and insurers	1	—		—			1,640		(539		)	1,640		(539		)
Small business administration pooled securities	4	34,553		(223		)	9,647		(95		)	44,200		(318		)
Equity securities	28	3,290		(39		)	7,619		(403		)	10,909		(442		)
Total temporarily impaired securities	163	$	475,739	$	(3,465	)	$	193,298	$	(6,919	)	$	669,037	$	(10,384	)

The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell each security before the recovery of its amortized cost basis. As a result, the Company does not consider these investments to be OTTI and accordingly, there was no OTTI recorded and no cumulative credit related component of OTTI for the three and six months ended June 30, 2018 and 2017.

The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category are as follows at June 30, 2018:

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U.S. Government Agency Securities, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. Government or one of its agencies.

•

Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.