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Securities
 12 Months Ended
Dec. 31, 2014
Available-for-sale Securities [Abstract]  
Securities
 SECURITIES

We classify debt and equity securities as “held to maturity”, “available for sale” or “trading” according to management’s intent.  The appropriate classification is determined at the time of purchase of each security and re-evaluated at each reporting date.

Securities held to maturity: Certain debt securities for which we have the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts.  There are no securities classified as held to maturity in the accompanying financial statements.

Securities available for sale: Securities not classified as "held to maturity" or as "trading" are classified as "available for sale."  Securities classified as "available for sale" are those securities that we intend to hold for an indefinite period of time, but not necessarily to maturity.  "Available for sale" securities are reported at estimated fair value net of unrealized gains or losses, which are adjusted for applicable income taxes, and reported as a separate component of shareholders' equity.

Trading securities: There are no securities classified as "trading" in the accompanying financial statements.

Impairment assessment:  Impairment exists when the fair value of a security is less than its cost.  Cost includes adjustments made to the cost basis of a security for accretion, amortization and previous other-than-temporary impairments.  We perform a quarterly assessment of the debt and equity securities in our investment portfolio that have an unrealized loss to determine whether the decline in the fair value of these securities below their cost is other-than-temporary.  This determination requires significant judgment.  Impairment is considered other-than-temporary when it becomes probable that we will be unable to recover the cost of an investment.  This assessment takes into consideration factors such as the length of time and the extent to which the market values have been less than cost, the financial condition and near term prospects of the issuer including events specific to the issuer or industry, defaults or deferrals of scheduled interest, principal or dividend payments, external credit ratings and recent downgrades, and our intent and ability to hold the security for a period of time sufficient to allow for a recovery in fair value.  If a decline in fair value is judged to be other than temporary, the cost basis of the individual security is written down to fair value which then becomes the new cost basis.  The amount of the write down is included in other-than-temporary impairment of securities in the consolidated statements of income.  The new cost basis is not adjusted for subsequent recoveries in fair value, if any.

Realized gains and losses on sales of securities are recognized on the specific identification method.  Amortization of premiums and accretion of discounts are computed using the interest method.

The amortized cost, unrealized gains, unrealized losses and estimated fair values of securities at December 31, 2014 and 2013, are summarized as follows:
 
December 31, 2014
 
Amortized
 
Unrealized
 
Estimated
Dollars in thousands
Cost
 
Gains
 
Losses
 
Fair Value
Available for Sale
 
 
 
 
 
 
 
Taxable debt securities
 
 
 
 
 
 
 
U.S. Government and agencies and corporations
$
22,153

 
$
1,073

 
$
52

 
$
23,174

Residential mortgage-backed securities:
 

 
 

 
 

 
 

Government-sponsored agencies
147,951

 
2,599

 
773

 
149,777

Nongovernment-sponsored entities
12,051

 
142

 
48

 
12,145

State and political subdivisions
 

 
 

 
 

 
 

General obligations
1,975

 
2

 
33

 
1,944

Water and sewer revenues
1,976

 
14

 
7

 
1,983

Other revenues
4,696

 
73

 
2

 
4,767

Corporate debt securities
3,776

 
—

 
—

 
3,776

Total taxable debt securities
194,578

 
3,903

 
915

 
197,566

Tax-exempt debt securities
 

 
 

 
 

 
 

State and political subdivisions
 

 
 

 
 

 
 

General obligations
49,515

 
2,338

 
12

 
51,841

Water and sewer revenues
11,258

 
244

 
3

 
11,499

Lease revenues
4,617

 
75

 
10

 
4,682

Lottery/casino revenues
3,811

 
206

 
9

 
4,008

Other revenues
12,845

 
404

 
18

 
13,231

Total tax-exempt debt securities
82,046

 
3,267

 
52

 
85,261

Equity securities
7

 
—

 
—

 
7

Total available for sale securities
$
276,631

 
$
7,170

 
$
967

 
$
282,834


 
December 31, 2013
 
Amortized
 
Unrealized
 
Estimated
Dollars in thousands
Cost
 
Gains
 
Losses
 
Fair Value
Available for Sale
 
 
 
 
 
 
 
Taxable debt securities
 
 
 
 
 
 
 
U.S. Government and agencies and corporations
$
29,100

 
$
675

 
$
118

 
$
29,657

Residential mortgage-backed securities:
 

 
 

 
 

 
 

Government-sponsored agencies
155,270

 
2,019

 
1,573

 
155,716

Nongovernment-sponsored entities
11,519

 
321

 
21

 
11,819

State and political subdivisions
 

 
 

 
 

 
 

General obligations
9,317

 
—

 
475

 
8,842

Water and sewer revenues
3,229

 
—

 
114

 
3,115

Other revenues
4,051

 
4

 
142

 
3,913

Corporate debt securities
3,973

 
24

 
31

 
3,966

Total taxable debt securities
216,459

 
3,043

 
2,474

 
217,028

Tax-exempt debt securities
 

 
 

 
 

 
 

State and political subdivisions
 

 
 

 
 

 
 

General obligations
41,156

 
675

 
1,154

 
40,677

Water and sewer revenues
8,996

 
15

 
306

 
8,705

Lease revenues
7,956

 
—

 
391

 
7,565

Lottery/casino revenues
4,443

 
63

 
169

 
4,337

Other revenues
10,527

 
55

 
191

 
10,391

Total tax-exempt debt securities
73,078

 
808

 
2,211

 
71,675

Equity securities
77

 
—

 
—

 
77

Total available for sale securities
$
289,614

 
$
3,851

 
$
4,685

 
$
288,780



The below information is relative to the five states where issuers with the highest volume of state and political subdivision securities held in our portfolio are located.  We own no such securities of any single issuer which we deem to be a concentration.
 
December 31, 2014
 
Amortized
 
Unrealized
 
Estimated
Dollars in thousands
Cost
 
Gains
 
Losses
 
Fair Value
 
 
 
 
 
 
 
 
California
$
15,060

 
$
597

 
$
—

 
$
15,657

West Virginia
14,181

 
355

 
9

 
14,527

Illinois
11,275

 
360

 
19

 
11,616

Ohio
6,772

 
69

 
42

 
6,799

Texas
5,699

 
410

 
3

 
6,106



Management performs pre-purchase and ongoing analysis to confirm that all investment securities meet applicable credit quality standards.  Prior to July 1, 2013, we principally used credit ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”) to support analyses of our portfolio of securities issued by state and political subdivisions, as we generally do not purchase securities that are rated below the six highest NRSRO rating categories.  Beginning July 1, 2013, in addition to considering a security’s NRSRO rating, we now also assess or confirm through an internal review of an issuer’s financial information and other applicable information that:  1) the issuer’s risk of default is low; 2) the characteristics of the issuer’s demographics and economic environment are satisfactory; and 3) the issuer’s budgetary position and stability of tax or other revenue sources are sound.

The proceeds from sales, calls and maturities of available for sale securities, including principal payments received on mortgage-backed obligations, and the related gross gains and losses realized are as follows:

Dollars in thousands
 
Proceeds from
 
Gross realized
 
 
 
 
Calls and
 
Principal
 
 
 
 
Years ended December 31,
 
Sales
 
Maturities
 
Payments
 
Gains
 
Losses
2014
 
$
80,914

 
$
4,051

 
$
34,390

 
$
1,037

 
$
824

2013
 
$
54,340

 
$
2,669

 
$
62,179

 
$
674

 
$
434

2012
 
$
72,056

 
$
4,618

 
$
66,377

 
$
3,253

 
$
905



Residential mortgage-backed obligations having contractual maturities ranging from 3 to 50 years are reflected in the following maturity distribution schedules based on their anticipated average life to maturity, which ranges from 1 to 33 years.  Accordingly, discounts are accreted and premiums are amortized over the anticipated average life to maturity of the specific obligation.

The maturities, amortized cost and estimated fair values of securities at December 31, 2014, are summarized as follows:
Dollars in thousands
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
 
$
60,935

 
$
61,689

Due from one to five years
 
95,082

 
96,260

Due from five to ten years
 
28,282

 
29,081

Due after ten years
 
92,325

 
95,797

Equity securities
 
7

 
7

Total
 
$
276,631

 
$
282,834



At December 31, 2014 and 2013, securities with estimated fair values of $128.1 million and $120.0 million respectively, were pledged to secure public deposits, and for other purposes required or permitted by law.

During 2014 and 2013 we recorded other-than-temporary impairment losses on residential mortgage-backed nongovernment sponsored entity securities as follows:
Dollars in thousands
2014
 
2013
Total other-than-temporary  impairment losses
$
(1
)
 
$
(155
)
Portion of loss recognized in other comprehensive income
—

 
37

Net impairment losses recognized in earnings
$
(1
)
 
$
(118
)

Activity related to the credit component recognized on debt securities available for sale for which a portion of other-than-temporary impairment was recognized in other comprehensive income for the years ended December 31, 2014 and 2013 is as follows:
Dollars in thousands
 
2014
 
2013
Balance, January 1
 
$
(3,021
)
 
$
(2,903
)
Additions for the credit component on debt securities in which other-than-temporary impairment was not previously recognized
 
(1
)
 
(118
)
Securities sold during the period
 
3,022

 
—

Balance, December 31
 
$
—

 
$
(3,021
)


We held 57 available for sale securities having an unrealized loss at December 31, 2014.  We do not intend to sell these securities, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost bases.  We believe that this decline in value is primarily attributable to the lack of market liquidity and to changes in market interest rates and not due to credit quality.  Accordingly, no additional other-than-temporary impairment charge to earnings is warranted at this time.

Provided below is a summary of securities available for sale which were in an unrealized loss position at December 31, 2014 and 2013, including debt securities for which a portion of other-than-temporary impairment has been recognized in other comprehensive income.
 
2014
 
Less than 12 months
 
12 months or more
 
Total
Dollars in thousands
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
Temporarily impaired securities
 
 
 
 
 
 
 
 
 
 
 
Taxable debt securities
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies and corporations
$
—

 
$
—

 
$
3,912

 
$
(52
)
 
$
3,912

 
$
(52
)
Residential mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

Government-sponsored agencies
36,825

 
(535
)
 
21,915

 
(238
)
 
58,740

 
(773
)
Nongovernment-sponsored entities
5,488

 
(44
)
 
2,163

 
(4
)
 
7,651

 
(48
)
State and political subdivisions:
 

 
 

 
 

 
 

 
 

 
 

General obligations
—

 
—

 
316

 
(33
)
 
316

 
(33
)
Water and sewer revenues
—

 
—

 
817

 
(7
)
 
817

 
(7
)
Other revenues
1,098

 
(2
)
 
—

 
—

 
1,098

 
(2
)
Corporate debt securities
—

 
—

 
—

 
—

 
—

 
—

Tax-exempt debt securities
 

 
 

 
 

 
 

 
 

 
 

State and political subdivisions:
 

 
 

 
 

 
 

 
 

 
 

General obligations
3,708

 
(8
)
 
438

 
(4
)
 
4,146

 
(12
)
Water and sewer revenues
721

 
(3
)
 
—

 
—

 
721

 
(3
)
Lease revenues
—

 
—

 
1,168

 
(10
)
 
1,168

 
(10
)
Lottery/casino revenues
—

 
—

 
1,126

 
(9
)
 
1,126

 
(9
)
Other revenues
1,247

 
(8
)
 
846

 
(10
)
 
2,093

 
(18
)
Total temporarily impaired securities
49,087

 
(600
)
 
32,701

 
(367
)
 
81,788

 
(967
)
Total other-than-temporarily
 

 
 

 
 

 
 

 
 

 
 

impaired securities
—

 
—

 
—

 
—

 
—

 
—

Total
$
49,087

 
$
(600
)
 
$
32,701

 
$
(367
)
 
$
81,788

 
$
(967
)













 
2013
 
Less than 12 months
 
12 months or more
 
Total
Dollars in thousands
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
 
Estimated
Fair Value
 
Unrealized
Loss
Temporarily impaired securities
 
 
 
 
 
 
 
 
 
 
 
Taxable debt securities
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies and corporations
$
10,868

 
$
(118
)
 
$
—

 
$
—

 
$
10,868

 
$
(118
)
Residential mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

Government-sponsored agencies
55,035

 
(1,385
)
 
13,249

 
(188
)
 
68,284

 
(1,573
)
Nongovernment-sponsored entities
2,407

 
(12
)
 
565

 
(7
)
 
2,972

 
(19
)
State and political subdivisions:
 

 
 

 
 

 
 

 
 

 
 

General obligations
4,505

 
(264
)
 
2,337

 
(211
)
 
6,842

 
(475
)
Water and sewer revenues
1,309

 
(31
)
 
1,554

 
(83
)
 
2,863

 
(114
)
Other revenues
3,142

 
(142
)
 
—

 
—

 
3,142

 
(142
)
Corporate debt securities
2,968

 
(31
)
 
—

 
—

 
2,968

 
(31
)
Tax-exempt debt securities
 

 
 

 
 

 
 

 
 

 
 

State and political subdivisions:
 

 
 

 
 

 
 

 
 

 
 

General obligations
19,603

 
(997
)
 
2,102

 
(157
)
 
21,705

 
(1,154
)
Water and sewer revenues
5,643

 
(224
)
 
983

 
(82
)
 
6,626

 
(306
)
Lease revenues
6,112

 
(349
)
 
958

 
(42
)
 
7,070

 
(391
)
Lottery/casino revenues
2,720

 
(132
)
 
554

 
(37
)
 
3,274

 
(169
)
Other revenues
8,815

 
(191
)
 
—

 
—

 
8,815

 
(191
)
Total temporarily impaired securities
123,127

 
(3,876
)
 
22,302

 
(807
)
 
145,429

 
(4,683
)
Other-than-temporarily impaired securities
 
 
 
 

 
 

 
 

 
 

Taxable debt securities
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

Nongovernment-sponsored entities
—

 
—

 
1

 
(2
)
 
1

 
(2
)
Total other-than-temporarily
 

 
 

 
 

 
 

 
 

 
 

impaired securities
—

 
—

 
1

 
(2
)
 
1

 
(2
)
Total
$
123,127

 
$
(3,876
)
 
$
22,303

 
$
(809
)
 
$
145,430

 
$
(4,685
)