NOTE 4 – INVESTMENT SECURITIES


	September 30, 2017									December 31, 2016
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(in thousands)									(in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	142,423	$	232	$	(824	)	$	141,831	$	118,537	$	102	$	(1,280	)	$	117,359
Mortgage-backed securities, residential		422,090		1,199		(3,320	)		419,969		406,851		1,174		(4,487	)		403,538
Mortgage-backed securities, multifamily		10,148		54		(36	)		10,166		10,192		30		(35	)		10,187
Obligations of states and political subdivisions		51,991		700		(277	)		52,414		48,868		391		(933	)		48,326
Debt securities		5,000		100		—			5,100		5,350		63		(1	)		5,412
Equity securities		15,460		2,738		(386	)		17,812		17,314		5,000		(432	)		21,882

	$	647,112	$	5,023	$	(4,843	)	$	647,292	$	607,112	$	6,760	$	(7,168	)	$	606,704


	September 30, 2017									December 31, 2016
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(in thousands)									(in thousands)
HELD TO MATURITY
U.S. government agencies	$	33,449	$	180	$	(274	)	$	33,355	$	33,553	$	144	$	(430	)	$	33,267
Mortgage-backed securities, residential		46,590		315		(569	)		46,336		38,706		369		(598	)		38,477
Mortgage-backed securities, multifamily		1,983		—		(13	)		1,970		2,059		—		(44	)		2,015
Obligations of states and political subdivisions		50,993		543		(144	)		51,392		71,284		269		(385	)		71,168
Debt securities		2,006		26		—			2,032		2,012		51		—			2,063

	$	135,021	$	1,064	$	(1,000	)	$	135,085	$	147,614	$	833	$	(1,457	)	$	146,990

The following table shows investment securities by stated maturity. Securities backed by mortgages have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay, and are, therefore, classified separately with no specific maturity date (in thousands):


	Available for Sale				Held to Maturity
September 30, 2017	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	4,825	$	4,862	$	18,662	$	18,699
Due after one year through five years		107,222		107,526		37,115		37,324
Due after five years through ten years		64,404		63,961		26,864		26,957
Due after ten years		22,963		22,996		3,807		3,799

		199,414		199,345		86,448		86,779
Mortgage-backed securities		432,238		430,135		48,573		48,306
Equity securities		15,460		17,812		—		—

Total securities	$	647,112	$	647,292	$	135,021	$	135,085

The following table shows proceeds from sales of securities and gross gains and losses on sales of securities for the periods indicated (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017			2016
Sale proceeds	$	—	$	—	$	4,500		$	15,654
Gross gains		—		—		2,539			370
Gross losses		—		—		(15	)		—

There were no other-than-temporary impairments during the nine months ended September 30, 2017 or 2016.

Gains or losses on sales of investment securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.

Securities with a carrying value of approximately $506.5 million and $443.4 million at September 30, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.

The following table indicates the length of time individual securities have been in a continuous unrealized loss position for the periods presented:


	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized		Number of				Unrealized
September 30, 2017	Fair Value		Losses		Fair Value		Losses		Securities		Fair Value		Losses
					(dollars in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	66,973	$	273	$	17,235	$	551		16	$	84,208	$	824
Mortgage-backed securities, residential		198,410		1,658		85,011		1,662		85		283,421		3,320
Mortgage-backed securities, multifamily		5,131		36		—		—		1		5,131		36
Obligations of states and political subdivisions		2,805		13		12,936		264		27		15,741		277
Equity securities		—		—		9,669		386		2		9,669		386

	$	273,319	$	1,980	$	124,851	$	2,863		131	$	398,170	$	4,843

HELD TO MATURITY
U.S. government agencies	$	5,419	$	14	$	6,768	$	260		2	$	12,187	$	274
Mortgage-backed securities, residential		27,833		309		7,350		260		18		35,183		569
Mortgage-backed securities, multifamily		1,970		13		—		—		2		1,970		13
Obligations of states and political subdivisions		13,949		105		767		39		10		14,716		144

	$	49,171	$	441	$	14,885	$	559		32	$	64,056	$	1,000


	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized		Number of				Unrealized
December 31, 2016	Fair Value		Losses		Fair Value		Losses		Securities		Fair Value		Losses
	(dollars in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	94,153	$	1,280	$	—	$	—		18	$	94,153	$	1,280
Mortgage-backed securities, residential		292,873		4,078		15,453		409		91		308,326		4,487
Mortgage-backed securities, multifamily		5,178		35		—		—		1		5,178		35
Obligations of states and political subdivisions		29,904		933		—		—		54		29,904		933
Other debt securities		350		1		—		—		1		350		1
Equity securities		6,030		94		4,720		338		2		10,750		432

	$	428,488	$	6,421	$	20,173	$	747		167	$	448,661	$	7,168

HELD TO MATURITY
U.S. government agencies	$	17,147	$	430	$	—	$	—		3	$	17,147	$	430
Mortgage-backed securities, residential		27,909		535		1,061		63		15		28,970		598
Mortgage-backed securities, multifamily		2,015		44		—		—		2		2,015		44
Obligations of states and political subdivisions		50,302		384		401		1		43		50,703		385

	$	97,373	$	1,393	$	1,462	$	64		63	$	98,835	$	1,457

Management has evaluated the securities in the above table and has concluded that none of the securities are other-than-temporarily impaired. The fair values being below cost is due to interest rate movements and is deemed temporary. All investment securities are evaluated on a periodic basis to identify any factors that would require a further analysis. In evaluating the Company’s securities, management considers the following items:

•

The Company’s ability and intent to hold the securities, including an evaluation of the need to sell the security to meet certain liquidity measures, or whether the Company has sufficient levels of cash to hold the identified security in order to recover the entire amortized cost of the security;

•

The financial condition of the underlying issuer;

•

The credit ratings of the underlying issuer and if any changes in the credit rating have occurred;

•

The length of time the security’s fair value has been less than amortized cost; and

•

Adverse conditions related to the security or its issuer if the issuer has failed to make scheduled payments or other factors.

If the above factors indicate that an additional analysis is required, management will perform and consider the results of a discounted cash flow analysis.

As of September 30, 2017, the equity securities include investments in other financial institutions for market appreciation purposes. These equities had a purchase price of $2.1 million and a market value of $4.9 million as of September 30, 2017.

As of September 30, 2017, the equity securities also included $12.9 million in investment funds that do not have a quoted market price, but use net asset value per share or its equivalent to measure fair value.

The investment funds include $9.7 million that are invested in government guaranteed loans, mortgage-backed securities, small business loans and other instruments supporting affordable housing and economic development. The Company may redeem these funds at the net asset value calculated at the end of the current business day less any unpaid management fees. As of September 30, 2017, the amortized cost of these securities was $10.1 million and the fair value was $9.7 million. There are no restrictions on redemptions for the holdings in these investments other than the notice required by the fund manager. There are no unfunded commitments related to these investments.

The investment funds also include $3.3 million that are primarily invested in community development loans that are guaranteed by the Small Business Administration (“SBA”). Because the funds are primarily guaranteed by the federal government there are minimal changes in market value between accounting periods. These funds can be redeemed with 60 days notice at the net asset value less unpaid management fees with the approval of the fund manager. As of September 30, 2017, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.