Annual report pursuant to Section 13 and 15(d)

Note 3 - Debt Securities

v3.8.0.1
Note 3 - Debt Securities
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE
3.
DEBT SECURITIES
 
The amortized cost and fair values of available-for-sale and held-to-maturity debt securities at
December 31, 2017
and
2016
are summarized as follows:
 
        Gross   Gross    
   
Amortized
  
Unrealized
  
Unrealized
  
Market
   
Cost
  
Gain
  
Loss
  
Value
December 31, 2017  
(In Thousands)
Securities Available for Sale                                
U.S. Treasury and government sponsored agencies   $
55,567
 
   $
38
 
   $
(249
)
   $
55,356
 
Mortgage-backed securities    
278,177
 
    
1,006
 
    
(2,685
)
    
276,498
 
State and municipal securities    
134,641
 
    
761
 
    
(553
)
    
134,849
 
Corporate debt    
69,996
 
    
1,416
 
    
(35
)
    
71,377
 
Total   $
538,381
 
   $
3,221
 
   $
(3,522
)
   $
538,080
 
Securities Held to Maturity                                
State and municipal securities    
250
 
    
-
 
    
-
 
    
250
 
Total   $
250
 
   $
-
 
   $
-
 
   $
250
 
                                 
December 31, 2016                                
Securities Available for Sale                                
U.S. Treasury and government sponsored agencies   $
45,998
 
   $
382
 
   $
(126
)
   $
46,254
 
Mortgage-backed securities    
228,843
 
    
1,515
 
    
(3,168
)
    
227,190
 
State and municipal securities    
139,504
 
    
1,120
 
    
(694
)
    
139,930
 
Corporate debt    
8,985
 
    
16
 
    
-
 
    
9,001
 
Total   $
423,330
 
   $
3,033
 
   $
(3,988
)
   $
422,375
 
Securities Held to Maturity                                
Mortgage-backed securities    
19,164
 
    
321
 
    
(245
)
    
19,240
 
State and municipal securities    
5,888
 
    
315
 
    
(12
)
    
6,191
 
Corporate debt    
37,512
 
    
374
 
    
(15
)
    
37,871
 
Total   $
62,564
 
   $
1,010
 
   $
(272
)
   $
63,302
 
 
All mortgage-backed debt securities are with government sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.
 
At year-end
2017
and
2016,
there were
no
holdings of debt securities of any issuer, other than the U.S. government and its agencies, in an amount greater than
10%
of stockholders’ equity.
 
In the
fourth
quarter of
2017,
the Company transferred its held-to-maturity investment portfolio to available-for-sale in order to provide more flexibility managing its investment portfolio. As a result, the Company is prohibited from classifying any investment securities bought during the
two
years following the transfer as held-to-maturity.
 
The amortized cost and fair value of debt securities as of
December 31, 2017
and
2016
by contractual maturity are shown below. Actual maturities
may
differ from contractual maturities because the issuers
may
have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
    December 31, 2017   December 31, 2016
    Amortized Cost   Market Value   Amortized Cost   Market Value
    (In Thousands)
Debt securities available for sale                                
Due within one year   $
22,122
     $
22,172
     $
28,270
     $
28,400
  
Due from one to five years    
160,773
      
160,563
      
152,347
      
153,003
  
Due from five to ten years    
73,362
      
74,684
      
13,870
      
13,782
  
Due after ten years    
3,947
      
4,163
      
-
      
-
  
Mortgage-backed securities    
278,177
      
276,498
      
228,843
      
227,190
  
    $
538,381
     $
538,080
     $
423,330
     $
422,375
  
                                 
Debt securities held to maturity                                
Due from one to five years   $
250
     $
250
     $
250
     $
250
  
Due from five to ten years    
-
      
-
      
34,251
      
34,617
  
Due after ten years    
-
      
-
      
8,899
      
9,195
  
Mortgage-backed securities    
-
      
-
      
19,164
      
19,240
  
    $
250
     $
250
     $
62,564
     $
63,302
  
 
The following table shows the gross unrealized losses and fair value of debt securities, aggregated by category and length of time that securities have been in a continuous unrealized loss position at
December 31, 2017
and
2016.
In estimating other-than-temporary impairment losses, management considers, among other things, the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The unrealized losses shown in the following table are primarily due to increases in market rates over the yields available at the time of purchase of the underlying securities and
not
credit quality. Because the Company does
not
intend to sell these securities and it is more likely than
not
that the Company will
not
be required to sell the securities before recovery of their amortized cost basis, which
may
be maturity, the Company does
not
consider these securities to be other-than-temporarily impaired at
December 31, 2017.
There were
no
other-than-temporary impairments for the years ended
December 31, 2017,
2016
and
2015.
 
    Less Than Twelve Months   Twelve Months or More   Total
    Gross       Gross       Gross    
    Unrealized       Unrealized       Unrealized    
    Losses   Fair Value   Losses   Fair Value   Losses   Fair Value
    (In Thousands)
December 31, 2017                        
U.S. Treasury and government sponsored agencies   $
(151
 )   $
33,401
     $
(98
 )   $
2,926
     $
(249
 )   $
36,327
  
Mortgage-backed securities    
(986
 )    
140,432
      
(1,699
 )    
75,903
      
(2,685
 )    
216,335
  
State and municipal securities    
(450
 )    
66,637
      
(103
 )    
6,648
      
(553
 )    
73,285
  
Corporate debt    
(35
 )    
6,955
      
-
      
-
      
(35
 )    
6,955
  
Total   $
(1,622
 )   $
247,425
     $
(1,900
 )   $
85,477
     $
(3,522
 )   $
332,902
  
                                                 
December 31, 2016                                                
U.S. Treasury and government sponsored agencies   $
(126
 )   $
10,865
     $
-
     $
-
     $
(126
 )   $
10,865
  
Mortgage-backed securities    
(3,413
 )    
174,225
      
-
      
-
      
(3,413
 )    
174,225
  
State and municipal securities    
(698
 )    
64,502
      
(8
 )    
1,021
      
(706
 )    
65,523
  
Corporate debt    
(15
 )    
3,034
      
-
      
-
      
(15
 )    
3,034
  
Total   $
(4,252
 )   $
252,626
     $
(8
 )   $
1,021
     $
(4,260
 )   $
253,647
  
 
At
December 31, 2017,
72
of the Company’s
796
debt securities were in an unrealized loss position for more than
12
months.
 
The following table summarizes information about sales of debt securities available for sale.
 
 
    Years Ended December 31,
    2017   2016   2015
    (In Thousands)
Sale proceeds   $
-
     $
6,085
     $
16,738
  
Gross realized gains   $
-
     $
4
     $
29
  
Gross realized losses    
-
      
(7
 )    
-
  
Net realized gain (loss)   $
-
     $
(3
 )   $
29
  
 
The carrying value of debt securities pledged to secure public funds on deposits and for other purposes as required by law as of
December 31, 2017
and
2016
was
$284.2
million and
$246.0
million, respectively.
 
Equity securities include (
1
) a restricted investment in Federal Home Loan Bank of Atlanta stock for membership requirement and to secure available lines of credit, (
2
) an investment in First National Bankers Bank stock, (
3
) an investment in a Community Reinvestment Act (“CRA”)-qualified mutual fund, and (
4
) an investment in common stock of a bank holding company. The amount of investment in the Federal Home Loan Bank of Atlanta stock was
$30,000
at
December 31, 2017
and
2016.
The Company terminated its membership in the Federal Home Loan Bank of Atlanta effective
November 11, 2016.
The small amount of stock that remains outstanding relates to the principal reducing borrowing. The amount of investment in the First National Bankers Bank stock was
$400,000
at
December 31, 2017
and
2016.
The amount of investment in the CRA-qualified mutual fund was
$500,000
at
December 31, 2017
and
2016.
The amount of the investment in common stock of the bank holding company was
$100,000
at
December 31, 2017
and
2016.