Note 5. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities classified as available-for-sale and held-to-maturity at September 30, 2017 and December 31, 2016 are summarized as follows (in thousands):



Available-for-sale	September 30, 2017
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
U.S. Government agency securities	$ 35,162	$ 87	$ (24)	$ 35,225
Asset-backed securities *	264,196	1,182	(439)	264,939
Tax-exempt obligations of states and political subdivisions	13,157	179	(17)	13,319
Taxable obligations of states and political subdivisions	71,592	1,671	(150)	73,113
Residential mortgage-backed securities	367,017	840	(3,420)	364,437
Collateralized mortgage obligation securities	129,722	294	(923)	129,093
Commercial mortgage-backed securities	153,274	488	(114)	153,648
Foreign debt securities	59,685	398	(88)	59,995
Corporate debt securities	102,205	1,047	(65)	103,187
	$ 1,196,010	$ 6,186	$ (5,240)	$ 1,196,956


	September 30, 2017
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
* Asset-backed securities as shown above	cost	gains	losses	value
Federally insured student loan securities	$ 94,409	$ 254	$ (418)	$ 94,245
Collateralized loan obligation securities	153,369	800	(19)	154,150
Other	16,418	128	(2)	16,544
	$ 264,196	$ 1,182	$ (439)	$ 264,939



Held-to-maturity	September 30, 2017
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
Other debt securities - single issuers	$ 11,017	$ 118	$ (2,761)	$ 8,374
Other debt securities - pooled	75,385	1,340	-	76,725
	$ 86,402	$ 1,458	$ (2,761)	$ 85,099



Available-for-sale	December 31, 2016
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
U.S. Government agency securities	$ 27,771	$ 23	$ (92)	$ 27,702
Asset-backed securities *	355,622	1,811	(2,037)	355,396
Tax-exempt obligations of states and political subdivisions	15,492	129	(137)	15,484
Taxable obligations of states and political subdivisions	78,143	1,539	(633)	79,049
Residential mortgage-backed securities	347,120	598	(5,149)	342,569
Collateralized mortgage obligation securities	160,649	619	(1,445)	159,823
Commercial mortgage-backed securities	117,844	250	(1,008)	117,086
Foreign debt securities	56,603	168	(274)	56,497
Corporate debt securities	95,005	421	(418)	95,008
	$ 1,254,249	$ 5,558	$ (11,193)	$ 1,248,614


	December 31, 2016
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
* Asset-backed securities as shown above	cost	gains	losses	value
Federally insured student loan securities	$ 122,579	$ 346	$ (2,000)	$ 120,925
Collateralized loan obligation securities	215,117	1,294	(14)	216,397
Other	17,926	171	(23)	18,074
	$ 355,622	$ 1,811	$ (2,037)	$ 355,396



Held-to-maturity	December 31, 2016
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value
Other debt securities - single issuers	$ 17,983	$ 179	$ (3,026)	$ 15,136
Other debt securities - pooled	75,484	1,179	-	76,663
	$ 93,467	$ 1,358	$ (3,026)	$ 91,799

Investments in Federal Home Loan and Atlantic Central Bankers Bank stock are recorded at cost and amounted to $991,000 and $1.6 million, respectively, at September 30, 2017 and December 31, 2016.

The amortized cost and fair value of the Company’s investment securities at September 30, 2017, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.



	Available-for-sale		Held-to-maturity
	Amortized	Fair	Amortized	Fair
	cost	value	cost	value
Due before one year	$ 6,433	$ 6,441	$ -	$ -
Due after one year through five years	170,145	171,473	-	-
Due after five years through ten years	361,549	362,268	-	-
Due after ten years	657,883	656,774	86,402	85,099
	$ 1,196,010	$ 1,196,956	$ 86,402	$ 85,099

At September 30, 2017 and December 31, 2016, there were no investment securities pledged for securities sold under repurchase agreements as required or permitted by law. At September 30, 2017 and December 31, 2016, investment securities with a fair value of approximately $606.8 million and $607.2 million, respectively, were pledged to secure a line of credit with the FHLB.

Fair value of available-for-sale securities are based on the fair market value supplied by a third-party market data provider, while the fair value of held-to-maturity securities are based on the present value of cash flows, which discounts expected cash flows from principal and interest using yield to maturity at the measurement date. The Company periodically reviews its investment portfolio to determine whether unrealized losses are other than temporary, based on an evaluation of the creditworthiness of the issuers/guarantors as well as the underlying collateral, if applicable, in addition to the continuing performance of the securities. The amount of the credit impairment is calculated by estimating the discounted cash flows for those securities. The Company did not recognize any other-than-temporary impairment charges in the first nine months of 2017.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at September 30, 2017 (dollars in thousands):



Available-for-sale		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	4	$ 17,266	$ (24)	$ -	$ -	$ 17,266	$ (24)
Asset-backed securities	16	16,453	(20)	58,961	(419)	75,414	(439)
Tax-exempt obligations of states and
political subdivisions	2	-	-	2,148	(17)	2,148	(17)
Taxable obligations of states and
political subdivisions	14	14,844	(127)	977	(23)	15,821	(150)
Residential mortgage-backed securities	93	173,175	(1,573)	98,021	(1,847)	271,196	(3,420)
Collateralized mortgage obligation securities	26	62,244	(468)	30,937	(455)	93,181	(923)
Commercial mortgage-backed securities	8	23,434	(114)	243	-	23,677	(114)
Foreign debt securities	21	15,869	(68)	1,180	(20)	17,049	(88)
Corporate debt securities	20	11,658	(30)	4,514	(35)	16,172	(65)
Total temporarily impaired
investment securities	204	$ 334,943	$ (2,424)	$ 196,981	$ (2,816)	$ 531,924	$ (5,240)



Held-to-maturity		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Corporate and other debt securities:
Single issuers	1	$ -	$ -	$ 6,343	$ (2,761)	$ 6,343	$ (2,761)
Total temporarily impaired
investment securities	1	$ -	$ -	$ 6,343	$ (2,761)	$ 6,343	$ (2,761)

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2016 (dollars in thousands):



Available-for-sale		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	5	$ 7,414	$ (36)	$ 7,824	$ (56)	$ 15,238	$ (92)
Asset-backed securities	23	10,186	(49)	93,375	(1,988)	103,561	(2,037)
Tax-exempt obligations of states and
political subdivisions	8	6,056	(118)	3,301	(19)	9,357	(137)
Taxable obligations of states and
political subdivisions	27	42,963	(633)	-	-	42,963	(633)
Residential mortgage-backed securities	68	180,357	(4,833)	54,254	(316)	234,611	(5,149)
Collateralized mortgage obligation securities	28	88,936	(1,004)	30,386	(441)	119,322	(1,445)
Commercial mortgage-backed securities	28	79,345	(963)	4,547	(45)	83,892	(1,008)
Foreign debt securities	34	26,696	(274)	700	-	27,396	(274)
Corporate debt securities	39	30,418	(414)	645	(4)	31,063	(418)
Total temporarily impaired
investment securities	260	$ 472,371	$ (8,324)	$ 195,032	$ (2,869)	$ 667,403	$ (11,193)



Held-to-maturity		Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Corporate and other debt securities:
Single issuers	1	$ -	$ -	$ 6,039	$ (3,026)	$ 6,039	$ (3,026)
Total temporarily impaired
investment securities	1	$ -	$ -	$ 6,039	$ (3,026)	$ 6,039	$ (3,026)

Other securities included in the held-to-maturity classification at September 30, 2017 consisted of three securities secured by diversified portfolios of corporate securities and two single-issuer trust preferred securities.

A total of $11.0 million of other debt securities - single issuers is comprised of the following: amortized cost of the two single-issuer trust preferred securities of $11.0 million, of which one security for $1.9 million was issued by a bank and one security for $9.1 million was issued by an insurance company.

A total of $75.4 million of other debt securities – pooled is comprised of three securities consisting of diversified portfolios of corporate securities.

The following table provides additional information related to the Company’s single issuer trust preferred securities as of September 30, 2017 (in thousands):



Single issuer	Book value	Fair value	Unrealized gain/(loss)	Credit rating
Security A	$ 1,913	$ 2,031	$ 118	Not rated
Security B	9,104	6,343	(2,761)	Not rated

Class: All of the above are trust preferred securities.

The Company has evaluated the securities in the above tables and has concluded that none of these securities has impairment that is other-than-temporary. The Company evaluates whether a credit impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral and (e) the payment structure of the security. The Company’s best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. The Company concluded that most of the securities that are in an unrealized loss position are in a loss position because of changes in market interest rates after the securities were purchased. Securities that have been in an unrealized loss position for 12 months or longer include other securities whose market values are sensitive to market interest rates. The Company’s unrealized loss for other debt securities, which include two single issuer trust preferred securities, is primarily related to general market conditions, including a lack of liquidity in the market. The severity of the temporary impairments in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level. As a result of its review, the Company concluded that other-than-temporary impairment did not exist due to the Company’s ability and intention to hold these securities to recover their amortized cost basis.