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SECURITIES

9 Months Ended

Sep. 30, 2019

SECURITIES

SECURITIES

NOTE 2. SECURITIES

Information related to the fair value and amortized cost of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is provided in the tables below.


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
(dollars in thousands)		Cost			Gain			Losses			Value
September 30, 2019
U.S. Treasury securities		$	995		$	12		$	0		$	1,007
U.S. government sponsored agencies			2,303			5			0			2,308
Mortgage-backed securities: residential			291,427			5,217			(412)			296,232
Mortgage-backed securities: commercial			37,335			334			0			37,669
State and municipal securities			262,504			13,624			(114)			276,014
Total		$	594,564		$	19,192		$	(526)		$	613,230

December 31, 2018
U.S. Treasury securities		$	994		$	0		$	(7)		$	987
U.S. government sponsored agencies			4,435			0			(85)			4,350
Mortgage-backed securities: residential			329,516			1,392			(5,496)			325,412
Mortgage-backed securities: commercial			38,712			0			(571)			38,141
State and municipal securities			217,964			1,403			(2,708)			216,659
Total		$	591,621		$	2,795		$	(8,867)		$	585,549

Information regarding the fair value and amortized cost of available-for-sale debt securities by maturity as of September 30, 2019 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.


		Amortized			Fair
(dollars in thousands)		Cost			Value
Due in one year or less		$	4,003		$	4,013
Due after one year through five years			18,138			18,529
Due after five years through ten years			28,136			29,341
Due after ten years			215,525			227,446
			265,802			279,329
Mortgage-backed securities			328,762			333,901
Total debt securities		$	594,564		$	613,230

Securities proceeds, gross gains and gross losses are presented below.


		Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)		2019			2018			2019			2018
Sales of securities available-for-sale
Proceeds		$	12,725		$	0		$	38,544		$	12,322
Gross gains			13			0			151			21
Gross losses			(7)			0			(57)			(27)
Number of securities			6			0			31			22

In accordance with ASU No. 2017-08, purchase premiums for callable securities are amortized to the earliest call date and premiums on non-callable securities as well as discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

Securities with carrying values of $61.3 million and $164.7 million were pledged as of September 30, 2019 and December 31, 2018, respectively, as collateral for securities sold under agreements to repurchase, borrowings from the Federal Home Loan Bank and for other purposes as permitted or required by law. The Company has no securities sold under agreements to repurchase or Federal Home Loan Bank borrowings as of September 30, 2019, causing the decline in pledged securities.

Information regarding securities with unrealized losses as of September 30, 2019 and December 31, 2018 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.


		Less than 12 months						12 months or more						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
(dollars in thousands)		Value			Losses			Value			Losses			Value			Losses
September 30, 2019
Mortgage-backed securities: residential		$	20,200		$	84		$	19,456		$	328		$	39,656		$	412
State and municipal securities			7,103			105			2,761			9			9,864			114
Total temporarily impaired		$	27,303		$	189		$	22,217		$	337		$	49,520		$	526

December 31, 2018
U.S. Treasury securities		$	0		$	0		$	987		$	7		$	987		$	7
U.S. government sponsored agencies			0			0			4,350			85			4,350			85
Mortgage-backed securities: residential			11,619			12			217,182			5,484			228,801			5,496
Mortgage-backed securities: commercial			0			0			38,141			571			38,141			571
State and municipal securities			26,229			124			85,982			2,584			112,211			2,708
Total temporarily impaired		$	37,848		$	136		$	346,642		$	8,731		$	384,490		$	8,867

The total number of securities with unrealized losses as of September 30, 2019 and December 31, 2018 is presented below.


		Less than		12 months
		12 months		or more		Total
September 30, 2019
Mortgage-backed securities: residential		10		8		18
Mortgage-backed securities: commercial		0		0		0
State and municipal securities		5		2		7
Total temporarily impaired		15		10		25

December 31, 2018
U.S. Treasury securities		0		1		1
U.S. government sponsored agencies		0		2		2
Mortgage-backed securities: residential		5		84		89
Mortgage-backed securities: commercial		0		9		9
State and municipal securities		35		111		146
Total temporarily impaired		40		207		247

The following factors are considered in determining whether or not the impairment of these securities is other-than-temporary. In making this determination, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer, as well as the underlying fundamentals of the relevant market and the outlook for such market in the near future. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. As of September 30, 2019 and December 31, 2018, all of the securities in the Company’s portfolio were backed by the U.S. government, government agencies, government sponsored entities or were A-rated or

better, except for certain non-local or local municipal securities, which are not rated. For the government, government agency, government-sponsored entity and municipal securities, management did not believe that there would be credit losses or that full principal would not be received. Management considers the unrealized losses on these securities to be primarily interest rate driven and does not expect material losses given current market conditions unless the securities are sold. However, at this time management does not have the intent to sell, and it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost basis.