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Investment Securities

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 4 - Investment Securities

The Company’s investment securities are classified as available-for-sale at December 31, 2016 and as available-for-sale and held-to-maturity at December 31, 2015. Investment securities available-for-sale are reported at fair value with unrealized gains or losses included in equity, net of tax. Accordingly, the carrying value of such securities reflects their fair value as of December 31, 2016 and December 31, 2015. Fair value is based upon either quoted market prices, or in certain cases where there is limited activity in the market for a particular instrument, assumptions are made to determine their fair value. See Note 22 of the Notes to Consolidated Financial Statements for a further discussion.

Transfers of debt securities between the held-to-maturity category to the available-for-sale category are made at fair value at the date of transfer. For transfers from the available-for-sale category to the held-to maturity category the unrealized holding gain or loss at the date of transfer remains in accumulated other comprehensive income and in the carrying value of the held-to-maturity investment security. Unrealized holding gains or losses that remain in accumulated other comprehensive income are amortized or accreted out of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the remaining terms of the securities. For transfers from the held-to-maturity category to the available-for-sale category unrealized holding gain or loss at the date of the transfer shall be recognized in accumulated other comprehensive income, net of applicable taxes.

During the year ended December 31, 2016, the Company transferred all securities previously categorized as held-to-maturity to available-for-sale classification. The transfer resulted in an increase of approximately $210 million in amortized cost basis of available-for-sale securities and resulted in a net increase to accumulated other comprehensive income of $7.4 million, net of tax. This transfer will enhance liquidity and increase flexibility with regard to asset-liability management and balance sheet composition. As a result of the transfer, the Company believes it has tainted its held-to-maturity classification and judgment will be required in the future in determining when circumstances have changed such that management can assert that it has the intent and ability to hold debt securities to maturity. Based on this guidance, the Company does not expect to classify any securities as held-to-maturity within the near future.

The following tables present information related to the Company’s portfolio of securities available-for-sale and held-to-maturity at December 31, 2016 and 2015.

		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
		(dollars in thousands)
December 31, 2016
Investment securities available-for-sale
Federal agency obligations		$	52,826		$	282		$	(271)		$	52,837
Residential mortgage pass-through securities			72,922			519			(944)			72,497
Commercial mortgage pass-through securities			4,186			23			-			4,209
Obligations of U.S. states and political subdivisions			148,747			2,789			(931)			150,605
Trust preferred securities			5,575			242			(151)			5,666
Corporate bonds and notes			36,717			586			(375)			36,928
Asset-backed securities			14,867			2			(286)			14,583
Certificates of deposit			973			10			-			983
Equity securities			376			192			-			568
Other securities			14,739			-			(325)			14,414
Total securities available-for-sale		$	351,928		$	4,645		$	(3,283)		$	353,290

		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
December 31, 2015		(dollars in thousands)
Investment securities available-for-sale
Federal agency obligations		$	29,062		$	142		$	(58)		$	29,146
Residential mortgage pass-through securities			44,155			803			(48)			44,910
Commercial mortgage pass-through securities			2,981			-			(9)			2,972
Obligations of U.S. states and political subdivisions			8,188			169			-			8,357
Trust preferred securities			16,088			398			(231)			16,255
Corporate bonds and notes			53,566			702			(292)			53,976
Asset-backed securities			20,005			18			(298)			19,725
Certificates of deposit			1,895			18			(8)			1,905
Equity securities			376			21			(23)			374
Other securities			18,303			-			(153)			18,150
Total securities available-for-sale		$	194,619		$	2,271		$	(1,120)		$	195,770

			Amortized Cost			Gross Unrecognized Gains			Gross Unrecognized Losses			Fair Value
Investment securities held-to-maturity
U.S. Treasury and agency securities		$	28,471		$	755		$	-		$	29,226
Federal agency obligations			33,616			280			(119)			33,777
Residential mortgage-backed securities			3,805			11			(6)			3,810
Commercial mortgage-backed securities			4,110			27			(2)			4,135
Obligations of U.S. states and political subdivisions			118,015			5,001			(3)			123,013
Corporate bonds and notes			36,039			719			(161)			36,597
Total securities held-to-maturity		$	224,056		$	6,793		$	(291)		$	230,558

The following table presents information for investments in securities available-for-sale at December 31, 2016, based on scheduled maturities. Actual maturities can be expected to differ from scheduled maturities due to prepayment or early call options of the issuer. Securities not due at a single maturity date are shown separately.

		December 31, 2016
		Amortized Cost			Fair Value
		(dollars in thousands)
Investment Securities Available-for-Sale:
Due in one year or less		$	5,003		$	5,054
Due after one year through five years			32,045			32,406
Due after five years through ten years			50,718			51,473
Due after ten years			171,939			172,669
Residential mortgage pass-through securities			72,922			72,497
Commercial mortgage pass-through securities			4,186			4,209
Equity securities			376			568
Other securities			14,739			14,414
Total securities available-for-sale		$	351,928		$	353,290

Gross gains and losses from the sales, calls, and maturities of investment securities for the years ended December 31, 2016, 2015 and 2014 were as follows (dollars in thousands):

		Years Ended December 31,
		2016			2015			2014
Proceeds		$	85,253		$	65,231		$	81,844

Gross gains on sales of investment securities		$	4,234		$	3,931		$	2,837
Gross losses on sales of investment securities			-			-			19
Net gains on sales of investment securities			4,234			3,931			2,818
Less: tax provision on net gains			(1,682)			(1,564)			(986)
Net gains on sales of investment securities, after tax		$	2,552		$	2,367		$	1,832

Other-than-Temporarily Impaired Investments

The Company reviews all securities for potential recognition of other-than-temporary impairment. The Company maintains a watch list for the identification and monitoring of securities experiencing problems that require a heightened level of review. This could include credit rating downgrades.

The Company’s assessment of whether an impairment in the portfolio is other-than temporary includes factors such as whether the issuer has defaulted on scheduled payments, announced restructuring and/or filed for bankruptcy, has disclosed severe liquidity problems that cannot be resolved, disclosed deteriorating financial condition or sustained significant losses.

Temporarily Impaired Investments

The Company does not believe that any of the unrealized losses, which were comprised of 84 and 74 investment securities as of December 31, 2016 and December 31, 2015, respectively, represent an other-than-temporary impairment. The gross unrealized losses associated with U.S. Treasury and agency securities, federal agency obligations, mortgage-backed securities, corporate bonds, tax-exempt securities, asset-backed securities, trust preferred securities, mutual funds and equity securities are not considered to be other-than-temporary because management believes these unrealized losses are related to changes in interest rates and do not affect the expected cash flows of the underlying collateral or issuer.

Factors which may contribute to unrealized losses include credit risk, market risk, changes in interest rates, economic cycles, and liquidity risk. The magnitude of any unrealized loss may be affected by the relative concentration of the Company’s investment in any one issuer or industry. The Company has established policies to reduce exposure through diversification of the investment portfolio including limits on concentrations to any one issuer. The Company believes the investment portfolio is prudently diversified.

The unrealized losses included in the tables below are primarily related to changes in interest rates and credit spreads. All of the Company’s investment securities are performing and are expected to continue to perform in accordance with their respective contractual terms and conditions. These are largely intermediate duration holdings and, in certain cases, monthly principal payments can further reduce loss exposure resulting from an increase in rates.

The Company evaluates all securities with unrealized losses quarterly to determine whether the loss is other-than-temporary. Unrealized losses in the corporate debt securities category consist primarily of senior unsecured corporate debt securities issued by large financial institutions, insurance companies and other corporate issuers. Single issuer corporate trust preferred securities are also included, and in the case of one holding the market valuation loss is largely based upon the floating rate coupon and corresponding market valuation. Neither that trust preferred issuer, nor any other corporate issuers, have defaulted on interest payments. The unrealized loss in equity securities consists of losses on other bank equities. The decline in fair value is due in large part to the lack of an active trading market for these securities, changes in market credit spreads and rating agency downgrades. Management concluded that these securities were not other-than-temporarily impaired at December 31, 2016.

In determining whether or not securities are OTTI, the Company must exercise considerable judgment. Accordingly, there can be no assurance that the actual results will not differ from the Company’s judgments and that such differences may not require the future recognition of other-than-temporary impairment charges that could have a material effect on the Company’s financial position and results of operations. In addition, the value of, and the realization of any loss on, an investment security is subject to numerous risks as cited above.

The following tables indicate gross unrealized losses not recognized in income and fair value, aggregated by investment category and the length of time individual securities have been in a continuous unrealized loss position at December 31, 2016 and 2015. There were no investments held-to-maturity as of December 31, 2016.

		December 31, 2016
		Total						Less than 12 Months						12 Months or Longer
		Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
		(dollars in thousands)
Investment Securities Available-for-Sale:
Federal agency obligation		$	22,672		$	(271)		$	21,416		$	(262)		$	1,256		$	(9)
Residential mortgage pass-through securities			50,136			(944)			49,817			(937)			319			(7)
Obligations of U.S. states and political subdivisions			52,307			(931)			52,307			(931)			-			-
Trust preferred securities			1,427			(151)			-			-			1,427			(151)
Corporate bonds and notes			15,930			(375)			7,671			(265)			8,259			(110)
Asset-backed securities			13,404			(286)			3,743			(88)			9,661			(198)
Other securities			11,467			(325)			-			-			11,467			(325)
Total Temporarily Impaired Securities		$	167,343		$	(3,283)		$	134,954		$	(2,483)		$	32,389		$	(800)

		December 31, 2015
		Total						Less than 12 Months						12 Months or Longer
		Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
		(dollars in thousands)
Investment Securities Available-for-Sale:
Federal agency obligation		$	6,755		$	(50)		$	2,770		$	(9)		$	3,985		$	(41)
Residential mortgage pass-through securities			5,694			(11)			5,694			(11)			—			—
Trust preferred securities			1,307			(269)			—			—			1,307			(269)
Corporate bonds and notes			1,961			(11)			1,961			(11)			—			—
Asset-backed securities			9,773			(31)			9,773			(31)			—			—
Certificates of deposit			369			(2)			369			(2)			—			—
Equity securities			307			(69)			—			—			307			(69)
Other securities			5,417			(82)			1,978			(21)			3,439			(61)
Total		$	31,583		$	(525)		$	22,545		$	(85)		$	9,038		$	(440)
Investment Securities Held-to-Maturity:
Federal agency obligation			3,228			(28)			3,228			(28)			—			—
Obligations of U.S. states and political subdivisions			8,341			(60)			1,401			(3)			6,940			(57)
Corporate bonds and notes			993			(7)			993			(7)			—			—
Total			12,562			(95)			5,622			(38)			6,940			(57)
Total Temporarily Impaired Securities		$	44,145		$	(620)		$	28,167		$	(123)		$	15,978		$	(497)

Investment securities having a carrying value of approximately $121.9 million and $142.5 million at December 31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits, borrowings, repurchase agreements, Federal Reserve Discount Window and Federal Home Loan Bank advances and for other purposes required or permitted by law. As of December 31, 2016 and December 31, 2015, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

- Definition

The entire disclosure for investments in certain debt and equity securities.

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