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Investment Securities

12 Months Ended

Dec. 31, 2017

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, 2017 and December 31, 2016. Investment securities available-for-sale are reported at fair value with unrealized gains or losses included in stockholders’ equity, net of tax. Accordingly, the carrying value of such securities reflects their fair value as of December 31, 2017 and December 31, 2016. 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 from 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, a component of stockholders’ equity 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 tax.

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. The transfer enhanced liquidity and increased 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, 2017 and 2016.

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		(dollars in thousands)
December 31, 2017
Investment securities available-for-sale
Federal agency obligations		$	56,297			$	141			$	(416)			$	56,022
Residential mortgage pass-through securities			183,509				330				(1,948)				181,891
Commercial mortgage pass-through securities			4,054				3				(3)				4,054
Obligations of U.S. states and political subdivisions			130,723				1,739				(1,334)				131,128
Trust preferred securities			4,577				205				(111)				4,671
Corporate bonds and notes			29,801				163				(271)				29,693
Asset-backed securities			12,021				66				(37)				12,050
Certificates of deposit			621				4				-				625
Equity securities			11,843				235				(350)				11,728
Other securities			3,422				-				-				3,422
Total securities available-for-sale		$	436,868			$	2,886			$	(4,470)			$	435,284

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
December 31, 2016		(dollars in thousands)
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			11,843				192				(325)				11,710
Other securities			3,272				-				-				3,272
Total securities available-for-sale		$	351,928			$	4,645			$	(3,283)			$	353,290

Investment securities having a carrying value of approximately $157.8 million and $121.9 million at December 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits, borrowings, repurchase agreements, Federal Reserve Discount Window borrowings and Federal Home Loan Bank advances and for other purposes required or permitted by law. As of December 31, 2017 and December 31, 2016, 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.

The following table presents information for investments in securities available-for-sale at December 31, 2017, 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, 2017
		Amortized Cost				Fair Value
		(dollars in thousands)
Investment Securities Available-for-Sale:
Due in one year or less		$	7,964			$	7,985
Due after one year through five years			28,056				28,294
Due after five years through ten years			39,646				40,069
Due after ten years			158,374				157,841
Residential mortgage pass-through securities			183,509				181,891
Commercial mortgage pass-through securities			4,054				4,054
Equity securities			11,843				11,728
Other securities			3,422				3,422
Total securities available-for-sale		$	436,868			$	435,284

Gross gains and losses from the sales, calls, and maturities of investment securities for the years ended December 31, 2017, 2016 and 2015 were as follows:

		Years Ended December 31,
		2017				2016				2015
		(dollars in thousands)
Proceeds		$	29,543			$	85,253			$	65,231

Gross gains on sales of investment securities			1,596			$	4,234			$	3,931
Gross losses on sales of investment securities			-				-				-
Net gains on sales of investment securities			1,596				4,234				3,931
Less: tax provision on net gains			(579)				(1,682)				(1,564)
Net gains on sales of investment securities, after tax		$	1,017			$	2,552			$	2,367

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 a 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 112 and 84 investment securities as of December 31, 2017 and December 31, 2016, 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, 2017.

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, 2017 and 2016. There were no investments held-to-maturity as of December 31, 2017 and 2016.

		December 31, 2017
		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		$	39,813			$	(416)			$	28,407			$	(213)			$	11,406			$	(203)
Residential mortgage pass-through securities			148,574				(1,948)				117,556				(1,146)				31,018				(802)
Commercial mortgage pass-through securities			1,198				(3)				1,198				(3)				-				-
Obligations of U.S. states and political subdivisions			57,685				(1,334)				17,909				(246)				39,776				(1,088)
Trust preferred securities			1,469				(111)				-				-				1,469				(111)
Corporate bonds and notes			11,074				(271)				1,965				(21)				9,109				(250)
Asset-backed securities			7,428				(37)				993				(2)				6,435				(35)
Equity securities			11,116				(350)				-				-				11,116				(350)
Total Temporarily Impaired Securities		$	278,357			$	(4,470)			$	168,028			$	(1,631)			$	110,329			$	(2,839)

		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)
Equity securities			11,467				(325)				-				-				11,467				(325)
Total Temporarily Impaired Securities		$	167,343			$	(3,283)			$	134,954			$	(2,483)			$	32,389			$	(800)