Note 3 – Securities

The fair value of securities is as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
September 30, 2014	Cost		Gains		Losses			Value
Available for sale
U.S. Treasury and federal agencies	$	27,093	$	67	$	(335	)	$	26,825
State and municipal		47,006		1,641		(52	)		48,595
Federal agency collateralized mortgage obligations		123,916		970		(1,758	)		123,128
Federal agency mortgage-backed pools		122,393		2,678		(962	)		124,109
Private labeled mortgage-backed pools		763		23		-			786
Corporate notes		32		17		-			49

Total available for sale investment securities	$	321,203	$	5,396	$	(3,107	)	$	323,492

Held to maturity
U.S. Treasury and federal agencies	$	9,783	$	49	$	(4	)	$	9,828
State and municipal		135,839		2,958		(22	)		138,775
Federal agency collateralized mortgage obligations		4,193		9		-			4,202
Federal agency mortgage-backed pools		22,634		399		-			23,033

Total held to maturity investment securities	$	172,449	$	3,415	$	(26	)	$	175,838


			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2013	Cost		Gains		Losses			Value

Available for sale
U.S. Treasury and federal agencies	$	43,808	$	133	$	(807	)	$	43,134
State and municipal		176,670		4,405		(3,177	)		177,898
Federal agency collateralized mortgage obligations		116,047		1,242		(2,583	)		114,706
Federal agency mortgage-backed pools		170,006		3,172		(2,284	)		170,894
Private labeled mortgage-backed pools		1,188		38		—			1,226
Corporate notes		708		25		—			733

Total available for sale investment securities	$	508,427	$	9,015	$	(8,851	)	$	508,591

Held to maturity, State and Municipal	$	9,910	$	—	$	—		$	9,910

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. While these securities are held in the available for sale portfolio and held-to-maturity, Horizon intends, and has the ability, to hold them until the earlier of a recovery in fair value or maturity.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. At September 30, 2014, no individual investment security had an unrealized loss that was determined to be other-than-temporary.

The unrealized losses on the Company’s investments in securities of state and municipal governmental agencies, U.S. Treasury and federal agencies, federal agency collateralized mortgage obligations, and federal agency mortgage-backed pools were caused by interest rate volatility and not a decline in credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company expects to recover the amortized cost basis over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at September 30, 2014.

The Company elected to transfer 319 available-for-sale (“AFS”) securities with an aggregate fair value of $167.1 million to a classification of held-to-maturity (“HTM”) on April 1, 2014. In accordance with FASB ASC 320-10-55-24, the transfer from AFS to HTM must be recorded at the fair value of the AFS securities at the time of transfer. The net unrealized holding gain of $1.3 million, net of tax, at the date of transfer was retained in accumulated other comprehensive income (loss), with the associated pre-tax amount retained in the carrying value of the HTM securities. Such amounts will be amortized to comprehensive income over the remaining life of the securities. The fair value of the transferred AFS securities became the book value of the HTM securities at April 1, 2014, with no unrealized gain or loss at this date. Future reporting periods, with potential changes in market value for these securities, would likely record an unrealized gain or loss for disclosure purposes.

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2014 and December 31, 2013, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2014				December 31, 2013
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Available for sale
Within one year	$	4,623	$	4,670	$	3,643	$	3,663
One to five years		45,741		46,156		49,198		49,627
Five to ten years		17,166		17,888		106,225		107,424
After ten years		6,601		6,755		62,120		61,051

		74,131		75,469		221,186		221,765
Federal agency collateralized mortgage obligations		123,916		123,128		116,047		114,706
Federal agency mortgage-backed pools		122,393		124,109		170,006		170,894
Private labeled mortgage-backed pools		763		786		1,188		1,226

Total available for sale investment securities	$	321,203	$	323,492	$	508,427	$	508,591

Held to maturity
Within one year	$	5,951	$	6,136	$	9,910	$	9,910
One to five years		381		382		—		—
Five to ten years		93,628		95,216		—		—
After ten years		45,662		46,869		—		—

		145,622		148,603		9,910		9,910
Federal agency collateralized mortgage obligations		4,193		4,202		—		—
Federal agency mortgage-backed pools		22,634		23,033		—		—

Total held to maturity investment securities	$	172,449	$	175,838	$	9,910	$	9,910

The following table shows the gross unrealized losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
September 30, 2014	Value		Losses			Value		Losses			Value		Losses
U.S. Treasury and federal agencies	$	3,956	$	(4	)	$	23,648	$	(335	)	$	27,604	$	(339	)
State and municipal		6,200		(35	)		2,674		(39	)		8,874		(74	)
Federal agency collateralized mortgage obligations		37,987		(318	)		40,882		(1,440	)		78,869		(1,758	)
Federal agency mortgage-backed pools		7,945		(26	)		33,870		(936	)		41,815		(962	)

Total temporarily impaired securities	$	56,088	$	(383	)	$	101,074	$	(2,750	)	$	157,162	$	(3,133	)


	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2013	Value		Losses			Value		Losses			Value		Losses
U.S. Treasury and federal agencies	$	32,099	$	(807	)	$	—	$	—		$	32,099	$	(807	)
State and municipal		57,078		(2,993	)		3,206		(184	)		60,284		(3,177	)
Federal agency collateralized mortgage obligations		64,445		(2,121	)		8,601		(462	)		73,046		(2,583	)
Federal agency mortgage-backed pools		87,919		(2,284	)		—		—			87,919		(2,284	)

Total temporarily impaired securities	$	241,541	$	(8,205	)	$	11,807	$	(646	)	$	253,348	$	(8,851	)


	Three Months Ended September 30					Nine Months Ended September 30
	2014			2013		2014			2013
Sales of securities available for sale (Unaudited)
Proceeds	$	45,228		$	648	$	45,228		$	23,853
Gross gains		1,001			6		1,001			382
Gross losses		(13	)		—		(13	)		(8	)