Note 4 – Securities

The fair value of securities is as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2014
Available for sale
U.S. Treasury and federal agencies	$	26,996	$	56	$	(229	)	$	26,823
State and municipal		46,535		1,462		(45	)		47,952
Federal agency collateralized mortgage obligations		122,930		975		(1,045	)		122,860
Federal agency mortgage-backed pools		122,583		3,172		(360	)		125,395
Private labeled mortgage-backed pools		670		19		—			689
Corporate notes		32		13		—			45

Total available for sale investment securities	$	319,746	$	5,697	$	(1,679	)	$	323,764

Held to maturity
U.S. Treasury and federal agencies	$	9,804	$	82	$	—		$	9,886
State and municipal		129,595		3,398		(106	)		132,887
Federal agency collateralized mortgage obligations		4,039		35		(1	)		4,073
Federal agency mortgage-backed pools		22,329		729		—			23,058

Total held to maturity investment securities	$	165,767	$	4,244	$	(107	)	$	169,904


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


	December 31, 2014				December 31, 2013
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Available for sale
Within one year	$	6,098	$	6,169	$	3,643	$	3,663
One to five years		44,720		45,093		49,198		49,627
Five to ten years		16,147		16,768		106,225		107,424
After ten years		6,598		6,790		62,120		61,051

		73,563		74,820		221,186		221,765
Federal agency collateralized mortgage obligations		122,930		122,860		116,047		114,706
Federal agency mortgage-backed pools		122,583		125,395		170,006		170,894
Private labeled mortgage-backed pools		670		689		1,188		1,226

Total available for sale investment securities	$	319,746	$	323,764	$	508,427	$	508,591

Held to maturity
Within one year	$	—	$	—	$	9,910	$	9,910
One to five years		592		593		—		—
Five to ten years		99,225		101,323		—		—
After ten years		39,582		40,857		—		—

		139,399		142,773		9,910		9,910
Federal agency collateralized mortgage obligations		4,039		4,073		—		—
Federal agency mortgage-backed pools		22,329		23,058		—		—

Total held to maturity investment securities	$	165,767	$	169,904	$	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 Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2014
U.S. Treasury and federal agencies	$	2,993	$	(7	)	$	20,762	$	(222	)	$	23,755	$	(229	)
State and municipal		10,287		(121	)		2,050		(30	)		12,336		(151	)
Federal agency collateralized mortgage obligations		15,013		(88	)		39,801		(957	)		54,813		(1,046	)
Federal agency mortgage-backed pools		5,993		(9	)		28,044		(351	)		34,037		(360	)

Total temporarily impaired securities	$	34,286	$	(225	)	$	90,657	$	(1,560	)	$	124,941	$	(1,786	)


	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2013
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	)

U.S. Treasury, federal agency, state and municipal

The unrealized losses on the Company’s investments in U.S. Treasury, federal agency and state and political subdivisions were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

Federal agency mortgage-backed pools and collateralized mortgage obligations

The unrealized losses on the Company’s investment in collateralized mortgage obligations securities were caused by interest rate increases. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

Information regarding security proceeds, gross gains and gross losses are presented below.


	Years ended December 31
	2014		2013			2012
Sales of securities available for sale
Proceeds	$	45,228	$	23,853		$	14,989
Gross gains		988		382			2
Gross losses		—		(8	)		—

The tax effect of the proceeds from the sale of securities available for sale was $346, $131 and $0 for the years ended December 31, 2014, 2013 and 2012, respectively.

The Company pledges securities to secure retail and corporate repurchase agreements to the Federal Reserve for borrowing availability and as settlements for the fair value of swap agreements. At December 31, 2014, the Company had pledged $159.7 million of fair value or $157.4 million of amortized cost, in securities as collateral for $139.7 million in repurchase agreements, $94.3 million of fair value or $91.8 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with no current outstanding borrowings and $13.0 million of fair value or $12.5 million of amortized cost, in securities as collateral for $4.5 million in settlements on the fair value of swap agreements.