Note 3 – Securities

The fair value of securities is as follows:


			Gross		Gross
March 31, 2015	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available for sale
U.S. Treasury and federal agencies	$	28,400	$	69	$	(48	)	$	28,421
State and municipal		50,036		1,577		(37	)		51,576
Federal agency collateralized mortgage obligations		120,785		1,471		(537	)		121,719
Federal agency mortgage-backed pools		125,923		3,590		(246	)		129,267
Corporate notes		32		18		—			50

Total available for sale investment securities	$	325,176	$	6,725	$	(868	)	$	331,033

Held to maturity
U.S. Treasury and federal agencies	$	9,824	$	157	$	—		$	9,981
State and municipal		128,558		6,179		(143	)		134,594
Federal agency collateralized mortgage obligations		3,873		45		—			3,918
Federal agency mortgage-backed pools		22,027		961		(76	)		22,912

Total held to maturity investment securities	$	164,282	$	7,342	$	(219	)	$	171,405


December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
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

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 March 31, 2015, 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 March 31, 2015.

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, 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 March 31, 2015 and December 31, 2014, 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.


	March 31, 2015				December 31, 2014
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Available for sale
Within one year	$	6,170	$	6,220	$	6,098	$	6,169
One to five years		49,096		49,902		44,720		45,093
Five to ten years		16,830		17,373		16,147		16,768
After ten years		6,372		6,552		6,598		6,790

		78,468		80,047		73,563		74,820
Federal agency collateralized mortgage obligations		120,785		121,719		122,930		122,860
Federal agency mortgage-backed pools		125,923		129,267		122,583		125,395
Private labeled mortgage-backed pools		—		—		670		689

Total available for sale investment securities	$	325,176	$	331,033	$	319,746	$	323,764

Held to maturity
Within one year	$	—	$	—	$	—	$	—
One to five years		1,223		1,243		592		593
Five to ten years		104,305		109,391		99,225		101,323
After ten years		32,854		33,941		39,582		40,857

		138,382		144,575		139,399		142,773
Federal agency collateralized mortgage obligations		3,873		3,918		4,039		4,073
Federal agency mortgage-backed pools		22,027		22,912		22,329		23,058

Total held to maturity investment securities	$	164,282	$	171,405	$	165,767	$	169,904

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
March 31, 2015	Value		Losses			Value		Losses			Value		Losses
U.S. Treasury and federal agencies	$	—	$	—		$	16,937	$	(48	)	$	16,937	$	(48	)
State and municipal		15,766		(173	)		1,259		(7	)		17,025		(180	)
Federal agency collateralized mortgage obligations		9,233		(21	)		29,821		(516	)		39,054		(537	)
Federal agency mortgage-backed pools		6,847		(84	)		27,253		(238	)		34,100		(322	)

Total temporarily impaired securities	$	31,846	$	(278	)	$	75,270	$	(809	)	$	107,116	$	(1,087	)


	Less than 12 Months					12 Months or More					Total
December 31, 2014	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury and federal agencies	$	2,993	$	(7	)	$	20,762	$	(222	)	$	23,755	$	(229	)
State and municipal		10,287		(121	)		2,050		(30	)		12,337		(151	)
Federal agency collateralized mortgage obligations		15,013		(88	)		39,801		(957	)		54,814		(1,045	)
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	)	$	124,943	$	(1,785	)


	Three Months Ended March 31
	2015			2014
Sales of securities available for sale (Unaudited)
Proceeds	$	13,332		$	—
Gross gains		147			—
Gross losses		(23	)		—