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Securities
 12 Months Ended
Dec. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Securities
Note 4 – Securities
The fair value of securities is as follows:
 
 
 
December 31, 2018
 
 
 
Amortized

Cost
 
 
Gross

Unrealized

Gains
 
 
Gross

Unrealized

Losses
 
 
Fair

Value
 
Available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
16,815
 
 
$
1
 
 
$
(208
)
 
$
16,608
 
State and municipal
 
 
210,386
 
 
 
1,495
 
 
 
(2,578
)
 
 
209,303
 
Federal agency collateralized mortgage obligations
 
 
187,563
 
 
 
625
 
 
 
(3,185
)
 
 
185,003
 
Federal agency mortgage-backed pools
 
 
183,479
 
 
 
80
 
 
 
(4,823
)
 
 
178,736
 
Corporate notes
 
 
10,666
 
 
 
107
 
 
 
(75
)
 
 
10,698
 
Total available for sale investment securities
 
$
608,909
 
 
$
2,308
 
 
$
(10,869
)
 
$
600,348
 
Held to maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal
 
$
191,269
 
 
$
1,773
 
 
$
(3,366
)
 
$
189,676
 
Federal agency collateralized mortgage obligations
 
 
5,144
 
 
 
6
 
 
 
(120
)
 
 
5,030
 
Federal agency mortgage-backed pools
 
 
13,699
 
 
 
74
 
 
 
(206
)
 
 
13,567
 
Total held to maturity investment securities
 
$
210,112
 
 
$
1,853
 
 
$
(3,692
)
 
$
208,273
 
 
 
 
December 31, 2017
 
 
 
Amortized

Cost
 
 
Gross

Unrealized
Gains
 
 
Gross

Unrealized
Losses
 
 
Fair

Value
 
Available for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
19,277
 
 
$
—
 
 
$
(225
)
 
$
19,052
 
State and municipal
 
 
148,045
 
 
 
2,189
 
 
 
(670
)
 
 
149,564
 
Federal agency collateralized mortgage obligations
 
 
132,871
 
 
 
45
 
 
 
(2,551
)
 
 
130,365
 
Federal agency mortgage-backed pools
 
 
211,487
 
 
 
155
 
 
 
(2,985
)
 
 
208,657
 
Private labeled mortgage-backed pools
 
 
1,650
 
 
 
—
 
 
 
(8
)
 
 
1,642
 
Corporate notes
 
 
272
 
 
 
113
 
 
 
—
 
 
 
385
 
Total available for sale investment securities
 
$
513,602
 
 
$
2,502
 
 
$
(6,439
)
 
$
509,665
 
Held to maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal
 
$
179,836
 
 
$
3,493
 
 
$
(2,932
)
 
$
180,397
 
Federal agency collateralized mortgage obligations
 
 
5,734
 
 
 
17
 
 
 
(69
)
 
 
5,682
 
Federal agency mortgage-backed pools
 
 
14,878
 
 
 
216
 
 
 
(88
)
 
 
15,006
 
Total held to maturity investment securities
 
$
200,448
 
 
$
3,726
 
 
$
(3,089
)
 
$
201,085
 
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, 2018, 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, 2018.
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, 2018 and December 31, 2017, 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, 2018
 
 
December 31, 2017
 
 
 
Amortized

Cost
 
 
Fair

Value
 
 
Amortized

Cost
 
 
Fair

Value
 
Available for sale
 
 
 
 
 
 
 
 
 
 
 
 
Within one year
 
$
20,532
 
 
$
20,448
 
 
$
13,347
 
 
$
13,326
 
One to five years
 
 
42,476
 
 
 
41,705
 
 
 
40,468
 
 
 
40,193
 
Five to ten years
 
 
107,839
 
 
 
107,107
 
 
 
50,473
 
 
 
51,156
 
After ten years
 
 
67,020
 
 
 
67,349
 
 
 
63,306
 
 
 
64,326
 
 
 
 
237,867
 
 
 
236,609
 
 
 
167,594
 
 
 
169,001
 
Federal agency collateralized mortgage obligations
 
 
187,563
 
 
 
185,003
 
 
 
132,871
 
 
 
130,365
 
Federal agency mortgage-backed pools
 
 
183,479
 
 
 
178,736
 
 
 
211,487
 
 
 
208,657
 
Private labeled mortgage-backed pools
 
 
—
 
 
 
—
 
 
 
1,650
 
 
 
1,642
 
Total available for sale investment securities
 
$
608,909
 
 
$
600,348
 
 
$
513,602
 
 
$
509,665
 
Held to maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Within one year
 
$
70
 
 
$
70
 
 
$
1,948
 
 
$
1,934
 
One to five years
 
 
48,732
 
 
 
49,324
 
 
 
40,603
 
 
 
41,531
 
Five to ten years
 
 
101,809
 
 
 
101,533
 
 
 
89,801
 
 
 
91,249
 
After ten years
 
 
40,658
 
 
 
38,749
 
 
 
47,484
 
 
 
45,683
 
 
 
 
191,269
 
 
 
189,676
 
 
 
179,836
 
 
 
180,397
 
Federal agency collateralized mortgage obligations
 
 
5,144
 
 
 
5,030
 
 
 
5,734
 
 
 
5,682
 
Federal agency mortgage-backed pools
 
 
13,699
 
 
 
13,567
 
 
 
14,878
 
 
 
15,006
 
Total held to maturity investment securities
 
$
210,112
 
 
$
208,273
 
 
$
200,448
 
 
$
201,085
 
 
 
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.
 
 
 
December 31, 2018
 
 
 
Less than 12 Months
 
 
12 Months or More
 
 
Total
 
 
 
Fair

Value
 
 
Unrealized

Losses
 
 
Fair

Value
 
 
Unrealized

Losses
 
 
Fair

Value
 
 
Unrealized

Losses
 
Investment Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
—
 
 
$
—
 
 
$
9,707
 
 
$
(208
)
 
$
9,707
 
 
$
(208
)
State and municipal
 
 
75,163
 
 
 
(1,628
)
 
 
106,335
 
 
 
(4,316
)
 
 
181,498
 
 
 
(5,944
)
Federal agency collateralized mortgage obligations
 
 
6,450
 
 
 
(25
)
 
 
106,257
 
 
 
(3,280
)
 
 
112,707
 
 
 
(3,305
)
Federal agency mortgage-backed pools
 
 
5,739
 
 
 
(39
)
 
 
175,865
 
 
 
(4,990
)
 
 
181,604
 
 
 
(5,029
)
Corporate notes
 
 
5,263
 
 
 
(75
)
 
 
—
 
 
 
—
 
 
 
5,263
 
 
 
(75
)
Total temporarily impaired securities
 
$
92,615
 
 
$
(1,767
)
 
$
398,164
 
 
$
(12,794
)
 
$
490,779
 
 
$
(14,561
)
 
 
 
December 31, 2017
 
 
 
Less than 12 Months
 
 
12 Months or More
 
 
Total
 
 
 
Fair

Value
 
 
Unrealized

Losses
 
 
Fair

Value
 
 
Unrealized

Losses
 
 
Fair

Value
 
 
Unrealized

Losses
 
Investment Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agencies
 
$
15,882
 
 
$
(180
)
 
$
2,870
 
 
$
(45
)
 
$
18,752
 
 
$
(225
)
State and municipal
 
 
54,312
 
 
 
(2,758
)
 
 
30,691
 
 
 
(844
)
 
 
85,003
 
 
 
(3,602
)
Federal agency collateralized mortgage obligations
 
 
54,006
 
 
 
(589
)
 
 
73,462
 
 
 
(2,031
)
 
 
127,468
 
 
 
(2,620
)
Federal agency mortgage-backed pools
 
 
103,926
 
 
 
(1,019
)
 
 
86,846
 
 
 
(2,054
)
 
 
190,772
 
 
 
(3,073
)
Private labeled mortgage-backed pools
 
 
1,642
 
 
 
(8
)
 
 
—
 
 
 
—
 
 
 
1,642
 
 
 
(8
)
Total temporarily impaired securities
 
$
229,768
 
 
$
(4,554
)
 
$
193,869
 
 
$
(4,974
)
 
$
423,637
 
 
$
(9,528
)
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 municipals were caused by interest rate changes. 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, 2018.
Federal agency mortgage-backed pools and collateralized mortgage obligations
The unrealized losses on the Company’s investment in federal agency mortgage backed pools and collateralized mortgage obligations securities were caused by interest rate changes. 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, 2018.
Information regarding security proceeds, gross gains and gross losses are presented below.
 
 
 
Years Ended December 31
 
 
 
2018
 
 
2017
 
 
2016
 
Sales of securities available for sale
 
 
 
 
 
 
 
 
 
Proceeds
 
$
38,519
 
 
$
5,490
 
 
$
182,549
 
Gross gains
 
 
37
 
 
 
151
 
 
 
2,646
 
Gross losses
 
 
(480
)
 
 
(113
)
 
 
(810
)
The tax effect of the proceeds from the sale of securities available for sale was $(93,000), $13,000 and $643,000 for the years ended December 31, 2018, 2017 and 2016, 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, 2018, the Company had pledged $58.8 million of fair value or $60.7 million of amortized cost, in securities as collateral for $52.1 million in repurchase agreements, $96.2 million of fair value or $95.9 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with $0 current outstanding borrowings and $11.1 million of fair value or $11.2 million of amortized cost, in securities as collateral for $
1.8
 million in settlements on the fair value of swap agreements.