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Securities
 12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Securities
Note 4 – Securities
The fair value of securities is as follows:
 
December 31, 2019
 
  
Amortized
Cost
 
  
Gross
Unrealized
Gains
 
  
Gross
Unrealized
Losses
 
  
Fair
Value
 
Available for sale
 
 
 
  
 
 
  
 
 
  
 
 
U.S. Treasury and federal agencies
  $
1,415
    $
—  
     $
 (2
 )   $
1,413
 
State and municipal
   
396,931
     
11,288
     
(2,451
 )    
405,768
 
Federal agency collateralized mortgage obligations
   
267,272
     
2,543
     
(563
 )    
269,252
 
Federal agency mortgage-backed pools
   
145,623
     
1,207
     
(258
 )    
146,572
 
Corporate notes
   
10,848
     
923
     
—  
      
11,771
 
                                 
Total available for sale investment securities
  $
822,089
    $
 15,961
    $
 (3,274
 )   $
834,776
 
                                 
Held to maturity
 
 
 
  
 
 
  
 
 
  
 
 
State and municipal
  $
190,767
    $
7,129
    $
 (54
 )   $
197,842
 
Federal agency collateralized mortgage obligations
   
4,560
     
13
     
(5
 )    
4,568
 
Federal agency mortgage-backed pools
   
12,572
     
194
     
(29
 )    
12,737
 
                                 
Total held to maturity investment securities
  $
207,899
    $
7,336
    $
 (88
 )   $
215,147
 
                                 
  
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
 
                                 
 
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, 2019, 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, 2019.
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, 2019 and December 31, 2018, 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, 2019
   
December 31, 2018
 
 
Amortized
Cost
 
  
Fair
Value
 
  
Amortized
Cost
 
  
Fair
Value
 
Available for sale
 
 
 
  
 
 
  
 
 
  
 
 
Within one year
  $
37,386
    $
37,321
    $
20,532
    $
20,448
 
One to five years
   
41,230
     
41,293
     
42,476
     
41,705
 
Five to ten years
   
117,004
     
122,145
     
107,839
     
107,107
 
After ten years
   
213,574
     
218,193
     
67,020
     
67,349
 
                                 
   
409,194
     
418,952
     
237,867
     
236,609
 
Federal agency collateralized mortgage obligations
   
267,272
     
269,252
     
187,563
     
185,003
 
Federal agency mortgage-backed pools
   
145,623
     
146,572
     
183,479
     
178,736
 
                                 
Total available for sale investment securities
  $
822,089
    $
834,776
    $
608,909
    $
600,348
 
                                 
Held to maturity
 
 
 
  
 
 
  
 
 
  
 
 
Within one year
  $
7,811
    $
7,874
    $
70
    $
70
 
One to five years
   
56,037
     
57,048
     
48,732
     
49,324
 
Five to ten years
   
94,756
     
98,480
     
101,809
     
101,533
 
After ten years
   
32,163
     
34,440
     
40,658
     
38,749
 
                                 
   
190,767
     
197,842
     
191,269
     
189,676
 
Federal agency collateralized mortgage obligations
   
4,560
     
4,568
     
5,144
     
5,030
 
Federal agency mortgage-backed pools
   
12,572
     
12,737
     
13,699
     
13,567
 
                                 
Total held to maturity investment securities
  $
207,899
    $
215,147
    $
210,112
    $
208,273
 
                                 
 
 
 
 
 
 
 
 
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, 2019
 
 
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
  $
1,413
     $
(2
 )   $
—  
     $
—  
     $
1,413
    $
(2
 )
State and municipal
   
129,942
     
(2,374
 )    
6,279
     
(131
 )    
136,221
     
(2,505
 )
Federal agency collateralized mortgage obligations
   
68,043
     
(308
 )    
23,301
     
(260
 )    
91,344
     
(568
 )
Federal agency mortgage-backed pools
   
24,740
     
(104
 )    
37,822
     
(183
 )    
62,562
     
(287
 )
                                                 
Total temporarily impaired securities
  $
224,138
    $
(2,788
 )   $
67,402
    $
(574
 )   $
291,540
    $
(3,362
 )
                                                 
 
 
 
 
 
 
 
 
                                                 
 
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
 )
                                                 
 
 
 
 
 
 
 
 
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, 2019.
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, 2019.
Information regarding security proceeds, gross gains and gross losses are presented below.
                         
 
Years Ended December 31
 
 
2019
 
  
2018
 
  
2017
 
Sales of securities available for sale
 
 
 
  
 
 
  
 
 
Proceeds
  $
98,425
    $
38,519
    $
5,490
 
Gross gains
   
168
     
37
     
151
 
Gross losses
   
(243
 )    
(480
 )    
(113
 )
 
 
 
 
 
 
 
 
The tax effect of the proceeds from the sale of securities available for sale was $(16,000), $(93,000) and $13,000 for the years ended December 31, 2019, 2018 and 2017, 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, 2019, the Company had pledged $106.8 million of fair value or $106.4 million of amortized cost, in securities as collateral for $90.9 million in repurchase agreements, $98.7 million of fair value or $94.7 million of amortized cost, in securities as collateral for borrowing availability at the Federal Reserve with $0 current outstanding borrowings and $33.4 million of fair value or $33.1 million of amortized cost, in securities as collateral for $14.8 million in settlements on the fair value of swap agreements.