INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2017

Investments, Debt and Equity Securities [Abstract]

NOTE 2 – INVESTMENT SECURITIES

Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale and
held-to-maturity were as follows:
	March 31, 2017									December 31, 2016
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value		Cost		Gain		Losses		Value
Available for Sale
U.S. Government Treasury	$	288,661	$	106	$	778	$	287,989	$	286,867	$	262	$	851	$	286,278
U.S. Government Agency		143,066		660		293		143,433		131,489		495		344		131,640
States and Political Subdivisions		99,685		126		111		99,700		95,197		23		381		94,839
Mortgage-Backed Securities		1,275		117		-		1,392		1,312		118		-		1,430
Equity Securities⁽¹⁾		8,588		-		-		8,588		8,547		-		-		8,547
Total	$	541,275	$	1,009	$	1,182	$	541,102	$	523,412	$	898	$	1,576	$	522,734

Held to Maturity
U.S. Government Treasury	$	93,335	$	26	$	98	$	93,263	$	119,131	$	107	$	81	$	119,157
States and Political Subdivisions		7,610		17		4		7,623		8,175		1		38		8,138
Mortgage-Backed Securities		57,570		58		629		56,999		50,059		29		637		49,451
Total	$	158,515	$	101	$	731	$	157,885	$	177,365	$	137	$	756	$	176,746

Total Investment Securities	$	699,790	$	1,110	$	1,913	$	698,987	$	700,777	$	1,035	$	2,332	$	699,480

⁽¹⁾ Includes Federal Home Loan Bank, Federal Reserve Bank, and FNBB, Inc. stock recorded at cost of $3.3 million, $4.8 million, and $0.5 million, respectively, at March 31, 2017 and $3.3 million, $4.8 million, and $0.5 million, respectively, at December 31, 2016.

Securities with an amortized cost of $332.4 million and $332.7 million at March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes.

The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required to own capital stock in the FHLB based generally upon the balances of residential and commercial real estate loans, and FHLB advances. FHLB stock which is included in equity securities is pledged to secure FHLB advances. No ready market exists for this stock, and it has no quoted market value; however, redemption of this stock has historically been at par value.

As a member of the Federal Reserve Bank of Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta based on a specified ratio relative to the Bank’s capital. Federal Reserve Bank stock is carried at cost and may be sold back to the Federal Reserve Bank at its carrying value.

Maturity Distribution. As of March 31, 2017, the Company's investment securities had the following maturity distribution based on contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. Mortgage-backed securities and certain amortizing U.S. government agency securities are shown separately because they are not due at a certain maturity date.

	Available for Sale				Held to Maturity
	Amortized		Market		Amortized		Market
(Dollars in Thousands)	Cost		Value		Cost		Value
Due in one year or less	$	185,316	$	185,386	$	35,468	$	35,485
Due after one through five years		242,632		241,724		65,477		65,401
Mortgage-Backed Securities		1,275		1,392		57,570		56,999
U.S. Government Agency		103,464		104,012		-		-
Equity Securities		8,588		8,588		-		-
Total	$	541,275	$	541,102	$	158,515	$	157,885

Unrealized Losses on Investment Securities. The following table summarizes the investment securities with unrealized losses aggregated by major security type and length of time in a continuous unrealized loss position:

	Less Than				Greater Than
	12 Months				12 Months				Total
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in Thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2017
Available for Sale
U.S. Government Treasury	$	133,781	$	778	$	-	$	-	$	133,781	$	778
U.S. Government Agency	$	52,628	$	278	$	3,871	$	15	$	56,499	$	293
States and Political Subdivisions		48,786		109		542		2		49,328		111
Mortgage-Backed Securities		-		-		3		-		3		-
Total		235,195		1,165		4,416		17		239,611		1,182

Held to Maturity
U.S. Government Treasury		47,679		98		-		-		47,679		98
States and Political Subdivisions		2,545		4		-		-		2,545		4
Mortgage-Backed Securities		35,437		592		3,404		37		38,841		629
Total	$	85,661	$	694	$	3,404	$	37	$	89,065	$	731

December 31, 2016
Available for Sale
U.S. Government Treasury	$	116,704	$	851	$	-	$	-	$	116,704	$	851
U.S. Government Agency		48,520		310		6,699		34		55,219		344
States and Political Subdivisions		81,521		380		294		1		81,815		381
Mortgage-Backed Securities		3		-		-		-		3		-
Total		246,748		1,541		6,993		35		253,741		1,576

Held to Maturity
U.S. Government Treasury		35,210		81		-		-		35,210		81
States and Political Subdivisions		7,491		38		-		-		7,491		38
Mortgage-Backed Securities		36,710		599		4,010		38		40,720		637
Total	$	79,411	$	718	$	4,010	$	38	$	83,421	$	756

Management evaluates securities for other than temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, the Company considers, (i) whether it has decided to sell the security, (ii) whether it is more likely than not that the Company will have to sell the security before its market value recovers, and (iii) whether the present value of expected cash flows is sufficient to recover the entire amortized cost basis. When assessing a security’s expected cash flows, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost and (ii) the financial condition and near-term prospects of the issuer. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by rating agencies have occurred, regulatory issues, and analysts’ reports.

At March 31, 2017, there were 287 positions (combined Available-for-Sale and Held-to-Maturity) with an unrealized loss totaling $1.9 million. Included were 116 positions comprised of Ginnie Mae mortgage-backed securities (51), US Treasuries (39), and SBA securities (26) with an unrealized loss totaling $1.6 million. Each of these positions carries the full faith and credit guarantee of the US Government. SBA securities float monthly or quarterly to the prime rate and are uncapped. Of these 116 positions, there were 11 GNMA positions and seven SBA positions in an unrealized loss position for longer than 12 months, with unrealized losses of $37,000 and $15,000, respectively. There were 22 agency positions with an unrealized loss of $0.2 million. The remaining 149 positions in an unrealized loss position were municipal bonds that were pre-refunded, or rated “AA-“or better, with unrealized losses of $0.1 million. Of these 149 positions, two were in an unrealized loss position greater than 12 months, with an unrealized loss of $2,000. Because the declines in the market value of these investments are attributable to changes in interest rates and not credit quality and because the Company has the present ability and intent to hold these investments until there is a recovery in fair value, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2017.

- Definition

The entire disclosure for investments in certain debt and equity securities.

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