INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 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:
	September 30, 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	$	257,635	$	32	$	869	$	256,798	$	286,867	$	262	$	851	$	286,278
U.S. Government Agency		147,550		729		290		147,989		131,489		495		344		131,640
States and Political Subdivisions		95,869		175		54		95,990		95,197		23		381		94,839
Mortgage-Backed Securities		1,218		114		-		1,332		1,312		118		-		1,430
Equity Securities⁽¹⁾		8,737		-		-		8,737		8,547		-		-		8,547
Total	$	511,009	$	1,050	$	1,213	$	510,846	$	523,412	$	898	$	1,576	$	522,734

Held to Maturity
U.S. Government Treasury	$	93,309	$	2	$	183	$	93,128	$	119,131	$	107	$	81	$	119,157
States and Political Subdivisions		7,051		31		2		7,080		8,175		1		38		8,138
Mortgage-Backed Securities		83,902		55		642		83,315		50,059		29		637		49,451
Total	$	184,262	$	88	$	827	$	183,523	$	177,365	$	137	$	756	$	176,746

Total Investment Securities	$	695,271	$	1,138	$	2,040	$	694,369	$	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 $3.2 million, $4.8 million, and $0.8 million, respectively, at September 30, 2017 and $3.3 million, $4.8 million, and $0.5 million, respectively, at December 31, 2016.

Securities with an amortized cost of $214.3 million and $332.7 million at September 30, 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.

Maturity Distribution. At September 30, 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
(Dollars in Thousands)	Amortized Cost		Market Value		Amortized Cost		Market Value
Due in one year or less	$	138,454	$	138,421	$	63,439	$	63,370
Due after one through five years		253,590		252,720		36,922		36,838
Mortgage-Backed Securities		1,217		1,332		83,901		83,315
U.S. Government Agency		109,011		109,636		-		-
Equity Securities		8,737		8,737		-		-
Total	$	511,009	$	510,846	$	184,262	$	183,523

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
September 30, 2017
Available for Sale
U.S. Government Treasury	$	191,720	$	759	$	9,981	$	110	$	201,701	$	869
U.S. Government Agency		34,775		126		17,853		164		52,628		290
States and Political Subdivisions		23,031		22		5,129		32		28,160		54
Total		249,526		907		32,963		306		282,489		1,213

Held to Maturity
U.S. Government Treasury		83,173		183		-		-		83,173		183
States and Political Subdivisions		504		2		-		-		504		2
Mortgage-Backed Securities		47,159		579		4,373		63		51,532		642
Total	$	130,836	$	764	$	4,373	$	63	$	135,209	$	827

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 available-for-sale (“AFS”) and held-to-maturity (“HTM”)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 September 30, 2017, there were 266 positions (combined AFS and HTM) with unrealized losses totaling $2.0 million. 58 of these positions were U.S. government treasury securities guaranteed by the U.S. government. 103 of these positions were U.S. government agency and mortgage-backed securities issued by U.S. government sponsored entities. Because the declines in the market value of these securities 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 September 30, 2017.