INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2018

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, 2018									December 31, 2017
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value		Cost		Gain		Losses		Value
Available for Sale
U.S. Government Treasury	$	272,335	$	-	$	4,222	$	268,113	$	237,505	$	-	$	2,164	$	235,341
U.S. Government Agency		153,087		625		621		153,091		144,324		727		407		144,644
States and Political Subdivisions		54,115		-		276		53,839		91,533		2		378		91,157
Mortgage-Backed Securities		922		50		-		972		1,102		83		-		1,185
Equity Securities⁽¹⁾		8,228		-		-		8,228		8,584		-		-		8,584
Total	$	488,687	$	675	$	5,119	$	484,243	$	483,048	$	812	$	2,949	$	480,911

Held to Maturity
U.S. Government Treasury	$	35,103	$	-	$	702	$	34,401	$	98,256	$	-	$	441	$	97,815
States and Political Subdivisions		6,566		-		45		6,521		6,996		-		41		6,955
Mortgage-Backed Securities		186,254		207		3,852		182,609		111,427		22		1,212		110,237
Total	$	227,923	$	207	$	4,599	$	223,531	$	216,679	$	22	$	1,694	$	215,007

Total Investment Securities	$	716,610	$	882	$	9,718	$	707,774	$	699,727	$	834	$	4,643	$	695,918

⁽¹⁾ Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded at cost of $3.4 million, $4.8 million, respectively, at September 30, 2018 and includes Federal Home Loan Bank, Federal Reserve Bank and FNBB Inc. stock recorded at cost of $3.1 million, $4.8 million, and $0.8 million, respectively, at December 31, 2017.

Securities with an amortized cost of $234.5 million and $328.1 million at September 30, 2018 and December 31, 2017, 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, 2018, 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	$	120,134	$	119,269	$	13,099	$	12,963
Due after one year through five years		232,224		228,353		28,570		27,959
Mortgage-Backed Securities		922		972		186,254		182,609
U.S. Government Agency		127,179		127,421		-		-
Equity Securities		8,228		8,228		-		-
Total	$	488,687	$	484,243	$	227,923	$	223,531

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, 2018
Available for Sale
U.S. Government Treasury	$	92,259	$	1,005	$	175,854	$	3,217	$	268,113	$	4,222
U.S. Government Agency		63,475		351		29,223		270		92,698		621
States and Political Subdivisions		34,928		164		14,831		112		49,759		276
Mortgage-Backed Securities		10		-		2		-		12		-
Total		190,672		1,520		219,910		3,599		410,582		5,119

Held to Maturity
U.S. Government Treasury		4,900		112		29,501		590		34,401		702
States and Political Subdivisions		6,026		38		495		7		6,521		45
Mortgage-Backed Securities		90,516		1,498		55,089		2,354		145,605		3,852
Total	$	101,442	$	1,648	$	85,085	$	2,951	$	186,527	$	4,599

December 31, 2017
Available for Sale
U.S. Government Treasury	$	155,443	$	963	$	79,900	$	1,201	$	235,343	$	2,164
U.S. Government Agency		45,737		150		25,757		257		71,494		407
States and Political Subdivisions		82,999		320		5,549		58		88,548		378
Mortgage-Backed Securities		2		-		-		-		2		-
Total		284,181		1,433		111,206		1,516		395,387		2,949

Held to Maturity
U.S. Government Treasury		77,861		298		14,939		143		92,800		441
States and Political Subdivisions		6,955		41		-		-		6,955		41
Mortgage-Backed Securities		56,030		469		30,216		743		86,246		1,212
Total	$	140,846	$	808	$	45,155	$	886	$	186,001	$	1,694

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, 2018, there were 541 positions (combined AFS and HTM) with unrealized losses totaling $9.7 million, of which 63 of these positions were U.S. government treasury securities guaranteed by the U.S. government and 309 of these positions were U.S. government agency and mortgage-backed securities issued by U.S. government sponsored entities, with the remaining 169 positions being municipal securities. 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, 2018.