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Note 6: Investment Securities | 3 Months Ended
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Sep. 30, 2014
Notes |
Note 6: Investment Securities | NOTE 6: INVESTMENT SECURITIES
| September 30, 2014
|  |  | Gross |  | Gross |  |  |  | Tax
| Amortized |  | Unrealized |  | Unrealized |  | Fair |  | Equivalent
| Cost |  | Gains |  | Losses |  | Value |  | Yield
(In Thousands) |  |  |  |  |  |  |  |  |
AVAILABLE-FOR-SALE SECURITIES: |  |  |  |  |  |  |  |  |
U.S. government agencies | $20,000 |  | $-- |  | $1,063 |  | $18,937 |  | 2.00%
Mortgage-backed securities | 273,358 |  | 4,502 |  | 1,233 |  | 276,627 |  | 2.02
States and political subdivisions | 120,060 |  | 6,713 |  | 226 |  | 126,547 |  | 5.37
Equity securities | 847 |  | 2,198 |  | -- |  | 3,045 |  | --
| $414,265 |  | $13,413 |  | $2,522 |  | $425,156 |  | 2.98%
| December 31, 2013
|  |  | Gross |  | Gross |  |  |  | Tax
| Amortized |  | Unrealized |  | Unrealized |  | Fair |  | Equivalent
| Cost |  | Gains |  | Losses |  | Value |  | Yield
(In Thousands) |  |  |  |  |  |  |  |  |
AVAILABLE-FOR-SALE SECURITIES: |  |  |  |  |  |  |  |
U.S. government agencies | $20,000 |  | $-- |  | $2,745 |  | $17,255 |  | 2.00%
Mortgage-backed securities | 365,020 |  | 4,824 |  | 2,266 |  | 367,578 |  | 2.04
Small Business Administration |  |  |  |  |  |  |  |  |
loan pools | 43,461 |  | 1,394 |  | -- |  | 44,855 |  | 1.34
States and political subdivisions | 122,113 |  | 2,549 |  | 1,938 |  | 122,724 |  | 5.47
Equity securities | 847 |  | 2,022 |  | -- |  | 2,869 |  | --
| $551,441 |  | $10,789 |  | $6,949 |  | $555,281 |  | 2.74%
| September 30, 2014
|  |  | Gross |  | Gross |  |  |  | Tax
| Amortized |  | Unrealized |  | Unrealized |  | Fair |  | Equivalent
| Cost |  | Gains |  | Losses |  | Value |  | Yield
(In Thousands) |  |  |  |  |  |  |  |  |
HELD-TO-MATURITY SECURITIES: |  |  |  |  |  |  |  |  |
States and political subdivisions | $450 |  | $55 |  | $-- |  | $505 |  | 7.37%
| December 31, 2013
|  |  | Gross |  | Gross |  |  |  | Tax
| Amortized |  | Unrealized |  | Unrealized |  | Fair |  | Equivalent
| Cost |  | Gains |  | Losses |  | Value |  | Yield
(In Thousands) |  |  |  |  |  |  |  |  |
HELD-TO-MATURITY SECURITIES: |  |  |  |  |  |  |  |  |
States and political subdivisions | $805 |  | $107 |  | $-- |  | $912 |  | 7.37%
The amortized cost and fair value of available-for-sale securities at September 30, 2014, 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.
| Amortized |  | Fair
| Cost |  | Value
(In Thousands) |  |  |
One year or less | $110 |  | $111
After one through five years | 1,472 |  | 1,486
After five through ten years | 7,504 |  | 7,794
After ten years | 130,974 |  | 136,093
Securities not due on a single maturity date | 273,358 |  | 276,627
Equity securities | 847 |  | 3,045
| $414,265 |  | $425,156
The held-to-maturity securities at September 30, 2014, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
| Amortized |  | Fair
| Cost |  | Value
(In Thousands) |  |  |
After one through five years | $450 |  | $505
Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2014 and December 31, 2013, respectively, was approximately $131.5 million and $237.6 million, which is approximately 30.9% and 42.7% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively. Based on an 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 debt securities are temporary at September 30, 2014. The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2014 and December 31, 2013:
| September 30, 2014
| Less than 12 Months |  | 12 Months or More |  | Total
| Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
Description of Securities | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses
(In Thousands) |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies | $-- |  | $-- |  | $20,000 |  | $(1,063) |  | $20,000 |  | $(1,063)
Mortgage-backed securities | 51,442 |  | (514) |  | 46,054 |  | (719) |  | 97,496 |  | (1,233)
State and political |  |  |  |  |  |  |  |  |  |  |
subdivisions | 2,561 |  | (8) |  | 11,393 |  | (218) |  | 13,954 |  | (226)
| $54,003 |  | $(522) |  | $77,447 |  | $(2,000) |  | $131,450 |  | $(2,522)
| December 31, 2013
| Less than 12 Months |  | 12 Months or More |  | Total
| Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
Description of Securities | Value |  | Losses |  | Value |  | Losses |  | Value |  | Losses
(In Thousands) |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies | $20,000 |  | $(2,745) |  | $-- |  | $-- |  | $20,000 |  | $(2,745)
Mortgage-backed securities | 127,901 |  | (1,871) |  | 39,255 |  | (395) |  | 167,156 |  | (2,266)
State and political |  |  |  |  |  |  |  |  |  |  |
subdivisions | 50,401 |  | (1,938) |  | -- |  | -- |  | 50,401 |  | (1,938)
| $198,302 |  | $(6,554) |  | $39,255 |  | $(395) |  | $237,557 |  | $(6,949)
Gross gains of $656,000 and $1.3 million and gross losses of $335,000 and $335,000 resulting from sales of available-for-sale securities were realized for the three and nine months ended September 30, 2014, respectively. Gross gains of $644,000 and $795,000 and gross losses of $534,000 and $554,000 resulting from sales of available-for-sale securities were realized for the three and nine months ended September 30, 2013, respectively. Gains and losses on sales of securities are determined on the specific-identification method. Other-than-temporary Impairment. Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities. The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities. For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model. For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model. The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets. The Company routinely conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred. The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors. If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary. The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange. For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other-than-temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows. If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings. During the three and nine months ended September 30, 2014, no securities were determined to have impairment that was other than temporary. Credit Losses Recognized on Investments. Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired. The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.
| Accumulated
| Credit Losses
(In Thousands) |
Credit losses on debt securities held |
January 1, 2013 | $4,176
Additions related to other-than-temporary losses not previously recognized | --
Additions related to increases in credit losses on debt securities for which |
other-than-temporary impairment losses were previously recognized | --
Reductions due to final principal payments | (4,176)
September 30, 2013 | $--
Amounts Reclassified Out of Accumulated Other Comprehensive Income. Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three and nine months ended September 30, 2014 and 2013, were as follows:
| Amounts Reclassified from |
| Other Comprehensive Income |
| Three Months Ended September 30, | Affected Line Item in
(In Thousands) | 2014 |  | 2013 | the Statements of Income
Unrealized gains (losses) on available- |  |  |  | Net realized gains on available-
for-sale securities | $321 |  | $110 | for-sale securities
Income Taxes | (112) |  | (38) | (Total reclassified amount before tax) Provision for income taxes
Total reclassifications out of accumulated |  |  |  |
other comprehensive income | $209 |  | $72 |
| Amounts Reclassified from |
| Other Comprehensive Income |
| Nine Months Ended September 30, | Affected Line Item in the
| 2014 |  | 2013 | Statements of Income
(In Thousands) |  |  |  |
Unrealized gains (losses) on available- |  |  |  | Net realized gains on available-
for-sale securities | $963 |  | $241 | for-sale securities
Income Taxes | (337) |  | (84) | (Total reclassified amount before tax) Provision for income taxes
Total reclassifications out of accumulated |  |  |  |
other comprehensive income | $626 |  | $157 |

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