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Note 2: Investments in Debt and Equity Securities | 12 Months Ended
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Dec. 31, 2014
Notes |
Note 2: Investments in Debt and Equity Securities | Note 2: Investments in Debt and Equity Securities The amortized cost and fair values of securities classified as available-for-sale were as follows:
| December 31, 2014
|  |  | Gross |  | Gross |  |
| Amortized |  | Unrealized |  | Unrealized |  | Fair
| Cost |  | Gains |  | Losses |  | Value
(In Thousands) |  |  |  |  |  |  |
U.S. government agencies | $20,000 |  | $-- |  | $486 |  | $19,514
Mortgage-backed securities | 254,294 |  | 4,325 |  | 821 |  | 257,798
States and political subdivisions | 79,237 |  | 5,810 |  | 7 |  | 85,040
Equity securities | 847 |  | 2,307 |  | -- |  | 3,154
| $354,378 |  | $12,442 |  | $1,314 |  | $365,506
| December 31, 2013
|  |  | Gross |  | Gross |  |
| Amortized |  | Unrealized |  | Unrealized |  | Fair
| Cost |  | Gains |  | Losses |  | Value
(In Thousands) |  |  |  |  |  |  |
U.S. government agencies | $20,000 |  | $-- |  | $2,745 |  | $17,255
Mortgage-backed securities | 365,020 |  | 4,824 |  | 2,266 |  | 367,578
Small Business Administration |  |  |  |  |  |  |
loan pools | 43,461 |  | 1,394 |  | -- |  | 44,855
States and political subdivisions | 122,113 |  | 2,549 |  | 1,938 |  | 122,724
Equity securities | 847 |  | 2,022 |  | -- |  | 2,869
| $551,441 |  | $10,789 |  | $6,949 |  | $555,281
At December 31, 2014, the Company’s mortgage-backed securities portfolio consisted of GNMA securities totaling $186.4 million, FNMA securities totaling $37.1 million and FHLMC securities totaling $34.3 million. At December 31, 2014, $238.1 million of the Company’s mortgage-backed securities had variable rates of interest and $19.7 million had fixed rates of interest. The amortized cost and fair value of available-for-sale securities at December 31, 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 |  | $110
After five through ten years | 4,770 |  | 5,042
After ten years | 94,357 |  | 99,402
Securities not due on a single maturity date | 254,294 |  | 257,798
Equity securities | 847 |  | 3,154
| $354,378 |  | $365,506
The amortized cost and fair values of securities classified as held to maturity were as follows:
| December 31, 2014
|  |  | Gross |  | Gross |  |
| Amortized |  | Unrealized |  | Unrealized |  | Fair
| Cost |  | Gains |  | Losses |  | Value
(In Thousands) |  |  |  |  |  |  |
States and political |  |  |  |  |  |  |
subdivisions | $450 |  | $49 |  | $— |  | $499
| December 31, 2013
|  |  | Gross |  | Gross |  |
| Amortized |  | Unrealized |  | Unrealized |  | Fair
| Cost |  | Gains |  | Losses |  | Value
(In Thousands) |  |  |  |  |  |  |
States and political |  |  |  |  |  |  |
subdivisions | $805 |  | $107 |  | $— |  | $912
The held-to-maturity securities at December 31, 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 |  | $499
The amortized cost and fair values of securities pledged as collateral was as follows at December 31, 2014 and 2013:
| 2014 |  | 2013
| Amortized |  | Fair |  | Amortized |  | Fair
| Cost |  | Value |  | Cost |  | Value
(In Thousands) |  |  |  |  |  |  |
Public deposits | $130,760 |  | $133,940 |  | $228,776 |  | $230,318
Collateralized borrowing |  |  |  |  |  |  |
accounts | 160,130 |  | 161,145 |  | 171,071 |  | 168,813
Structured repurchase |  |  |  |  |  |  |
agreements | -- |  | -- |  | 60,352 |  | 61,026
Other | 3,965 |  | 4,053 |  | 1,403 |  | 1,437
| $294,855 |  | $299,138 |  | $461,602 |  | $461,594
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 December 31, 2014 and 2013, was approximately $106.0 million and $237.6 million, respectively, which is approximately 29.0% and 42.7% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively. 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 debt securities are temporary. 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 December 31, 2014 and 2013:
| 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 |  | $(486) |  | $20,000 |  | $(486)
Mortgage-backed securities | 40,042 |  | (328) |  | 45,056 |  | (493) |  | 85,098 |  | (821)
States and political subdivisions | -- |  | -- |  | 925 |  | (7) |  | 925 |  | (7)
| $40,042 |  | $(328) |  | $65,981 |  | $(986) |  | $106,023 |  | $(1,314)
| 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)
States and political subdivisions | 50,401 |  | (1,938) |  | -- |  | -- |  | 50,401 |  | (1,938)
| $198,302 |  | $(6,554) |  | $39,255 |  | $(395) |  | $237,557 |  | $(6,949)
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 nonagency 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 2014 and 2013, no securities were determined to have impairment that had become other than temporary. During 2012, the Company determined that the impairment of a nonagency collateralized mortgage obligation with a book value of $680,000 had become other than temporary. Consequently, the Company recorded a total of $680,000 of pre-tax charges to income. 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
| 2014 |  | 2013
(In Thousands) |  |  |
Credit losses on debt securities held |  |  |
Beginning of year | $-- |  | $4,176
Reductions due to final principal payments | -- |  | (4,176)
Additions related to increases in credit losses on debt |  |  |
securities for which other-than-temporary |  |  |
impairment losses were previously recognized | -- |  | --
Reductions due to sales | -- |  | --
End of year | $-- |  | $--

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