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Note 5: Investment Securities

3 Months Ended

Mar. 31, 2016

Note 5: Investment Securities

NOTE 5: INVESTMENT SECURITIES

	March 31, 2016
			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		$19		$—		$20,019		2.00%
Mortgage-backed securities	152,977		1,734		100		154,611		2.10
States and political subdivisions	66,345		5,360		—		71,705		5.68
Other securities	847		2,364		—		3,211		—
	$240,169		$9,477		$100		$249,546		3.07%

	December 31, 2015
			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		$—		$219		$19,781		2.00%
Mortgage-backed securities	159,777		2,038		601		161,214		2.09
States and political subdivisions	72,951		5,081		1		78,031		5.71
Other securities	847		2,983		—		3,830		—
	$253,575		$10,102		$821		$262,856		3.12%

	March 31, 2016
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
(In Thousands)
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$353		$29		$—		$382		7.37%

	December 31, 2015
			Gross		Gross				Tax
	Amortized		Unrealized		Unrealized		Fair		Equivalent
	Cost		Gains		Losses		Value		Yield
(In Thousands)
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$353		$31		$—		$384		7.37%

The amortized cost and fair value of available-for-sale securities at March 31, 2016, 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	$—		$—
After one through five years	623		647
After five through ten years	7,284		7,627
After ten years	78,438		83,450
Securities not due on a single maturity date	152,977		154,611
Other securities	847		3,211

	$240,169		$249,546

The held-to-maturity securities at March 31, 2016, 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	$353		$382

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 March 31, 2016 and December 31, 2015, respectively, was approximately $39.0 million and $76.0 million, which is approximately 15.6% and 28.9% of the Company’s combined 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 March 31, 2016.

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 March 31, 2016 and December 31, 2015:

	March 31, 2016
	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)
Mortgage-backed securities	$35,197		$(62)		$3,781		$(38)		$38,978		$(100)

	December 31, 2015
	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		(219)		$—		$—		$20,000		$(219)
Mortgage-backed securities	45,494		(348)		9,635		(253)		55,129		(601)
State and political
subdivisions	—		—		910		(1)		910		(1)
	$65,494		$(567)		$10,545		$(254)		$76,039		$(821)

Gross gains of $91,000 and $0 and gross losses of $88,000 and $0 resulting from sales of available-for-sale securities were realized during the three months ended March 31, 2016 and 2015, 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. Where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model. 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 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 reviews and evaluations 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 months ended March 31, 2016, no securities were determined to have impairment that had become other than temporary.

Credit Losses Recognized on Investments. There were no debt securities that 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.

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 months ended March 31, 2016 and 2015, were as follows:

	Amounts Reclassified from Other Comprehensive Income			Affected Line Item in the
	Three Months Ended March 31,			Statements of Income
	2016		2015
(In Thousands)
Unrealized gains on available-				Net realized gains on available-
for-sale securities	$3		$—	for-sale securities
				(Total reclassified amount before tax)
Income Taxes	(1)		—	Provision for income taxes
Total reclassifications out of accumulated
other comprehensive income	$2		$—

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

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