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Investment Securities Available-for-Sale

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investment Securities Available-for-Sale

Note 3. Investment Securities Available-for-Sale

Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:

						Gross				Gross				Estimated
June 30, 2018		Amortized				Unrealized				Unrealized				Fair
(dollars in thousands)		Cost				Gains				Losses				Value
U. S. agency securities		$	225,610			$	8			$	5,467			$	220,151
Residential mortgage backed securities			389,504				283				9,481				380,306
Municipal bonds			48,292				584				672				48,204
Corporate bonds			8,004				60				1				8,063
Other equity investments			218				—				—				218
		$	671,628			$	935			$	15,621			$	656,942

						Gross				Gross				Estimated
December 31, 2017		Amortized				Unrealized				Unrealized				Fair
(dollars in thousands)		Cost				Gains				Losses				Value
U. S. agency securities		$	198,115			$	283			$	2,414			$	195,984
Residential mortgage backed securities			322,067				187				4,418				317,836
Municipal bonds			60,976				1,295				214				62,057
Corporate bonds			13,010				163				—				13,173
Other equity investments			218				—				—				218
		$	594,386			$	1,928			$	7,046			$	589,268

In addition, at June 30, 2018 and December 31, 2017 the Company held $35.9 million and $36.3 million, respectively, in equity securities in a combination of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.

Gross unrealized losses and fair value by length of time that the individual available-for-sale securities have been in a continuous unrealized loss position are as follows:

						Less than								12 Months
						12 Months								or Greater								Total
						Estimated								Estimated								Estimated
June 30, 2018		Number of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(dollars in thousands)		Securities				Value				Losses				Value				Losses				Value				Losses
U. S. agency securities			56			$	142,970			$	3,004			$	64,860			$	2,463			$	207,830			$	5,467
Residential mortgage backed securities			157				181,775				3,812				144,061				5,669				325,836				9,481
Municipal bonds			13				23,059				672				—				—				23,059				672
Corporate bonds			1				1,499				1				—				—				1,499				1
			227			$	349,303			$	7,489			$	208,921			$	8,132			$	558,224			$	15,621

						Less than								12 Months
						12 Months								or Greater								Total
						Estimated								Estimated								Estimated
December 31, 2017		Number of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(dollars in thousands)		Securities				Value				Losses				Value				Losses				Value				Losses
U. S. agency securities			38			$	102,264			$	1,073			$	55,093			$	1,341			$	157,357			$	2,414
Residential mortgage backed securities			137				152,350				1,306				147,953				3,112				300,303				4,418
Municipal bonds			8				17,446				214				—				—				17,446				214
			183			$	272,060			$	2,593			$	203,046			$	4,453			$	475,106			$	7,046

The unrealized losses that exist are generally the result of changes in market interest rates and interest spread relationships since original purchases. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is relatively short at 3.8 years. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not believe that the investment securities that were in an unrealized loss position as of June 30, 2018 represent an other-than-temporary impairment. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

The amortized cost and estimated fair value of investments available-for-sale at June 30, 2018 and December 31, 2017 by contractual maturity are shown in the table below. Expected maturities for residential mortgage backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		June 30, 2018								December 31, 2017
		Amortized				Estimated				Amortized				Estimated
(dollars in thousands)		Cost				Fair Value				Cost				Fair Value
U. S. agency securities maturing:
One year or less		$	111,981			$	108,302			$	109,893			$	108,198
After one year through five years			91,692				90,544				74,106				73,916
Five years through ten years			21,937				21,305				14,116				13,870
Residential mortgage backed securities			389,504				380,306				322,067				317,836
Municipal bonds maturing:
One year or less			6,118				6,197				5,068				5,171
After one year through five years			16,880				17,056				19,405				19,879
Five years through ten years			24,226				23,797				35,432				35,846
After ten years			1,068				1,154				1,071				1,161
Corporate bonds maturing:
After one year through five years			6,504				6,563				11,510				11,673
After ten years			1,500				1,500				1,500				1,500
Other equity investments			218				218				218				218
		$	671,628			$	656,942			$	594,386			$	589,268

For the six months ended June 30, 2018, gross realized gains on sales of investments securities were $93 thousand and gross realized losses on sales of investment securities were $25 thousand. For the six months ended June 30, 2017, gross realized gains on sales of investments securities were $750 thousand and gross realized losses on sales of investment securities were $219 thousand.

Proceeds from sales and calls of investment securities for the six months ended June 30, 2018 were $29.0 million compared to $58.0 million for the same period in 2017.

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at June 30, 2018 and December 31, 2017 was $470.2 million and $465.4 million, respectively, which is well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of June 30, 2018 and December 31, 2017, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, which exceeded ten percent of shareholders’ equity.