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Investment Securities

9 Months Ended

Sep. 30, 2018

Investments Debt And Equity Securities [Abstract]

Investment Securities

(4)

Investment Securities

Available for sale securities

The amortized cost and fair value of debt securities classified as available-for-sale at September 30, 2018 and December 31, 2017 were as follows:

		Total
		Amortized				Gross Unrealized								Fair
(in thousands)		Cost				Gains				Losses				Value
September 30, 2018
U.S. Treasury		$	1,983			$	0			$	(67	)		$	1,916
U.S. government and federal agency obligations			10,933				0				(459	)			10,474
Government sponsored enterprises			45,777				0				(812	)			44,965
Obligations of states and political subdivisions			41,088				21				(764	)			40,345
Mortgage-backed securities:
Residential - government agencies			127,375				41				(4,918	)			122,498
Other debt securities (a)			3,000				0				0				3,000
Bank issued trust preferred securities (a)			1,486				0				(122	)			1,364
Total available-for-sale securities		$	231,642			$	62			$	(7,142	)		$	224,562

December 31, 2017
U.S. Treasury		$	1,980			$	0			$	(13	)		$	1,967
U.S. government and federal agency obligations			12,341				0				(268	)			12,073
Government sponsored enterprises			37,321				0				(424	)			36,897
Obligations of states and political subdivisions			47,019				114				(477	)			46,656
Mortgage-backed securities:
Residential - government agencies			131,045				44				(2,140	)			128,949
Other debt securities (a)			3,000				0				0				3,000
Bank issued trust preferred securities (a)			1,486				0				0				1,486
Total available-for-sale securities		$	234,192			$	158			$	(3,322	)		$	231,028

(a) As of January 1, 2018, the Company adopted ASU 2016-01, resulting in reclassification of certain hybrid instruments possessing characteristics typically associated with debt obligations from other securities carried at cost to available for sale securities carried at fair value.

The Company’s investment securities are classified as available for sale. Agency bonds and notes, small business administration guaranteed loan certificates (SBA), residential and commercial agency mortgage-backed securities, and agency collateralized mortgage obligations (CMO) include securities issued by the Government National Mortgage Association (GNMA), a U.S. government agency, and the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal Home Loan Bank (FHLB), which are U.S. government-sponsored enterprises.

Debt securities with carrying values aggregating approximately $184.2 million and $181.7 million at September 30, 2018 and December 31, 2017, respectively, were pledged to secure public funds, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities classified as available-for-sale at September 30, 2018, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

		Amortized				Fair
(in thousands)		Cost				Value
Due in one year or less		$	16,968			$	16,846
Due after one year through five years			65,499				64,046
Due after five years through ten years			14,151				13,705
Due after ten years			7,649				7,467
Total			104,267				102,064
Mortgage-backed securities			127,375				122,498
Total available-for-sale securities		$	231,642			$	224,562

Other securities

Other securities include equity securities with readily determinable fair values and other investment securities whose accounting is not addressed in ASU 2016-01 include Federal Home Loan Bank (FHLB) stock, and Midwest Independent Bank (MIB) bankers bank stock, that do not have readily determinable fair values, which are held for debt and regulatory purposes.

(in thousands)		September 30, 2018				December 31, 2017
Other securities:
FHLB stock		$	4,854			$	6,390
MIB stock			151				151
Equity securities with readily determinable fair values			13				10
Total other investment securities		$	5,018			$	6,551

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2018 and December 31, 2017 were as follows:

		Less than 12 months								12 months or more								Total				Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(in thousands)		Value				Losses				Value				Losses				Value				Losses
At September 30, 2018
U.S. Treasury		$	1,205			$	(40	)		$	711			$	(27	)		$	1,916			$	(67	)
U.S. government and federal agency obligations			0				0				10,474				(459	)			10,474				(459	)
Government sponsored enterprises			15,983				(220	)			28,983				(592	)			44,966				(812	)
Obligations of states and political subdivisions			18,265				(182	)			17,905				(582	)			36,170				(764	)
Mortgage-backed securities:
Residential - government agencies			31,595				(646	)			87,268				(4,272	)			118,863				(4,918	)
Bank issued trust preferred securities			0				0				1,364				(122	)			1,364				(122	)
Total		$	67,048			$	(1,088	)		$	146,705			$	(6,054	)		$	213,753			$	(7,142	)

(in thousands)
At December 31, 2017
U.S. Treasury		$	1,967			$	(13	)		$	0			$	0			$	1,967			$	(13	)
U.S. government and federal agency obligations			0				0				12,073				(268	)			12,073				(268	)
Government sponsored enterprises			16,471				(119	)			20,426				(305	)			36,897				(424	)
Obligations of states and political subdivisions			22,013				(165	)			12,570				(312	)			34,583				(477	)
Mortgage-backed securities:
Residential - government agencies			52,829				(488	)			69,580				(1,652	)			122,409				(2,140	)
Total		$	93,280			$	(785	)		$	114,649			$	(2,537	)		$	207,929			$	(3,322	)

The total available for sale portfolio consisted of approximately 371 securities at September 30, 2018. The portfolio included 344 securities having an aggregate fair value of $213.7 million that were in a loss position at September 30, 2018. Securities identified as temporarily impaired which had been in a loss position for 12 months or longer totaled $146.7 million at fair value. The $7.1 million aggregate unrealized loss included in accumulated other comprehensive income at September 30, 2018 was caused by interest rate fluctuations.

The total available for sale portfolio consisted of approximately 355 securities at December 31, 2017. The portfolio included 280 securities having an aggregate fair value of $207.9 million that were in a loss position at December 31, 2017. Securities identified as temporarily impaired which had been in a loss position for 12 months or longer had a fair value of $114.6 million at December 31, 2017. The $3.3 million aggregate unrealized loss included in accumulated other comprehensive loss at December 31, 2017 was caused by interest rate fluctuations.

Because the decline in fair value is attributable to changes in interest rates and not credit quality, these investments were not considered other-than-temporarily impaired at September 30, 2018 and December 31, 2017, respectively. In the absence of changes in credit quality of these investments, the fair value is expected to recover on all debt securities as they approach their maturity date or re-pricing date, or if market yields for such investments decline. In addition, the Company does not have the intent to sell these investments over the period of recovery, and it is not more likely than not that the Company will be required to sell such investment securities.

The table presents the components of investment securities gains and losses, which have been recognized in earnings:

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)		2018				2017				2018				2017
Investment securities gains, net
Available for sale securities:
Gains realized on sales		$	47			$	12			$	253			$	12
Losses realized on sales			0				(12	)			0				(12	)
Other securities:
Fair value adjustments, net			3				0				3				0
Investment securities gains, net		$	50			$	0			$	256			$	0

Securities gains for the three and nine months ended September 30, 2018 included gains realized from a series of short term sales of U.S. Treasury securities with repurchase agreements in order to generate capital gains to offset capital losses that were to expire during 2018 and 2019.