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Investments

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investments

2. Investments

A summary of investment securities available-for-sale is as follows:

(Dollars in thousands)		As of June 30, 2018
						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
		cost				gains				losses				fair value

U. S. treasury securities		$	1,999			$	-			$	(47	)		$	1,952
U. S. federal agency obligations			13,774				3				(100	)			13,677
Municipal obligations, tax exempt			182,163				482				(3,106	)			179,539
Municipal obligations, taxable			55,284				64				(708	)			54,640
Agency mortgage-backed securities			144,416				9				(3,876	)			140,549
Certificates of deposit			7,780				-				-				7,780
Total		$	405,416			$	558			$	(7,837	)		$	398,137

(Dollars in thousands)		As of December 31, 2017
						Gross				Gross
		Amortized				unrealized				unrealized				Estimated
		cost				gains				losses				fair value

U. S. treasury securities		$	1,999			$	-			$	(9	)		$	1,990
U. S. federal agency obligations			16,572				5				(85	)			16,492
Municipal obligations, tax exempt			183,846				1,972				(1,080	)			184,738
Municipal obligations, taxable			57,783				409				(216	)			57,976
Agency mortgage-backed securities			119,096				92				(1,633	)			117,555
Certificates of deposit			9,224				-				-				9,224
Common stocks			-				8				-				8
Total		$	388,520			$	2,486			$	(3,023	)		$	387,983

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of June 30, 2018 and December 31, 2017. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

(Dollars in thousands)						As of June 30, 2018
						Less than 12 months								12 months or longer								Total
		No. of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		securities				value				losses				value				losses				value				losses
U.S. treasury securities			1			$	1,952			$	(47	)		$	-			$	-			$	1,952			$	(47	)
U.S. federal agency obligations			11				3,723				(31	)			9,729				(69	)			13,452				(100	)
Municipal obligations, tax exempt			301				89,803				(1,508	)			33,670				(1,598	)			123,473				(3,106	)
Municipal obligations, taxable			110				36,430				(531	)			10,984				(177	)			47,414				(708	)
Agency mortgage-backed securities			103				102,870				(2,155	)			37,065				(1,721	)			139,935				(3,876	)
Total			526			$	234,778			$	(4,272	)		$	91,448			$	(3,565	)		$	326,226			$	(7,837	)

(Dollars in thousands)						As of December 31, 2017
						Less than 12 months								12 months or longer								Total
		No. of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		securities				value				losses				value				losses				value				losses
U.S. treasury securities			1			$	1,990			$	(9	)		$	-			$	-			$	1,990			$	(9	)
U. S. federal agency obligations			14				7,989				(24	)			8,272				(61	)			16,261				(85	)
Municipal obligations, tax exempt			178				37,299				(273	)			31,930				(807	)			69,229				(1,080	)
Municipal obligations, taxable			73				18,792				(96	)			9,744				(120	)			28,536				(216	)
Agency mortgage-backed securities			79				68,630				(620	)			39,844				(1,013	)			108,474				(1,633	)
Total			345			$	134,700			$	(1,022	)		$	89,790			$	(2,001	)		$	224,490			$	(3,023	)

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the security and its belief that it was more likely than not that the Company will not be required to sell the security before recovery of their cost basis, the Company believed that the U.S. treasury security identified in the table above was temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the U.S. federal agency obligations identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. The Company did not intend to sell and it was more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of their costs. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association (“GNMA”). The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The table below sets forth amortized cost and fair value of investment securities at June 30, 2018. The table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

(Dollars in thousands)		Amortized				Estimated
		cost				fair value
Due in less than one year		$	30,042			$	29,939
Due after one year but within five years			196,229				192,202
Due after five years but within ten years			94,540				92,727
Due after ten years			84,605				83,269
Total		$	405,416			$	398,137

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

(Dollars in thousands)		Three months ended June 30,								Six months ended June 30,
		2018				2017				2018				2017

Sales proceeds		$	-			$	1,917			$	1,535			$	13,459

Realized gains		$	-			$	177			$	35			$	348
Realized losses			-				-				-				(24	)
Net realized losses		$	-			$	177			$	35			$	324

Securities with carrying values of $248.6 million and $232.5 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at June 30, 2018 and December 31, 2017, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

Effective January 1, 2018, the Company changed the classification of its common stock investments from available-for-sale with changes in fair value excluded from earnings and reported as a separate component of stockholders’ equity, net of taxes to be carried at fair value with changes in fair value included in net earnings. The Company received $7,000 of proceeds from the sale of its remaining common stock investments during the six months ended June 30, 2018.