Annual report pursuant to Section 13 and 15(d)

Note 2 - Debt Securities

v3.10.0.1
Note 2 - Debt Securities
 12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE
2.
DEBT SECURITIES
 
The amortized cost and fair values of available-for-sale and held-to-maturity debt securities at
December 31, 2018
and
2017
are summarized as follows:
 
     
Amortized

Cost
   Gross
Unrealized
Gain		   Gross
Unrealized
Loss		    
Market

Value
December 31, 2018  
(In Thousands)
Securities Available for Sale                
U.S. Treasury and government sponsored agencies   $
77,534
     $
78
     $
(619
 )   $
76,993
 
Mortgage-backed securities    
309,244
      
591
      
(5,531
 )    
304,304
 
State and municipal securities    
106,465
      
208
      
(679
 )    
105,994
 
Corporate debt    
102,982
      
668
      
(757
 )    
102,893
 
Total   $
596,225
     $
1,545
     $
(7,586
 )   $
590,184
 
                                 
December 31, 2017                                
Securities Available for Sale                                
U.S. Treasury and government sponsored agencies   $
55,567
     $
38
     $
(249
 )   $
55,356
 
Mortgage-backed securities    
278,177
      
1,006
      
(2,685
 )    
276,498
 
State and municipal securities    
134,641
      
761
      
(553
 )    
134,849
 
Corporate debt    
69,996
      
1,416
      
(35
 )    
71,377
 
Total   $
538,381
     $
3,221
     $
(3,522
 )   $
538,080
 
Securities Held to Maturity                                
State and municipal securities    
250
      
-
      
-
      
250
 
Total   $
250
     $
-
     $
-
     $
250
 
 
All mortgage-backed debt securities are with government sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.
 
At year-end
2018
and
2017,
there were
no
holdings of debt securities of any issuer, other than the U.S. government and its agencies, in an amount greater than
10%
of stockholders’ equity.
 
In the
fourth
quarter of
2017,
the Company transferred its held-to-maturity investment portfolio to available-for-sale in order to provide more flexibility managing its investment portfolio. As a result, the Company is prohibited from classifying any investment securities bought during the
two
years following the transfer as held-to-maturity.
 
The amortized cost and fair value of debt securities as of
December 31, 2018
and
2017
by contractual maturity are shown below. Actual maturities
may
differ from contractual maturities because the issuers
may
have the right to call or prepay obligations with or without call or prepayment penalties.
 
    December 31, 2018   December 31, 2017
      Amortized Cost       Market Value       Amortized Cost       Market Value  
    (In Thousands)
Debt securities available for sale                                
Due within one year   $
38,343
     $
38,225
     $
22,122
     $
22,172
  
Due from one to five years    
167,873
      
166,380
      
160,773
      
160,563
  
Due from five to ten years    
77,811
      
78,276
      
73,362
      
74,684
  
Due after ten years    
2,954
      
2,999
      
3,947
      
4,163
  
Mortgage-backed securities    
309,244
      
304,304
      
278,177
      
276,498
  
    $
596,225
     $
590,184
     $
538,381
     $
538,080
  
                                 
Debt securities held to maturity                                
Due from one to five years   $
-
     $
-
     $
250
     $
250
  
    $
-
     $
-
     $
250
     $
250
  
 
The following table shows the gross unrealized losses and fair value of debt securities, aggregated by category and length of time that securities have been in a continuous unrealized loss position at
December 31, 2018
and
2017.
In estimating other-than-temporary impairment losses, management considers, among other things, the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The unrealized losses shown in the following table are primarily due to increases in market rates over the yields available at the time of purchase of the underlying securities and
not
credit quality. Because the Company does
not
intend to sell these securities and it is more likely than
not
that the Company will
not
be required to sell the securities before recovery of their amortized cost basis, which
may
be maturity, the Company does
not
consider these securities to be other-than-temporarily impaired at
December 31, 2018.
There were
no
other-than-temporary impairments for the years ended
December 31, 2018,
2017
and
2016.
 
    Less Than Twelve Months   Twelve Months or More   Total
      Gross
Unrealized
Losses		    
Fair Value
       Gross
Unrealized
Losses		    
Fair Value
       Gross
Unrealized
Losses		    
Fair Value
  
    (In Thousands)
December 31, 2018                        
U.S. Treasury and government sponsored agencies   $
(8
 )   $
1,001
     $
(611
 )   $
50,878
     $
(619
 )   $
51,879
  
Mortgage-backed securities    
(539
 )    
67,721
      
(4,992
 )    
204,260
      
(5,531
 )    
271,981
  
State and municipal securities    
(101
 )    
20,821
      
(578
 )    
52,190
      
(679
 )    
73,011
  
Corporate debt    
(315
 )    
36,245
      
(442
 )    
13,474
      
(757
 )    
49,719
  
Total   $
(963
 )   $
125,788
     $
(6,623
 )   $
320,802
     $
(7,586
 )   $
446,590
  
                                                 
December 31, 2017                                                
U.S. Treasury and government sponsored agencies   $
(151
 )   $
33,401
     $
(98
 )   $
2,926
     $
(249
 )   $
36,327
  
Mortgage-backed securities    
(986
 )    
140,432
      
(1,699
 )    
75,903
      
(2,685
 )    
216,335
  
State and municipal securities    
(450
 )    
66,637
      
(103
 )    
6,648
      
(553
 )    
73,285
  
Corporate debt    
(35
 )    
6,955
      
-
      
-
      
(35
 )    
6,955
  
Total   $
(1,622
 )   $
247,425
     $
(1,900
 )   $
85,477
     $
(3,522
 )   $
332,902
  
 
At
December 31, 2018,
373
of the Company’s
729
debt securities were in an unrealized loss position for more than
12
months.
 
The following table summarizes information about sales of debt securities available for sale.
 
    Years Ended December 31,
    2018   2017   2016
    (In Thousands)
Sale proceeds   $
5,736
     $
3,500
     $
6,085
  
Gross realized gains   $
15
     $
-
     $
4
  
Gross realized losses    
-
      
-
      
(7
 )
Net realized gain (loss)   $
15
     $
-
     $
(3
 )
 
The carrying value of debt securities pledged to secure public funds on deposits and for other purposes as required by law as of
December 31, 2018
and
2017
was
$281.9
million and
$284.2
million, respectively.
 
Equity securities include (
1
) a restricted investment in Federal Home Loan Bank of Atlanta stock for membership requirement and to secure available lines of credit, (
2
) an investment in First National Bankers Bank stock, (
3
) an investment in a Community Reinvestment Act (“CRA”)-qualified mutual fund, and (
4
) an investment in common stock of a bank holding company. The Company terminated its membership in the Federal Home Loan Bank of Atlanta effective
November 11, 2016.
Membership stock of the Federal Home Loan Bank of Atlanta was redeemed in
2018
after the Company paid off the remaining balance of its borrowing. The amount of investment in the First National Bankers Bank stock was
$400,000
at
December 31, 2018
and
2017.
The amount of investment in the CRA-qualified mutual fund was
$500,000
at
December 31, 2018
and
2017.
The amount of the investment in common stock of the bank holding company was
$100,000
at
December 31, 2017.
This stock was sold during
2018
resulting in a gain on sale of
$175,000.