CASH 2017 Annual Report
23 The following table sets forth the contractual maturities of the Company’s mortgage-backed securities at September 30, 2017. Not considered in the preparation of the table below is the effect of prepayments, periodic principal repayments and the adjustable-rate nature of these instruments, all of which typically lower the average life of these securities. September 30, 2017 1 Year or Less After 1 Year Through 5 Years After 5 Years Through 10 Years After 10 Years Total Investment Securities Carrying Value Carrying Value Carrying Value Carrying Value Amortized Cost Fair Value Available for Sale (Dollars in Thousands) Freddie Mac $ — $ — $ — $ 100,287 $ 102,385 $ 100,287 Fannie Mae — — — 486,167 486,533 486,167 Total Investment Securities $ — $ — $ — $ 586,454 $ 588,918 $ 586,454 Weighted Average Yield —% —% —% 2.73% 2.64% 2.73% September 30, 2017 1 Year or Less After 1 Year Through 5 Years After 5 Years Through 10 Years After 10 Years Total Investment Securities Carrying Value Carrying Value Carrying Value Carrying Value Amortized Cost Fair Value Held to Maturity (Dollars in Thousands) Farmer Mac $ — $ — $ — $ 61,295 $ 61,295 $ 60,733 Fannie Mae — — — 43,458 43,458 42,894 Ginnie Mae — — — 8,936 8,936 8,829 Total Investment Securities $ — $ — $ — $ 113,689 $ 113,689 $ 112,456 Weighted Average Yield —% —% —% 2.64% 2.64% 2.73% At September 30, 2017, the contractual maturity of all of the Company’s mortgage backed securities was in excess of ten years. The actual maturity of a mortgage-backed security is typically less than its stated contractual maturity due to scheduled principal payments and prepayments of the underlying mortgages. Prepayments that are different than anticipated will affect the yield to maturity. The yield is based upon the interest income and the amortization of any premium or discount related to the mortgage-backed security. In accordancewithU.S. GenerallyAcceptedAccountingPrinciples (“GAAP”), premiums and discounts are amortized over the estimated lives of the loans, which decrease and increase interest income, respectively. The prepayment assumptions used to determine the amortization period for premiums and discounts can significantly affect the yield of mortgage- backed securities, and these assumptions are reviewed periodically to reflect actual prepayments. Although prepayments of underlying mortgages depend on many factors, including the type of mortgages, the coupon rate, borrower credit scores, loan to premises value, the age of mortgages, the geographical location of the underlying real estate collateralizing the mortgages and general levels of market interest rates, the difference between the interest rates on the underlying mortgages and the prevailing mortgage interest rates generally is the most significant determinant of the rate of prepayments. During periods of falling mortgage interest rates, if the coupon rate of the underlying mortgages exceeds the prevailing market interest rates offered for mortgage loans, refinancing generally increases and accelerates the prepayment of the underlying mortgages and the related security. Under such circumstances, the Company may be subject to reinvestment risk because, to the extent that the Company’s mortgage-backed securities amortize or prepay faster than anticipated, the Company may not be able to reinvest the proceeds of such repayments and prepayments at a comparable rate. During periods of rising interest rates, these prepayments tend to decelerate as the prevailing market interest rates for mortgage rates increase and prepayment incentives dissipate.
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