INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

NOTE 5: INVESTMENT SECURITIES

The amortized cost and approximate fair values of securities as of March 31, 2015 and December 31, 2014 are as follows:

	March 31, 2015
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			FairValue
	(Unaudited; In Thousands)
Available-for-sale securities
Federal agencies	$	31,835	$	261	$	(78	)	$	32,018
State and municipal		43,018		1,752		(39	)		44,731
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		54,451		764		(138	)		55,077
Corporate		3,625		4		(335	)		3,294
Totals	$	132,929	$	2,781	$	(590	)	$	135,120
	December 31, 2014
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			FairValue
	(In Thousands)
Available-for-sale securities
Federal agencies	$	31,894	$	147	$	(419	)	$	31,622
State and municipal		40,710		1,537		(47	)		42,200
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,533		558		(350	)		51,741
Corporate		3,636		2		(316	)		3,322
Totals	$	127,773	$	2,244	$	(1,132	)	$	128,885

 The amortized cost and fair value of available-for-sale securities at March 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale
	Amortized Cost		Fair Value
	(Unaudited; In Thousands)
Within one year	$	4,005	$	4,044
One to five years		20,143		20,346
Five to ten years		20,848		21,272
After ten years		33,482		34,381
		78,478		80,043
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		54,451		55,077
Totals	$	132,929	$	135,120

No securities were pledged at March 31, 2015 or at December 31, 2014 to secure FHLB advances. Securities with a carrying value of $24,803,000 and $28,071,000 were pledged at March 31, 2015 and December 31, 2014 to secure public deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available-for-sale during the three-month periods ended March 31, 2015 and March 31, 2014 were $2,841,000 and $8,264,000. Gross gains of $93,000 and $279,000 resulting from sales and calls of available-for-sale securities were realized for the three-month periods ended March 31, 2015 and March 31, 2014, respectively. There were no gross losses realized for the three-month period ended March 31, 2015 and gross losses of $192,000 were realized for the three-month period ended March 31, 2014.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2015 was $32,928,000 which is approximately 24.4% of the Corporation’s investment portfolio. The fair value of these investments at December 31, 2014 was $44,161,000, which represented approximately 34.3% of the Corporation’s investment portfolio. Management has the ability and intent to hold securities with unrealized losses to recovery, which may be maturity. Based on evaluation of available evidence, including recent changes in market interest rates, management believes that any declines in fair values for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting credit portion of the loss recognized in net income and the noncredit portion of the loss would be recognized in accumulated other comprehensive income in the period the other-than-temporary impairment is identified.

The following tables show the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014:

	March 31, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses
	(Unaudited; In Thousands)
Federal agencies	$	1,999	$	(1	)	$	10,919	$	(77	)	$	12,918	$	(78	)
State and municipal		3,656		(33	)		538		(6	)		4,194		(39	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		4,508		(16	)		8,518		(122	)		13,026		(138	)
Corporate		1,701		(13	)		1,089		(322	)		2,790		(335	)
Total temporarily impaired securities	$	11,864	$	(63	)	$	21,064	$	(527	)	$	32,928	$	(590	)
	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses
	(In Thousands)
Federal agencies	$	12,302	$	(178	)	$	8,756	$	(241	)	$	21,058	$	(419	)
State and municipal		1,651		(14	)		2,706		(33	)		4,357		(47	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		6,230		(74	)		10,697		(276	)		16,927		(350	)
Corporate		724		(1	)		1,095		(315	)		1,819		(316	)
Total temporarily impaired securities	$	20,907	$	(267	)	$	23,254	$	(865	)	$	44,161	$	(1,132	)

Federal Agencies

The unrealized losses on the Corporation’s investments in direct obligations of U.S. government agencies were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at March 31, 2015.

State and Municipal

The unrealized losses on the Corporation’s investments in securities of state and political subdivisions were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at March 31, 2015.

Government-Sponsored Enterprise (GSE) Residential Mortgage-Backed and Other Asset-Backed Agency Securities

The unrealized losses on the Corporation’s investment in residential mortgage-backed agency securities were primarily caused by interest rate changes. The Corporation expects to recover the amortized cost bases over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at March 31, 2015.

Corporate Securities

The unrealized losses on the Corporation’s investment in corporate securities were due primarily to a loss on one pooled trust preferred issue held by the Corporation. The ALESCO 9A issue had an unrealized loss at March 31, 2015 of $319,000. The PRETSL XXVII issue was also at an unrealized loss of $12,000 at March 31, 2015. This compares to December 31, 2014, which showed unrealized losses on both ALESCO 9A and PRETSL XXVII of $313,000 and $1,000, respectively. These two securities are both “A” tranche investments (A2A and A-1 respectively) and have performed as agreed since purchase. The two are rated A2 and A1, respectively, by Moody’s indicating these securities are considered upper medium-grade quality and subject to low credit risk. Both provide good collateral coverage at those tranche levels, providing protection for the Corporation. The Corporation has reviewed the pricing reports for these investments and has determined that the decline in the market price is not other than temporary and indicates thin trading activity rather than a true decline in the value of the investment. Factors considered in reaching this determination included the class or “tranche” held by the Corporation, the collateral coverage position of the tranches, the number of deferrals and defaults on the issues, projected and actual cash flows and the credit ratings. These two investments represent 1.22% of the book value of the Corporation’s investment portfolio and approximately 0.96% of market value at March 31, 2015. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, and the Corporation expects to receive all contractual cash flows related to these investments. Based upon these factors, the Corporation has determined these securities are not other-than-temporarily impaired at March 31, 2015.