Securities

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 6. Securities

Securities have been classified as available-for-sale or held-to-maturity in the consolidated financial statements according to management’s intent. The following tables present the amortized cost, gross unrealized gains and losses, and the fair value of the Company’s securities at March 31, 2015 and December 31, 2014:

	March 31, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
(in thousands)	Cost		Gains		Losses		Value
Available-for-sale:
Obligations of U.S. government agencies	$	26,502	$	425	$	-	$	26,927
Obligations of state and political subdivisions		11,199		111		3		11,307
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		25,304		491		3		25,792
Collateralized mortgage obligations - commercial		62,167		807		7		62,967
Residential mortgage-backed securities		72,742		1,260		-		74,002
Corporate debt securities		500		-		75		425
Negotiable certificates of deposit		2,232		13		-		2,245
Equity securities		1,010		-		40		970
Total available-for-sale securities	$	201,656	$	3,107	$	128	$	204,635

	December 31, 2014
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
(in thousands)	Cost		Gains		Losses		Value
Available-for-sale:
Obligations of U.S. government agencies	$	29,246	$	77	$	47	$	29,276
Obligations of state and political subdivisions		23,132		1,380		3		24,509
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential		26,129		103		1		26,231
Collateralized mortgage obligations - commercial		61,017		492		253		61,256
Residential mortgage-backed securities		73,998		441		341		74,098
Corporate debt securities		500		-		80		420
Negotiable certificates of deposit		2,232		-		-		2,232
Equity securities		1,010		-		43		967
Total available-for-sale securities	$	217,264	$	2,493	$	768	$	218,989

At March 31, 2015 and December 31, 2014, securities with a carrying amount of $202.2 million and $217.6 million, respectively, were pledged as collateral to secure public deposits and for other purposes.

The following table shows the amortized cost and approximate fair value of the Company’s available-for-sale debt securities at March 31, 2015 using contractual maturities.  Expected maturities will differ from contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because collateralized mortgage obligations and residential mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

	March 31, 2015
	Amortized		Fair
(in thousands)	Cost		Value
Amounts maturing in:
One year or less	$	-	$	-
After one year through five years		2,232		2,245
After five years through ten years		35,631		36,128
After ten years		2,570		2,531
Collateralized mortgage obligations		87,471		88,759
Residential mortgage-backed securities		72,742		74,002
Total	$	200,646	$	203,665

Gross proceeds from the sale of available-for-sale securities were $35.9 million and $11.1 million for the three months ended March 31, 2015 and March 31, 2014, respectively, with gross gains of $2.2 million and $1.2 million, respectively realized upon the sales. There were no losses realized upon the sales for the three months ended March 31, 2015 and 2014.

In the first quarter of 2014, the Company sold its entire held-to-maturity portfolio consisting of four obligations of states and political subdivisions with an aggregate amortized cost of $2.3 million. Gross proceeds received from the sale of the held-to-maturity portfolio were $2.7 million for the three months ended March 31, 2014, with gross gains of $0.4 million realized upon the sale. The four securities were tax-exempt, zero-coupon bonds of California municipalities. These securities were sold as part of management’s strategy to reduce the amount of potential credit and concentration risk within the investment portfolio.

The following tables indicate the length of time that individual available-for-sale 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 Greater					Total
	Number			Gross		Number			Gross		Number			Gross
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Obligations of US government agencies	-	$	-	$	-	-	$	-	$	-	-	$	-	$	-
Obligations of state and policitical subdivisions	-		-		-	1		256		3	1		256		3
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential	2		1,271		3	-		-		-	2		1,271		3
Collateralized mortgage obligations - commercial	1		5,229		7	-		-		-	1		5,229		7
Residential mortgage-backed securities	-		-		-	-		-		-	-		-		-
Corporate debt securities	-		-		-	1		425		75	1		425		75
Negotiable certificates of deposit	-		-		-	-		-		-	-		-		-
Equity Securities	-		-		-	1		960		40	1		960		40
Total	3	$	6,500	$	10	3	$	1,641	$	118	6	$	8,141	$	128

	December 31, 2014
	Less than 12 Months					12 Months or Greater					Total
	Number			Gross		Number			Gross		Number			Gross
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
(dollars in thousands)	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Obligantions of U.S. government agencies	2	$	9,513	$	47	-	$	-	$	-	2	$	9,513	$	47
Obligations of state and policitical subdivisions	-		-		-	1		254		3	1		254		3
U.S. government/government-sponsored agencies:
Collateralized mortgage obligations - residential	1		653		1	-		-		-	1		653		1
Collateralized mortgage obligations - commercial	7		32,513		105	3		8,693		148	10		41,206		253
Residential mortgage-backed securities	3		16,659		56	6		37,619		285	9		54,278		341
Corporate debt securities	-		-		-	1		420		80	1		420		80
Negotiable certificates of deposit	-		-		-	-		-		-	-		-		-
Equity securities	-		-		-	1		957		43	1		957		43
Total	13	$	59,338	$	209	12	$	47,943	$	559	25	$	107,281	$	768

Management evaluates individual securities in an unrealized loss position quarterly for OTTI. As part of its evaluation, management considers, among other things, the length of time a security’s fair value is less than amortized cost, the severity of decline, any credit deterioration of the issuer, whether or not management intends to sell the security, and whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost.

Securities issued by U.S. government or U.S. government-sponsored agencies, including single-maturity bonds, residential mortgage-backed securities, and residential and commercial CMOs, comprise the majority of the Company’s securities portfolio. Management performed a review of the fair values of all securities in an unrealized loss position as of March 31, 2015 and determined that movements in the fair values of the securities were consistent with the change in market interest rates. At March 31, 2015, the Company held six securities that were in an unrealized loss position, with three of those securities in an unrealized loss position for more than 12 months. All but one of the securities in an unrealized loss position at March 31, 2015 were debt securities. Additionally, management considers the severity of each security’s unrealized loss position, placing greater emphasis on any security with a unrealized loss greater than 5.0% of its amortized cost. At March 31, 2015, there was one security, a corporate debt security, with an unrealized loss greater than 5.0% of its amortized cost. The security, a floating rate bond of JP Morgan Chase, had an unrealized loss of $75 thousand, or 15.0%, of its amortized cost at March 31, 2015. This bond was originally issued by Chase Manhattan Bank. JP Morgan Chase, surviving after the merger, is one of the largest banks in the world with a legacy dating back to 1799. JP Morgan Chase was considered well capitalized under regulatory capital guidelines at March 31, 2015.

The remaining five securities in an unrealized position at March 31, 2015 included three securities issued by a U.S. government or government-sponsored agency, one obligation of a state and political subdivision and one equity security. The obligations of the U.S. government or government-sponsored agencies are securities issued by GNMA and FHLMC that are currently rated Aaa by Moody’s Investor Services or AAA by Standard & Poor’s (“S&P”) and are guaranteed by the U.S. government. The one state and political subdivision obligation in an unrealized loss position at March 31, 2015 was a general-purpose debt obligation, which has an S&P credit rating of A+, is secured by the unlimited taxing power of the issuer and carries a secondary level of credit enhancement. The one equity security in an unrealized loss position at March 31, 2015 was a mutual fund investment that qualifies the Company for credit under the Community Reinvestment Act. The mutual fund is comprised of one- to four-family residential mortgage-backed securities collateralized by properties within the Company’s geographical market. In aggregate, unrealized losses totaled $128 thousand, which represented only 0.06%, of the total amortized cost of investment securities at March 31, 2015.

To date, the Company has received all scheduled principal and interest payments and expects to fully collect all future contractual principal and interest payments. The Company does not intend to sell the securities nor is it more likely than not that the Company will be required to sell the securities prior to recovery of their amortized cost. Based on the result of its review and considering the attributes of these debt and equity securities, management concluded that the individual unrealized losses were temporary and OTTI did not exist at March 31, 2015.

Investments in FHLB and Federal Reserve Bank (“FRB”) stock, which have limited marketability, are carried at cost and totaled $4.4 million and $4.2 million at March 31, 2015 and December 31, 2014, respectively. FRB stock of $1.3 million is included in Other Assets at March 31, 2015 and December 31, 2014. Management noted no indicators of impairment for the FHLB of Pittsburgh and FRB of Philadelphia stock at March 31, 2015.