INVESTMENT 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. INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the investment securities and the corresponding amounts of unrealized gains and losses therein as of March 31, 2015 and December 31, 2014:

	Amortized		Unrealized		Unrealized		Fair		Carrying
	Cost		Gains		Losses		Value		Amount
	(Dollars in Thousands)
March 31, 2015
Securities available-for-sale:
U.S. Government – sponsored enterprises	$	5,000	$	-	$	(118)	$	4,882	$	4,882
State and municipal		5,066		62		(1)		5,127		5,127
Mortgage-backed securities – residential		96,696		140		(900)		95,936		95,936
Collateralized mortgage obligations – U.S. Government		10,235		-		(289)		9,946		9,946
Total securities available-for-sale		116,997		202		(1,308)		115,891		115,891
Securities held-to-maturity (1):
Mortgage-backed securities – residential		17,517		-		(39)		17,478		17,517
Total securities held-to-maturity		17,517		-		(39)		17,478		17,517
Total investment securities	$	134,514	$	202	$	(1,347)	$	133,369	$	133,408
December 31, 2014
Securities available-for-sale:
U.S. Government – sponsored enterprises	$	5,000	$	-	$	(262)	$	4,738	$	4,738
State and municipal		5,071		20		(8)		5,083		5,083
Mortgage-backed securities – residential		99,861		28		(1,375)		98,514		98,514
Collateralized mortgage obligations – U.S. Government		10,776		-		(412)		10,364		10,364
Total securities available-for-sale		120,708		48		(2,057)		118,699		118,699
Securities held-to-maturity (1):
Mortgage-backed securities – residential		17,919		-		(33)		17,886		17,919
Total securities held-to-maturity		17,919		-		(33)		17,886		17,919
Total investment securities	$	138,627	$	48	$	(2,090)	$	136,585	$	136,618

____________

(1) Investment securities held-to-maturity are carried at amortized cost.

The amortized cost and fair value of investment securities, both available-for-sale and held-to-maturity, segregated by contractual maturity as of March 31, 2015, are shown below:

	Amortized Cost		Fair Value
	(Dollars in Thousands)
Due in one year or less	$	-	$	-
Due from more than one to five years		-		-
Due from more than five to ten years		3,240		3,277
Due after ten years		1,826		1,850
U.S. Government-sponsored enterprises		5,000		4,882
Mortgage-backed securities – residential (1)		114,213		113,414
Collateralized mortgage obligations – U.S. Government		10,235		9,946
	$	134,514	$	133,369

____________

(1) Investment securities held-to-maturity, included in Mortgage-backed securities – residential, are carried at amortized cost.

Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Investment securities not due at a single maturity date, including mortgage-backed securities and collateralized mortgage obligations, are shown separately.

The following table summarizes the investment securities, both available-for-sale and held-to-maturity with unrealized losses as of March 31, 2015 and December 31, 2014, aggregated by investment category and length of time in a continuous unrealized loss position:

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized  Losses		Fair Value		Unrealized  Losses		Fair Value		Unrealized  Losses
	(Dollars in Thousands)
March 31, 2015
U.S. Government-sponsored enterprises	$	-	$	-	$	4,882	$	(118)	$	4,882	$	(118)
State and municipal		430		(1)		-		-		430		(1)
Mortgage-backed securities – residential (1)		-		-		79,323		(939)		79,323		(939)
Collateralized mortgage obligations – U.S. Government		-		-		9,946		(289)		9,946		(289)
	$	430	$	(1)	$	94,151	$	(1,346)	$	94,581	$	(1,347)
December 31, 2014
U.S. Government – sponsored enterprises	$	-	$	-	$	4,738	$	(262)	$	4,738	$	(262)
State and municipal		1,836		(8)		-		-		1,836		(8)
Mortgage-backed securities – residential (1)		14,230		(172)		93,779		(1,236)		108,009		(1,408)
Collateralized mortgage obligations – U.S. Government		-		-		10,364		(412)		10,364		(412)
	$	16,066	$	(180)	$	108,881	$	(1,910)	$	124,947	$	(2,090)

____________

(1) Investment securities held-to-maturity, included in Mortgage-backed securities – residential, are carried at amortized cost.

The decrease in unrealized losses as of March 31, 2015 is due to a decrease in interest rates, which started in 2014 and continued through the end of the first quarter of 2015. The 10-year treasury rate as of March 31, 2015 and December 31, 2014 was 1.94% and 2.17%, respectively.

Other-Than-Temporary Impairment

Management evaluates investment securities for other-than-temporary impairment (OTTI) on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation. As of March 31, 2015, the Company’s security portfolio consisted of 32 securities available-for-sale, 16 of which were in an unrealized loss position, and two securities held-to-maturity, both of which were in an unrealized loss position. Nearly all unrealized losses were related to debt securities whose underlying collateral is residential mortgages. However, all of these debt securities were issued by government sponsored organizations, as discussed below.

As of March 31, 2015, $128.3 million, or approximately 96.2% of the debt securities held by the Company, were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. The decline in fair value was attributable to changes in interest rates and not credit quality. The Company currently does not have the intent to sell these securities and it is not more likely than not it will be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these debt securities to be other-than-temporarily impaired as of March 31, 2015. During the three months ended March 31, 2015 and 2014, the Company did not record OTTI related to non-agency collateralized mortgage-backed securities or collateralized mortgage obligations

Proceeds from Investment Securities

Proceeds from sales, payments, maturities, and calls of securities available-for-sale were $3.5 million and $4.7 million for the three months ended March 31, 2015 and 2014, respectively. No gross gains were realized during the three months ended March 31, 2015. Gross losses of $9,000 were realized during the three months ended March 31, 2015. The net loss on sale of securities available-for-sale for the three months ended March 31, 2015, includes $9,000 of accumulated other comprehensive income reclassifications from unrealized holding gains. No gross gains or losses were realized during the three months ended March 31, 2014. Gains and losses on sales of investment securities are recorded on the trade date and are determined using the specific identification method. There were no unsettled investment securities transactions at March 31, 2015, and $14.1 million in unsettled investment securities transactions at December 31, 2014.

Proceeds from payments, maturities, and calls of securities held-to-maturity were $0.4 million and $0.3 million for the three months ended March 31, 2015 and 2014. The Company did not sell investment securities classified as held-to-maturity during the three months ended March 31, 2015 and 2014, and currently intends to hold such securities until maturity.