INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

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

2. INVESTMENT SECURITIES

 

Investment securities are summarized as follows:

	June 30, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		Loss		Value
	(Dollars in thousands)
Held to Maturity
Debt Securities – Municipal	$	375	$	—	$	—	$	375
U.S. Treasury and government sponsored entity mortgage-backed securities		467		54		—		521
Totals	$	842	$	54	$	—	$	896
Available for Sale
Debt securities:
Corporate	$	5,678	$	10	$	(1,042)	$	4,646
U.S. Treasury and federal agencies		33		—		—		33
Equity securities		3		2		—		5
U.S. treasury and government sponsored entity mortgage-backed securities		102,049		535		(479)		102,105
Totals	$	107,763	$	547	$	(1,521)	$	106,789

	December 31, 2015
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		Loss		Value
	(Dollars in thousands)
Held to Maturity
Debt Securities - Municipal	$	577	$	—	$	—	$	577
U.S. Treasury and government sponsored entity mortgage-backed securities		507		53		—		560
Totals	$	1,084	$	53	$	—	$	1,137
Available for Sale
Debt securities:
Corporate	$	9,660	$	26	$	(842)	$	8,844
U.S. Treasury and federal agencies		10,033		7		—		10,040
Equity securities		3		39		—		42
U.S. Treasury and government sponsored entity mortgage-backed securities		94,248		223		(1,489)		92,982
Totals	$	113,944	$	295	$	(2,331)	$	111,908

As of June 30, 2016 and December 31, 2015, the Company had investment securities available for sale with an estimated fair value of $101.2 million and $97.9 million, respectively, pledged as collateral to secure public fund deposits.

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2016 and December 31, 2015:

	June 30, 2016
	Less Than 12 Months				12 Months or Longer				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss		Fair Value		Loss
	(Dollars in thousands)
Debt securities -
Corporate	$	—	$	—	$	2,645	$	(1,042)	$	2,645	$	(1,042)
U.S. treasury and government sponsored entity mortgage- backed securities		—		—		39,304		(479)		39,304		(479)
Totals	$	—	$	—	$	41,949	$	(1,521)	$	41,949	$	(1,521)

	December 31, 2015
	Less Than 12 Months				12 Months or Longer				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss		Fair Value		Loss
	(Dollars in thousands)
Debt securities -
Corporate	$	—	$	—	$	2,843	$	(842)	$	2,843	$	(842)
U.S. Treasury and government sponsored entity mortgage- backed securities		20,704		(217)		51,821		(1,272)		72,525		(1,489)
Totals	$	20,704	$	(217)	$	54,664	$	(2,114)	$	75,368	$	(2,331)

Management has reviewed its investment securities as of June 30, 2016 and has determined that all declines in fair value below amortized cost are temporary.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The OTTI assessment is a subjective process requiring the use of judgments and assumptions. During the securities-level assessments, consideration is given to (1) the intent not to sell and probability that the Company will not be required to sell the security before recovery of its cost basis to allow for any anticipated recovery in fair value, (2) the financial condition and near-term prospects of the issuer, as well as company news and current events, and (3) the ability to collect the future expected cash flows. Key assumptions utilized to forecast expected cash flows may include loss severity, expected cumulative loss percentage, cumulative loss percentage to date, weighted average FICO and weighted average loan-to-value (“LTV”), rating or scoring, credit ratings and market spreads, as applicable.

The Company assesses and recognizes OTTI in accordance with applicable accounting standards. Under these standards, if the Company determines that a security in the unrealized loss position is designated to be sold or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis, the impairment of such security is concluded to be other than temporary and the entire amount of the unrealized loss will be recorded in earnings. If the Company has not made a decision to sell the security and it does not expect that it will be required to sell the security prior to the recovery of the amortized cost basis but the Company concludes that the entire amortized cost basis of the security will not be recovered, while the OTTI is concluded to exists, the Company only recognizes currently in earnings the amount of decline in value attributable to credit deterioration, with the remaining component of OTTI presented in other comprehensive income.

Corporate Debt Securities - The Company’s investments in the preceding table in corporate debt securities consist of corporate debt securities issued by large financial institutions and single issuer and pooled trust preferred/collateralized debt obligations backed by bank trust preferred capital securities.

At June 30, 2016, two single issuer trust preferred securities have been in a continuous unrealized loss position for 12 months or longer. Those securities have aggregate depreciation of 28.3% from the Company’s amortized cost basis. The initial decline of these securities was primarily attributable to depressed market pricing of non-rated issues of trust preferred securities observed during the financial downturn. The unrealized loss position continued to improve, and the current decline of these debt securities is principally attributable to the rising interest rate environment and depressed pricing on lower yielding investments with prolonged maturities, which had an impact for these types of investments. These securities were performing in accordance with their contractual terms as of June 30, 2016, and had paid all contractual cash flows since the Company’s initial investment. Management believes these unrealized losses are not other-than-temporary based upon the Company’s analysis that the securities will perform in accordance with their terms and the Company’s intent not to sell these investments for a period of time sufficient to allow for the anticipated recovery of fair value, which may be maturity.  The Company expects recovery of fair value when market conditions have stabilized and that the Company will receive all contractual principal and interest payments related to those investments.

United States Treasury, US Federal Agencies and Government Sponsored Enterprise Mortgage-backed Securities - The Company’s investments in the preceding table in United States government sponsored enterprise notes consist of debt obligations of the Federal Home Loan Bank (“FHLB”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Federal National Mortgage Association (“FNMA”). At June 30, 2016 the Company had 11 agency mortgage-backed securities with unrealized losses for 12 months or longer. Those securities had aggregate depreciation of 1.2% from the Company’s amortized cost basis. These securities were performing in accordance with their contractual terms as of June 30, 2016, and had paid all contractual cash flows since the Company’s initial investment and that the Company expects to receive all contractual principal and interest payments related to those investments. Management believes these unrealized losses are not other-than-temporary based upon the Company’s analysis that the securities will perform in accordance with their terms and the Company’s intent not to sell these investments for a period of time sufficient to allow for the anticipated recovery of fair value, which may be maturity.

The amortized cost and estimated fair value of debt securities available for sale and held to maturity at June 30, 2016 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016
	Held to Maturity				Available for Sale Securities
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)
Due within 1 year	$	375	$	375	$	1,990	$	2,000
Due after 1 year through 5 years		—		—		33		33
Due after 5 years through 10 years		—		—		—		—
Due after 10 years		—		—		3,688		2,646
Total	$	375	$	375	$	5,711	$	4,679

Equity securities had a cost of $3 thousand and a fair value of $5 thousand as of June 30, 2016. Mortgage-backed securities had a cost of $102.5 million and a fair value of $102.6 million as of June 30, 2016.