Investment Securities

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Note 4: Investment Securities

The amortized cost and estimated fair value of investment securities are summarized as follows:

	June 30, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
U.S. Government and agency obligations	$	11,111	$	7	$	(232	)	$	10,886
Mortgage-backed securities – residential		6,968		23		(129	)		6,862
Total available-for-sale	$	18,079	$	30	$	(361	)	$	17,748
Held-to-Maturity Portfolio
Mortgage-backed securities – residential	$	467	$	6	$	-		$	473
State and municipal securities		5,880		19		(65	)		5,834
Total held-to-maturity	$	6,347	$	25	$	(65	)	$	6,307

	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
U.S. Government and agency obligations	$	10,612	$	-	$	(142	)	$	10,470
Mortgage-backed securities – residential		7,909		19		(85	)		7,843
Total available-for-sale	$	18,521	$	19	$	(227	)	$	18,313
Held-to-Maturity Portfolio
Mortgage-backed securities – residential	$	637	$	9	$	-		$	646
State and municipal securities		5,938		41		(37	)		5,942
Total held-to-maturity	$	6,575	$	50	$	(37	)	$	6,588

The amortized cost and estimated fair value of debt investments at June 30, 2018 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Available-for-Sale				Held-to-Maturity
	Amortized				Amortized
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	-	$	-	$	376	$	375
Due after one year through five years		9,611		9,414		3,885		3,846
Due after five years through ten years		500		500		1,619		1,613
Due after ten years		1,000		972		-		-
Sub-total	$	11,111	$	10,886	$	5,880	$	5,834
Mortgage-backed securities – residential		6,968		6,862		467		473
Totals	$	18,079	$	17,748	$	6,347	$	6,307

The Company’s investment securities’ 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, are as follows:

	June 30, 2018
	Less than Twelve Months						Twelve Months or More						Total
	Number of						Number of						Number of
	Individual		Unrealized		Fair		Individual		Unrealized		Fair		Individual		Unrealized		Fair
(Dollars in thousands)	Securities		Losses		Value		Securities		Losses		Value		Securities		Losses		Value
Available-for-Sale
U.S. Government and agency obligations		4	$	84	$	3,916		5	$	148	$	5,958		9	$	232	$	9,874
Mortgage-backed securities - residential		2		38		1,572		3		91		2,879		5		129		4,451
Totals		6	$	122	$	5,488		8	$	239	$	8,837		14	$	361	$	14,325
Held-to-Maturity
Mortgage-backed securities – residential(1)		-	$	-	$	-		1	$	-	$	168		1	$	-	$	168
State and municipal securities		16		44		3,375		4		21		1,063		20		65		4,438
Totals		16	$	44	$	3,375		5	$	21	$	1,231		21	$	65	$	4,606

	December 31, 2017
	Less than Twelve Months						Twelve Months or More						Total
	Number of						Number of						Number of
	Individual		Unrealized		Fair		Individual		Unrealized		Fair		Individual		Unrealized		Fair
(Dollars in thousands)	Securities		Losses		Value		Securities		Losses		Value		Securities		Losses		Value
Available-for-Sale
U.S. Government and agency obligations		4	$	34	$	4,472		5	$	108	$	5,999		9	$	142	$	10,471
Mortgage-backed securities - residential		4		23		2,459		4		62		3,435		8		85		5,894
Totals		8	$	57	$	6,931		9	$	170	$	9,434		17	$	227	$	16,365
Held-to-Maturity
Mortgage-backed securities – residential(1)		-	$	-	$	-		1	$	-	$	171		1	$	-	$	171
State and municipal securities		10		16		1,574		5		21		1,331		15		37		2,905
Totals		10	$	16	$	1,574		6	$	21	$	1,502		16	$	37	$	3,076

⁽¹⁾ Aggregate unrealized loss position of these securities is less than $500.

The Company conducts a formal review of investment securities on a quarterly basis for the presence of other-than-temporary impairment (“OTTI”). The Company assesses whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the statement of condition date. Under these circumstances, OTTI is considered to have occurred (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not anticipated to be sufficient to recover the entire amortized cost basis. The guidance requires that credit-related OTTI is recognized in earnings while non-credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”). Non-credit-related OTTI is based on other factors, including illiquidity and changes in the general interest rate environment. Presentation of OTTI is made in the consolidated statement of income on a gross basis, including both the portion recognized in earnings as well as the portion recorded in OCI. The gross OTTI would then be offset by the amount of non-credit-related OTTI, showing the net as the impact on earnings.

There were 35 securities in an unrealized loss position at June 30, 2018, of which 13 have been in loss positions for a period greater than twelve months and 22 have been in loss positions for a period less than twelve months. This compares to 33 securities in an unrealized loss position at December 31, 2017, of which 15 had been in loss positions for a period greater than twelve months and 18 had been in loss positions for a period less than twelve months. These issuing entities are currently rated Aaa by Moody’s Investor Services and AA+ by Standard and Poors. Among the 13 securities in loss positions for a period greater than twelve months at June 30, 2018, nine were either direct issuances of, or mortgage-backed securities or collateralized mortgage obligations issued by, the following entities sponsored and guaranteed by the United States Government: GNMA, FNMA, and FHLMC. The remaining four securities that have been in a loss position for a period greater than twelve months were issued by a state or political subdivision, primarily local municipalities. The unrealized losses reflected are primarily attributable to changes in interest rates since the securities were acquired.

Among the 22 securities in an unrealized loss position at June 30, 2018 for less than twelve months, six were either direct issuances of, or mortgage-backed securities or collateralized mortgage obligations issued by, the following entities sponsored and guaranteed by the United States Government: FNMA, FHLMC, FHLB and FFCB. The remaining 16 securities were issued by a state or political subdivision, primarily local municipalities. The unrealized losses reflected are primarily attributable to changes in interest rates since the securities were acquired. The Company does not intend to sell these securities, nor is it more likely than not, that the Company will be required to sell these securities prior to recovery of the amortized cost. The state and municipal securities are general obligation (G.O.) bonds backed by the full faith and credit of local municipalities. There has never been a default of a New York G.O. in the history of the state. Historical performance does not guarantee future performance, but it does indicate that the risk of loss on default of a G.O. municipal bond for the Company is relatively low. All are paying in accordance with their terms with no deferrals of interest or defaults. As such, management does not believe any individual unrealized loss as of June 30, 2018 represents OTTI.

There were no realized gains or losses on sales of securities for the three or six months ended June 30, 2018 and June 30, 2017.

As of June 30, 2018 and December 31, 2017, no securities were pledged to secure public deposits or for any other purpose required or permitted by law.

Management has reviewed its loan and mortgage-backed securities portfolios and determined that, to the best of its knowledge, little or no exposure exists to sub-prime or other high-risk residential mortgages. The Company is not in the practice of investing in, or originating, these types of investments or loans.