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Investment Securities
 3 Months Ended
Mar. 31, 2019
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:

 

    March 31, 2019  
          Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
(In thousands)   Cost     Gains     Losses     Value  
Available-for-Sale Portfolio                                
U.S. Government and agency obligations   $ 12,610     $ -     $ (86 )   $ 12,524  
Mortgage-backed securities – residential     5,374       20       (79 )     5,315  
Total available-for-sale   $ 17,984     $ 20     $ (165 )   $ 17,839  
Held-to-Maturity Portfolio                                
Mortgage-backed securities – residential   $ 452     $ 6     $ -     $ 458  
State and municipal securities     5,589       62       (11 )     5,640  
Total held-to-maturity   $ 6,041     $ 68     $ (11 )   $ 6,098  

 

    December 31, 2018  
          Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
(In thousands)   Cost     Gains     Losses     Value  
Available-for-Sale Portfolio                                
U.S. Government and agency obligations   $ 12,610     $ 7     $ (162 )   $ 12,455  
Mortgage-backed securities – residential     5,953       24       (101 )     5,876  
Total available-for-sale   $ 18,563     $ 31     $ (263 )   $ 18,331  
Held-to-Maturity Portfolio                                
Mortgage-backed securities – residential   $ 458     $ 6     $ (1 )   $ 463  
State and municipal securities     5,594       29       (56 )     5,567  
Total held-to-maturity   $ 6,052     $ 35     $ (57 )   $ 6,030  
  

The amortized cost and estimated fair value of debt investments at March 31, 2019 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   $ -     $ -     $ 817     $ 817  
Due after one year through five years     11,610       11,528       3,114       3,115  
Due after five years through ten years     -       -       1,658       1,708  
Due after ten years     1,000       996       -       -  
Sub-total   $ 12,610     $ 12,524     $ 5,589     $ 5,640  
Mortgage-backed securities – residential     5,374       5,315       452       458  
Totals   $ 17,984     $ 17,839     $ 6,041     $ 6,098  

 

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:

 

    March 31, 2019  
    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     1     $ 1     $ 1,003       8     $ 85     $ 9,520       9     $ 86     $ 10,523  
Mortgage-backed securities - residential     1       1       167       4       78       3,559       5       79       3,726  
Totals     2     $ 2     $ 1,170       12     $ 163     $ 13,079       14     $ 165     $ 14,249  
Held-to-Maturity                                                                        
Mortgage-backed securities – residential(1)     -     $ -     $ -       1     $ -     $ 163       1     $ -     $ 163  
State and municipal securities     -       -       -       10       11       1,520       10       11       1,520  
Totals     -     $ -     $ -       11     $ 11     $ 1,683       11     $ 11     $ 1,683  

 

    December 31, 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     -     $ -     $ -       8     $ 162     $ 9,445       8     $ 162     $ 9,445  
Mortgage-backed securities – residential(1)     1       -       203       4       101       3,749       5       101       3,952  
Totals     1     $ -     $ 203       12     $ 263     $ 13,194       13     $ 263     $ 13,397  
Held-to-Maturity                                                                        
Mortgage-backed securities – residential     -     $ -     $ -       1     $ 1     $ 165       1     $ 1     $ 165  
State and municipal securities     3       4       1,039       15       52       3,021       18       56       4,060  
Totals     3     $ 4     $ 1,039       16     $ 53     $ 3,186       19     $ 57     $ 4,225  

 

(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 consolidated balance sheet 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 25 securities in an unrealized loss position at March 31, 2019, of which 23 have been in loss positions for a period greater than twelve months and two have been in loss positions for a period less than twelve months. This compares to 32 securities in an unrealized loss position at December 31, 2018, of which 28 had been in loss positions for a period greater than twelve months and four 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 23 securities in loss positions for a period greater than twelve months at March 31, 2019, 13 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 10 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 two securities in an unrealized loss position at March 31, 2019 for less than twelve months, both 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 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 March 31, 2019 represents OTTI.

 

There were no realized gains or losses on sales of securities for the three months ended March 31, 2019 and March 31, 2018.

 

As of March 31, 2019 and December 31, 2018, 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.