Investment Securities

6 Months Ended

Jun. 30, 2017

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, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
U.S. Government and agency obligations	$	10,609	$	-	$	(80	)	$	10,529
Mortgage-backed securities – residential		7,885		25		(44	)		7,866
Total available-for-sale	$	18,494	$	25	$	(124	)	$	18,395
Held-to-Maturity Portfolio
Mortgage-backed securities – residential	$	655	$	8	$	-		$	663
State and municipal securities		5,943		54		(16	)		5,981
Total held-to-maturity	$	6,598	$	62	$	(16	)	$	6,644

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
U.S. Government and agency obligations	$	8,106	$	3	$	(110	)	$	7,999
Mortgage-backed securities – residential		9,769		42		(63	)		9,748
Total available-for-sale	$	17,875	$	45	$	(173	)	$	17,747
Held-to-Maturity Portfolio
Mortgage-backed securities – residential	$	745	$	13	$	-		$	758
State and municipal securities		6,675		25		(74	)		6,626
Total held-to-maturity	$	7,420	$	38	$	(74	)	$	7,384

The amortized cost and estimated fair value of debt investments at June 30, 2017 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	$	-	$	-	$	1,000	$	1,002
Due after one year through five years		9,609		9,543		3,536		3,549
Due after five years through ten years		-		-		1,407		1,430
Due after ten years		1,000		986		-		-
Sub-total	$	10,609	$	10,529	$	5,943	$	5,981
Mortgage-backed securities – residential		7,885		7,866		655		663
Totals	$	18,494	$	18,395	$	6,598	$	6,644

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, 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		8	$	63	$	9,046		1	$	17	$	982		9	$	80	$	10,028
Mortgage-backed securities - residential		2		22		2,497		3		22		1,927		5		44		4,424
Totals		10	$	85	$	11,543		4	$	39	$	2,909		14	$	124	$	14,452
Held-to-Maturity
Mortgage-backed securities – residential(1)		1	$	-	$	175		-	$	-	$	-		1	$	-	$	175
State and municipal securities(1)		7		16		1,974		1		-		45		8		16		2,019
Totals		8	$	16	$	2,149		1	$	-	$	45		9	$	16	$	2,194

	December 31, 2016
	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		6	$	110	$	6,996		-	$	-	$	-		6	$	110	$	6,996
Mortgage-backed securities - residential		3		49		4,441		2		14		987		5		63		5,428
Totals		9	$	159	$	11,437		2	$	14	$	987		11	$	173	$	12,424
Held-to-Maturity
Mortgage-backed securities – residential(1)		1	$	-	$	178		-	$	-	$	-		1	$	-	$	178
State and municipal securities(1)		14		74		4,275		1		-		45		15		74		4,320
Totals		15	$	74	$	4,453		1	$	-	$	45		16	$	74	$	4,498

⁽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 23 securities in an unrealized loss position at June 30, 2017, of which five have been in loss positions for a period greater than twelve months and 18 have been in loss positions for a period less than twelve months. This compares to 27 securities in an unrealized loss position at December 31, 2016, of which three had been in loss positions for a period greater than twelve months and 24 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 five securities in loss positions for a period greater than twelve months at June 30, 2017, four 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 security that has been in a loss position for a period greater than twelve months was issued by a state subdivision. The unrealized losses reflected are primarily attributable to changes in interest rates since the securities were acquired.

Among the 18 securities in an unrealized loss position at June 30, 2017 for less than twelve months, 11 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 seven securities were issued by a state or political subdivision. 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. As such, management does not believe any individual unrealized loss as of June 30, 2017 represents OTTI.

There were no gross realized gains or losses on sales of securities for the three and six months ended June 30, 2017 and June 30, 2016.

As of June 30, 2017 and December 31, 2016, 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.