Note 5 - Investment Securities

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

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

Note 5: Investment Securities

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at September 30, 2015 and December 31, 2014 is as follows:

	At September 30, 2015
(dollars in thousands)	Amortized  Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Collateralized mortgage obligations	$	127,369	$	1,371	$	(353	)	$	128,387
Mortgage-backed securities		10,287		188		(51	)		10,424
Municipal securities		21,820		374		(110	)		22,084
Corporate bonds		29,313		275		(367	)		29,221
Asset-backed securities		17,804		-		(590	)		17,214
Trust preferred securities		3,070		-		(1,400	)		1,670
Other securities		115		4		-			119
Total securities available for sale	$	209,778	$	2,212	$	(2,871	)	$	209,119
U.S. Government agencies	$	12,091	$	1	$	(39	)	$	12,053
Collateralized mortgage obligations		120,051		1,574		(206	)		121,419
Mortgage-backed securities		7,954		73		-			8,027
Other securities		20		-		-			20
Total securities held to maturity	$	140,116	$	1,648	$	(245	)	$	141,519

	At December 31, 2014
(dollars in thousands)	Amortized Cost		Gross Unrealized  Gains		Gross Unrealized  Losses			Fair Value
Collateralized mortgage obligations	$	98,626	$	692	$	(96	)	$	99,222
Mortgage-backed securities		13,271		564		(33	)		13,802
Municipal securities		15,784		363		(40	)		16,107
Corporate bonds		33,840		621		(34	)		34,427
Asset-backed securities		18,353		152		-			18,505
Trust preferred securities		5,261		-		(2,068	)		3,193
Other securities		115		8		-			123
Total securities available for sale	$	185,250	$	2,400	$	(2,271	)	$	185,379
U.S. Government agencies	$	1	$	-	$	-		$	1
Collateralized mortgage obligations		67,845		531		(144	)		68,232
Other securities		20		-		-			20
Total securities held to maturity	$	67,866	$	531	$	(144	)	$	68,253

     The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at September 30, 2015 is as follows:

	Available for Sale				Held to Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	23,526	$	24,035	$	1	$	1
After 1 year to 5 years		68,022		67,445		62,243		62,778
After 5 years to 10 years		106,071		105,624		77,872		78,740
After 10 years		12,159		12,015		-		-
Total	$	209,778	$	209,119	$	140,116	$	141,519

Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

      The Company’s investment securities portfolio consists primarily of debt securities issued by U.S. government agencies, U.S. government-sponsored agencies, state governments, local municipalities and certain corporate entities. There were no private label mortgage-backed securities (“MBS”) or collateralized mortgage obligations (“CMO”) held in the investment securities portfolio as of September 30, 2015 and December 31, 2014. There were also no MBS or CMO securities that were rated “Alt-A” or “sub-prime” as of those dates.

       The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Net unrealized gains and losses in the available for sale portfolio are included in shareholders’ equity as a component of accumulated other comprehensive income or loss, net of tax. Securities classified as held to maturity are carried at amortized cost. An unrealized loss exists when the current fair value of an individual security is less than the amortized cost basis.

      The Company regularly evaluates investment securities that are in an unrealized loss position in order to determine if the decline in fair value is other than temporary. Factors considered in the evaluation include the current economic climate, the length of time and the extent to which the fair value has been below cost, the current interest rate environment and the rating of each security. An other-than-temporary impairment (“OTTI”) loss must be recognized for a debt security in an unrealized loss position if the Company intends to sell the security or it is more likely than not that it will be required to sell the security prior to recovery of the amortized cost basis. The amount of OTTI loss recognized is equal to the difference between the fair value and the amortized cost basis of the security that is attributed to credit deterioration. Accounting standards require the evaluation of the expected cash flows to be received to determine if a credit loss has occurred. In the event of a credit loss, that amount must be recognized against income in the current period. The portion of the unrealized loss related to other factors, such as liquidity conditions in the market or the current interest rate environment, is recorded in accumulated other comprehensive income (loss).

       Impairment charges (credit losses) on trust preferred securities for the nine month period ended September 30, 2015 amounted to $3,000. There were no impairment charges on trust preferred securities during the three month period ended September 30, 2015 and September 30, 2014. The impairment charges on trust preferred securities for the nine months ended September 30, 2014 amounted to $7,000.

       The following table presents a roll-forward of the balance of credit-related impairment losses on securities held at September 30, 2015 and 2014 for which a portion of OTTI was recognized in other comprehensive income:

(dollars in thousands)	2015			2014
Beginning Balance, January 1st	$	3,966		$	3,959
Additional credit-related impairment loss on securities for which an other-than-temporary impairment was previously recognized		3			7
Reductions for securities paid off during the period		-			-
Reductions for securities sold during the period		(3,039	)
Reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the Company intends to sell the security		-			-
Ending Balance, September 30th	$	930		$	3,966

The following tables show the fair value and gross unrealized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	At September 30, 2015
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized  Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations	$	23,084	$	353	$	-	$	-	$	23,084	$	353
Mortgage-backed securities		5,815		29		1,010		22		6,825		51
Municipal securities		1,412		13		5,408		97		6,820		110
Corporate bonds		12,488		367		-		-		12,488		367
Asset backed securities		17,214		590		-		-		17,214		590
Trust preferred securities		-		-		1,670		1,400		1,670		1,400
Total Available for Sale	$	60,013	$	1,352	$	8,088	$	1,519	$	68,101	$	2,871

	At September 30, 2015
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized  Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government agencies	$	4,018	$	39	$	-	$	-	$	4,018	$	39
Collateralized mortgage obligations		9,460		206		-		-		9,460		206
Total Held to Maturity	$	13,478	$	245	$	-	$	-	$	13,478	$	245

	At December 31, 2014
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized  Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations	$	17,331	$	96	$	-	$	-	$	17,331	$	96
Mortgage-backed securities		3,997		2		1,069		31		5,066		33
Municipal securities		1,298		10		1,395		30		2,693		40
Corporate bonds		4,880		34		-		-		4,880		34
Trust preferred securities		-		-		3,193		2,068		3,193		2,068
Total Available for Sale	$	27,506	$	142	$	5,657	$	2,129	$	33,163	$	2,271

	At December 31, 2014
	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Collateralized mortgage obligations	$	19,766	$	92	$	9,232	$	52	$	28,998	$	144
Total Held to Maturity	$	19,766	$	92	$	9,232	$	52	$	28,998	$	144

       Unrealized losses on securities in the investment portfolio amounted to $3.1 million with a total fair value of $81.6 million as of September 30, 2015 compared to unrealized losses of $2.4 million with a total fair value of $62.2 million as of December 31, 2014. The Company believes the unrealized losses presented in the tables above are temporary in nature and primarily related to market interest rates or limited trading activity in particular type of security rather than the underlying credit quality of the issuers. The Company does not believe that these losses are other than temporary and does not currently intend to sell or believe it will be required to sell securities in an unrealized loss position prior to maturity or recovery of the amortized cost bases.

       The Company held one U.S. Government agency security, nine collateralized mortgage obligations and four mortgage-backed securities that were in an unrealized loss position at September 30, 2015. Principal and interest payments of the underlying collateral for each of these securities are backed by U.S. Government sponsored agencies and carry minimal credit risk. Management found no evidence of OTTI on any of these securities and believes the unrealized losses are due to fluctuations in fair values resulting from changes in market interest rates and are considered temporary as of September 30, 2015.

       All municipal securities held in the investment portfolio are reviewed on least a quarterly basis for impairment. Each bond carries an investment grade rating by either Moody’s or Standard & Poor’s. In addition the Company periodically conducts its own independent review on each issuer to ensure the financial stability of the municipal entity. The largest geographic concentration was in Pennsylvania and New Jersey and consisted of either general obligation or revenue bonds backed by the taxing power of the issuing municipality. At September 30, 2015, the investment portfolio included nine municipal securities that were in an unrealized loss position. Management believes the unrealized losses were the result of movements in long-term interest rates and are not reflective of any credit deterioration.

       At September 30, 2015, the investment portfolio included two asset-backed securities that were in an unrealized loss position. The asset-backed securities held in the investment securities portfolio consist solely of Sallie Mae bonds, collateralized by student loans which are guaranteed by the U.S. Department of Education. Management believes the unrealized losses on these securities were driven by changes in market interest rates and not a result of any credit deterioration. At September 30, 2015, the investment portfolio included four corporate bonds that were in an unrealized loss position. Management believes the unrealized losses on these securities were driven by changes in market interest rates and not a result of any credit deterioration.

       The unrealized losses on the trust preferred securities are primarily the result of the secondary market for such securities becoming inactive and are also considered temporary at this time. The following table provides additional detail on the trust preferred securities held in the portfolio as of September 30, 2015.

(dollars in thousands)	Class /  Tranche	Amortized Cost		Fair Value		Unrealized Losses			Lowest Credit Rating Assigned	Number of Banks Currently Performing		Deferrals / Defaults as % of Current Balance			Conditional Default Rates for 2015 and beyond			Cumulative OTTI Life to Date
TPREF Funding II	Class B Notes	$	732	$	395	$	(337	)	C		20		36	%		0.38	%	$	267
TPREF Funding III	Class B2 Notes		1,518		815		(703	)	C		16		29			0.40			483
ALESCO Preferred Funding V	Class C1 Notes		820		460		(360	)	C		40		15			0.34			180
Total		$	3,070	$	1,670	$	(1,400	)			76		27	%				$	930

       Proceeds of sales of securities available for sale during the three months ended September 30, 2015 were $2.6 million. Gross gains of $206,000 and gross losses of $142,000 were realized on these sales. The tax provision applicable to the net gains for the three months ended September 30, 2015 amounted to $23,000. Proceeds of sales of securities available for sale during the nine months ended September 30, 2015 were $6.7 million. Gross gains of $361,000 and gross losses of $288,000 were realized on these sales. The tax provision applicable to the net gains for the three months ended September 30, 2015 amounted to $26,000.

      The Company realized gross gains on the sale of securities of $458,000 during the nine months ended September 30, 2014. The related sale proceeds amounted to $5.7 million. The tax provision applicable to these gross gains in 2014 amounted to approximately $165,000.

        In July 2014, thirteen CMOs with a fair value of $70.1 million that were previously classified as available-for-sale were transferred to the held-to-maturity category. These securities were transferred at fair value. Unrealized losses of $1.2 million associated with the transferred securities will remain in other comprehensive income and be amortized as an adjustment to yield over the remaining life of those securities. At September 30, 2015, there is a remaining $1.0 million unrealized loss to be amortized.