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Securities
 3 Months Ended
Mar. 31, 2015
Securities [Abstract]  
Securities

NOTE 7. Securities

 

This table provides the major components of securities available for sale (“AFS”) and held to maturity (“HTM”) at amortized cost and estimated fair value at March 31, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

(In thousands)

 

Amortized cost

 

Gross unrealized gains

 

Gross unrealized losses

 

Estimated fair value

 

Amortized cost

 

Gross unrealized gains

 

Gross unrealized losses

 

Estimated fair value

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

$
4,612 

 

$

 -

 

$
(84)

 

$
4,528 

 

$
4,711 

 

$

 -

 

$
(93)

 

$
4,618 

State and political subdivisions    

 

 
11,031 

 

 
148 

 

 
(16)

 

 
11,163 

 

 
11,055 

 

 
112 

 

 
(35)

 

 
11,132 

Residential mortgage-backed securities    

 

 
31,819 

 

 
658 

 

 
(165)

 

 
32,312 

 

 
33,884 

 

 
646 

 

 
(147)

 

 
34,383 

Corporate and other securities

 

 
10,116 

 

 
63 

 

 
(307)

 

 
9,872 

 

 
10,188 

 

 
63 

 

 
(311)

 

 
9,940 

Total securities available
for sale

 

$
57,578 

 

$
869 

 

$
(572)

 

$
57,875 

 

$
59,838 

 

$
821 

 

$
(586)

 

$
60,073 

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

$
4,440 

 

$

 -

 

$
(127)

 

$
4,313 

 

$
4,440 

 

$

 -

 

$
(124)

 

$
4,316 

State and political subdivisions    

 

 
2,415 

 

 
281 

 

 

 -

 

 
2,696 

 

 
2,417 

 

 
277 

 

 

 -

 

 
2,694 

Residential mortgage-backed securities    

 

 
7,615 

 

 
208 

 

 
(33)

 

 
7,790 

 

 
8,164 

 

 
211 

 

 
(29)

 

 
8,346 

Commercial mortgage-backed securities    

 

 
3,980 

 

 
20 

 

 
(21)

 

 
3,979 

 

 
4,005 

 

 
13 

 

 
(53)

 

 
3,965 

Corporate and other securities

 

 
983 

 

 
10 

 

 

 -

 

 
993 

 

 
983 

 

 

 -

 

 
(23)

 

 
960 

Total securities held to
maturity

 

$
19,433 

 

$
519 

 

$
(181)

 

$
19,771 

 

$
20,009 

 

$
501 

 

$
(229)

 

$
20,281 

 

This table provides the remaining contractual maturities and yields of securities within the investment portfolios.  The carrying value of securities at March 31, 2015 is distributed by contractual maturity.  Mortgage-backed securities and other securities, which may have principal prepayment provisions, are distributed based on contractual maturity.  Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within one year

 

After one through five years

 

After five through ten years

 

After ten years

 

Total carrying value

 

(In thousands, except percentages)

 

Amount

 

Yield

 

Amount

 

Yield

 

Amount

 

Yield

 

Amount

 

Yield

 

Amount

 

Yield

 

Available for sale at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

$

 -

 

 -

%

$
1,018 

 
1.00 

%

$
937 

 
2.07 

%

$
2,573 

 
2.04 

%

$
4,528 

 
1.81 

%

State and political subdivisions    

 

 
39 

 
6.48 

 

 
1,172 

 
2.23 

 

 
6,334 

 
2.41 

 

 
3,618 

 
2.56 

 

 
11,163 

 
2.45 

 

Residential mortgage-backed securities    

 

 

 -

 

 -

 

 
1,538 

 
1.79 

 

 
2,204 

 
1.94 

 

 
28,570 

 
2.79 

 

 
32,312 

 
2.68 

 

Corporate and other securities

 

 

 -

 

 -

 

 
2,400 

 
1.02 

 

 
1,446 

 
1.18 

 

 
6,026 

 
0.75 

 

 
9,872 

 
0.88 

 

Total securities available
for sale

 

$
39 

 
6.48 

%

$
6,128 

 
1.44 

%

$
10,921 

 
2.12 

%

$
40,787 

 
2.42 

%

$
57,875 

 
2.27 

%

Held to maturity at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

$

 -

 

 -

%

$

 -

 

 -

%

$

 -

 

 -

%

$
4,440 

 
1.96 

%

$
4,440 

 
1.96 

%

State and political subdivisions    

 

 
309 

 
0.75 

 

 

 -

 

 -

 

 

 -

 

 -

 

 
2,106 

 
4.72 

 

 
2,415 

 
4.21 

 

Residential mortgage-backed securities    

 

 

 -

 

 -

 

 
380 

 
4.81 

 

 
248 

 
5.21 

 

 
6,987 

 
2.81 

 

 
7,615 

 
2.99 

 

Commercial mortgage-backed securities    

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 
3,980 

 
2.76 

 

 
3,980 

 
2.76 

 

Corporate and other securities

 

 

 -

 

 -

 

 

 -

 

 -

 

 
983 

 
2.95 

 

 

 -

 

 -

 

 
983 

 
2.95 

 

Total securities held to
maturity

 

$
309 

 
0.75 

%

$
380 

 
4.81 

%

$
1,231 

 
3.41 

%

$
17,513 

 
2.81 

%

$
19,433 

 
2.86 

%

The fair value of securities with unrealized losses by length of time that the individual securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

Less than 12 months

 

12 months and greater

 

Total

(In thousands, except number in a loss position)

 

Total number in a loss position

 

Estimated fair value

 

Unrealized loss

 

Estimated fair value

 

Unrealized loss

 

Estimated fair value

 

Unrealized loss

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

 
6 

 

$
957 

 

$
(10)

 

$
3,571 

 

$
(74)

 

$
4,528 

 

$
(84)

State and political subdivisions    

 

 
5 

 

 
2,800 

 

 
(16)

 

 

 -

 

 

 -

 

 
2,800 

 

 
(16)

Residential mortgage-backed securities    

 

 
7 

 

 
4,049 

 

 
(6)

 

 
5,449 

 

 
(159)

 

 
9,498 

 

 
(165)

Corporate and other securities

 

 
7 

 

 
1,057 

 

 
(44)

 

 
3,736 

 

 
(263)

 

 
4,793 

 

 
(307)

Total temporarily impaired securities

 

 
25 

 

$
8,863 

 

$
(76)

 

$
12,756 

 

$
(496)

 

$
21,619 

 

$
(572)

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

 
2 

 

$

 -

 

$

 -

 

$
4,313 

 

$
(127)

 

$
4,313 

 

$
(127)

Residential mortgage-backed securities    

 

 
3 

 

 

 -

 

 

 -

 

 
2,370 

 

 
(33)

 

 
2,370 

 

 
(33)

Commercial mortgage-backed securities    

 

 
1 

 

 
1,837 

 

 
(21)

 

 

 -

 

 

 -

 

 
1,837 

 

 
(21)

Total temporarily impaired securities

 

 
6 

 

$
1,837 

 

$
(21)

 

$
6,683 

 

$
(160)

 

$
8,520 

 

$
(181)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

Less than 12 months

 

12 months and greater

 

Total

(In thousands, except number in a loss position)

 

Total number in a loss position

 

Estimated fair value

 

Unrealized loss

 

Estimated fair value

 

Unrealized loss

 

Estimated fair value

 

Unrealized loss

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

 
4 

 

$

 -

 

$

 -

 

$
4,590 

 

$
(93)

 

$
4,590 

 

$
(93)

State and political subdivisions    

 

 
7 

 

 

 -

 

 

 -

 

 
4,103 

 

 
(35)

 

 
4,103 

 

 
(35)

Residential mortgage-backed securities    

 

 
9 

 

 
6,579 

 

 
(16)

 

 
5,889 

 

 
(131)

 

 
12,468 

 

 
(147)

Corporate and other securities

 

 
7 

 

 
1,053 

 

 
(46)

 

 
3,736 

 

 
(265)

 

 
4,789 

 

 
(311)

Total temporarily impaired securities

 

 
27 

 

$
7,632 

 

$
(62)

 

$
18,318 

 

$
(524)

 

$
25,950 

 

$
(586)

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

 
2 

 

$

 -

 

$

 -

 

$
4,316 

 

$
(124)

 

$
4,316 

 

$
(124)

Residential mortgage-backed securities    

 

 
3 

 

 

 -

 

 

 -

 

 
2,586 

 

 
(29)

 

 
2,586 

 

 
(29)

Commercial mortgage-backed securities    

 

 
1 

 

 

 -

 

 

 -

 

 
1,822 

 

 
(53)

 

 
1,822 

 

 
(53)

Corporate and other securities

 

 
1 

 

 

 -

 

 

 -

 

 
960 

 

 
(23)

 

 
960 

 

 
(23)

Total temporarily impaired securities

 

 
7 

 

$

 -

 

$

 -

 

$
9,684 

 

$
(229)

 

$
9,684 

 

$
(229)

 

Unrealized Losses

 

The unrealized losses in each of the categories presented in the tables above are discussed in the paragraphs that follow:

 

U.S. government sponsored entities and state and political subdivision securities: The unrealized losses on investments in these types of securities were caused by the increase in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than temporarily impaired as of March 31, 2015.  There was no impairment on these securities at December 31, 2014.

 

Residential and commercial mortgage-backed securities:  The unrealized losses on investments in mortgage-backed securities were caused by increases in interest rate spreads or the increase in interest rates at the long end of the Treasury curve.  The majority of contractual cash flows of these securities are guaranteed by the FNMA, GNMA, and the FHLMC.  It is expected that the securities would not be settled at a price significantly less than the par value of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of March 31, 2015 or December 31, 2014.

 

Corporate and other securities: Included in this category are corporate debt securities, Community Reinvestment Act (“CRA”) investments, asset-backed securities, and one trust preferred security.  The unrealized losses on corporate debt securities were due to widening credit spreads or the increase in interest rates at the long end of the Treasury curve and the unrealized losses on CRA investments were caused by decreases in the market prices of the shares.  The Company evaluated the prospects of the issuers and forecasted a recovery period; and as a result determined it did not consider these investments to be other-than-temporarily impaired as of March 31, 2015 or December 31, 2014.  The unrealized loss on the trust preferred security was caused by an inactive trading market and changes in market credit spreads.  At March 31, 2015 and December 31, 2014, this category consisted of one single-issuer trust preferred security.  The contractual terms do not allow the security to be settled at a price less than the par value.  Because the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may be at maturity, the Company did not consider this security to be other-than-temporarily impaired as of March 31, 2015 or December 31, 2014.

 

Realized Gains and Losses

 

Gross realized gains (losses) on securities for the three months ended March 31, 2015 and 2014 are detailed in the table below:

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31,

(In thousands)

 

2015

 

2014

Available for sale:

 

 

 

 

 

 

Realized gains

 

$

 -

 

$
114 

Realized losses

 

 

 -

 

 
(4)

Total securities available for sale

 

 

 -

 

 
110 

Held to maturity:

 

 

 

 

 

 

Realized gains

 

 

 -

 

 

 -

Realized losses

 

 

 -

 

 

 -

Total securities held to maturity

 

 

 -

 

 

 -

Net gains on sales of securities

 

$

 -

 

$
110 

 

The net realized gains are included in noninterest income in the Consolidated Statements of Income as net security gains.  For the three months ended March 31, 2015, there were no gross realized gains or losses.

 

For the three months ended March 31, 2014, there were gross realized gains of $114 thousand and gross realized losses of $4 thousand.  The net realized gains during 2014 were a result of the following:

 

·

The company sold approximately $2.8 million in book value of available for sale mortgage-backed securities, asset-backed securities, and corporate bonds, resulting in pre-tax gains of approximately $114 thousand.

 

Pledged Securities

 

Securities with a carrying value of $50.5 million and $50.4 million at March 31, 2015 and December 31, 2014, respectively, were pledged to secure Government deposits, secure other borrowings and for other purposes required or permitted by law.  Included in these figures was $31.5 million and $32.1 million pledged against municipal deposits at March 31, 2015 and December 31, 2014, respectively.