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Investment Securities
3 Months Ended
Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
2.
Investment Securities
 
Agency bonds and notes, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal Home Loan Bank (“FHLB”), which are U.S. government-sponsored enterprises. The Company also holds a pass-through asset-backed security guaranteed by the U.S. Small Business Administration (“SBA”) representing participating interests in pools of long-term debentures issued by state and local development companies certified by the SBA. Privately-issued CMO and asset-backed securities (“ABS”) are complex securities issued by non-government special-purpose entities that are collateralized by residential mortgage loans and residential home equity loans.
 
Investment securities have been classified according to management’s intent.
 
Trading Account Securities 
 
The Company invests in small and medium lot, investment grade municipal bonds through a managed brokerage account. The brokerage account is managed by an investment advisory firm registered with the U.S. Securities and Exchange Commission. At December 31, 2015 and September 30, 2015, trading account securities recorded at fair value totaled $7.5 million and $9.0 million, respectively, and were comprised of investment grade municipal bonds. During the three-months ended December 31, 2015, the Company reported net gains on trading account securities of $177,000, including net realized gains on the sale of securities of $194,000 and net unrealized losses on securities still held as of the balance sheet date of $17,000. During the three-months ended December 31, 2014, the Company reported net gains on trading account securities of $71,000, including net realized gains on the sale of securities of $77,000 and net unrealized losses on securities still held as of the balance sheet date of $6,000.
 
Securities Available for Sale and Held to Maturity
 
The amortized cost of securities available for sale and held to maturity and their approximate fair values are as follows:
 
 
 
 
 
Gross
 
Gross
 
 
 
 
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
 
 
Cost
 
Gains
 
Losses
 
Value
 
 
 
(In thousands)
 
December 31, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency bonds and notes
 
$
1,054
 
$
8
 
$
-
 
$
1,062
 
Agency mortgage-backed
 
 
47,630
 
 
507
 
 
81
 
 
48,056
 
Agency CMO
 
 
18,865
 
 
57
 
 
122
 
 
18,800
 
Privately-issued CMO
 
 
2,943
 
 
436
 
 
-
 
 
3,379
 
Privately-issued ABS
 
 
4,514
 
 
1,145
 
 
-
 
 
5,659
 
SBA certificates
 
 
1,428
 
 
9
 
 
-
 
 
1,437
 
Municipal obligations
 
 
90,757
 
 
5,016
 
 
57
 
 
95,716
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total securities available for sale
 
$
167,191
 
$
7,178
 
$
260
 
$
174,109
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency mortgage-backed
 
$
294
 
$
27
 
$
-
 
$
321
 
Municipal obligations
 
 
4,249
 
 
578
 
 
-
 
 
4,827
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total securities held to maturity
 
$
4,543
 
$
605
 
$
-
 
$
5,148
 
 
 
 
 
 
Gross
 
Gross
 
 
 
 
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
 
 
Cost
 
Gains
 
Losses
 
Value
 
 
 
(In thousands)
 
September 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency bonds and notes
 
$
5,564
 
$
18
 
$
-
 
$
5,582
 
Agency mortgage-backed
 
 
47,418
 
 
901
 
 
41
 
 
48,278
 
Agency CMO
 
 
18,943
 
 
118
 
 
47
 
 
19,014
 
Privately-issued CMO
 
 
3,005
 
 
465
 
 
-
 
 
3,470
 
Privately-issued ABS
 
 
4,820
 
 
1,289
 
 
-
 
 
6,109
 
SBA certificates
 
 
1,472
 
 
8
 
 
-
 
 
1,480
 
Municipal bonds
 
 
90,380
 
 
4,185
 
 
170
 
 
94,395
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total securities available for sale
 
$
171,602
 
$
6,984
 
$
258
 
$
178,328
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency mortgage-backed
 
$
345
 
$
31
 
$
-
 
$
376
 
Municipal bonds
 
 
4,275
 
 
540
 
 
-
 
 
4,815
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total securities held to maturity
 
$
4,620
 
$
571
 
$
-
 
$
5,191
 
 
The amortized cost and fair value of investment securities as of December 31, 2015 by contractual maturity are shown below. Expected maturities of mortgage-backed securities, CMO and ABS may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.
 
 
 
Available for Sale
 
Held to Maturity
 
 
 
Amortized
 
Fair
 
Amortized
 
Fair
 
 
 
Cost
 
Value
 
Cost
 
Value
 
 
 
(In thousands)
 
Due within one year
 
$
2,414
 
$
2,464
 
$
615
 
$
660
 
Due after one year through five years
 
 
6,201
 
 
6,527
 
 
1,648
 
 
1,926
 
Due after five years through ten years
 
 
19,230
 
 
20,697
 
 
1,309
 
 
1,475
 
Due after ten years
 
 
63,966
 
 
67,090
 
 
677
 
 
766
 
 
 
 
91,811
 
 
96,778
 
 
4,249
 
 
4,827
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CMO
 
 
21,808
 
 
22,179
 
 
-
 
 
-
 
ABS
 
 
4,514
 
 
5,659
 
 
-
 
 
-
 
SBA certificates
 
 
1,428
 
 
1,437
 
 
-
 
 
-
 
Mortgage-backed securities
 
 
47,630
 
 
48,056
 
 
294
 
 
321
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
167,191
 
$
174,109
 
$
4,543
 
$
5,148
 
 
Information pertaining to investment securities with gross unrealized losses at December 31, 2015, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, follows:
 
 
 
Number
 
 
 
Gross
 
 
 
of Investment
 
Fair
 
Unrealized
 
 
 
Positions
 
Value
 
Losses
 
 
 
(Dollars in thousands)
 
Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuous loss position less than twelve months:
 
 
 
 
 
 
 
 
 
 
Agency mortgage-backed
 
 
7
 
$
11,697
 
$
48
 
Agency CMO
 
 
5
 
 
7,289
 
 
27
 
Municipal obligations
 
 
4
 
 
2,145
 
 
24
 
 
 
 
 
 
 
 
 
 
 
 
Total less than twelve months
 
 
16
 
 
21,131
 
 
99
 
 
 
 
 
 
 
 
 
 
 
 
Continuous loss position more than twelve months:
 
 
 
 
 
 
 
 
 
 
Agency mortgage-backed
 
 
2
 
 
1,882
 
 
33
 
Agency CMO
 
 
2
 
 
6,158
 
 
95
 
Municipal obligations
 
 
2
 
 
1,247
 
 
33
 
 
 
 
 
 
 
 
 
 
 
 
Total more than twelve months
 
 
6
 
 
9,287
 
 
161
 
 
 
 
 
 
 
 
 
 
 
 
Total securities available for sale
 
 
22
 
$
30,418
 
$
260
 
 
At December 31, 2015, the Company did not have any securities held to maturity with an unrealized loss.
 
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
 
The total available for sale debt securities in loss positions at December 31, 2015, which consisted of U.S. government agency mortgage-backed securities and CMO and municipal bonds, had depreciated approximately 0.85% from their amortized cost basis and are fixed and variable rate securities with a weighted-average yield of 1.96% and a weighted-average coupon rate of 2.95% at December 31, 2015. All of the agency and municipal securities are issued by U.S. government-sponsored enterprises and municipal governments, and are generally secured by first mortgage loans and municipal project revenues.
 
The Company evaluates the existence of a potential credit loss component related to the decline in fair value of the privately-issued CMO and ABS portfolios each quarter using an independent third party analysis. At December 31, 2015, the Company held twenty privately-issued CMO and ABS securities acquired in a 2009 bank acquisition with an aggregate carrying value of $2.6 million and fair value of $3.6 million that have been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies.
 
At December 31, 2015, there were no privately-issued CMO or ABS in loss positions. Based on the independent third party analysis of the expected cash flows, management has determined that no other-than-temporary impairment is required to be recognized on the privately-issued CMO and ABS portfolios. While the Company did not recognize a credit-related impairment loss at December 31, 2015, additional deterioration in market and economic conditions may have an adverse impact on the credit quality in the future and therefore, require a credit-related impairment charge.
 
The unrealized losses on U.S. government agency mortgage-backed securities and CMO and municipal bonds relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities to maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.
 
During the three-month periods ended December 31, 2015 and December 31, 2014, the Company did not realize any gross gains or losses on sales of available for sale securities.
 
Certain available for sale debt securities were pledged under repurchase agreements and to secure FHLB borrowings at December 31, 2015 and September 30, 2015, and may be pledged to secure federal funds borrowings.