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Securities
 9 Months Ended
Sep. 30, 2013
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 September 30, 2013 and December 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013

 

December 31, 2012

(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  

 

$
6,748 

 

$
28 

 

$
(397)

 

$
6,379 

 

$
2,482 

 

$
86 

 

$

 -

 

$
2,568 

State and political subdivisions    

 

 
17,027 

 

 
171 

 

 
(584)

 

 
16,614 

 

 
14,690 

 

 
613 

 

 

 -

 

 
15,303 

Residential mortgage-backed securities    

 

 
43,269 

 

 
817 

 

 
(417)

 

 
43,669 

 

 
43,984 

 

 
1,684 

 

 
(123)

 

 
45,545 

Commercial mortgage-backed securities    

 

 
1,307 

 

 
4 

 

 
(3)

 

 
1,308 

 

 
4,423 

 

 
42 

 

 
(2)

 

 
4,463 

Corporate and other securities

 

 
13,255 

 

 
66 

 

 
(365)

 

 
12,956 

 

 
21,741 

 

 
490 

 

 
(572)

 

 
21,659 

Total securities available for sale

 

$
81,606 

 

$
1,086 

 

$
(1,766)

 

$
80,926 

 

$
87,320 

 

$
2,915 

 

$
(697)

 

$
89,538 

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

$
5,928 

 

$

 -

 

$
(462)

 

$
5,466 

 

$
5,050 

 

$
38 

 

$

 -

 

$
5,088 

State and political subdivisions    

 

 
2,443 

 

 
114 

 

 
(20)

 

 
2,537 

 

 
2,746 

 

 
288 

 

 

 -

 

 
3,034 

Residential mortgage-backed securities    

 

 
9,848 

 

 
171 

 

 
(150)

 

 
9,869 

 

 
11,048 

 

 
374 

 

 
(13)

 

 
11,409 

Commercial mortgage-backed securities    

 

 
6,781 

 

 
99 

 

 
(391)

 

 
6,489 

 

 
2,671 

 

 
539 

 

 

 -

 

 
3,210 

Corporate and other securities

 

 
980 

 

 

 -

 

 
(80)

 

 
900 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Total securities held to maturity

 

$
25,980 

 

$
384 

 

$
(1,103)

 

$
25,261 

 

$
21,515 

 

$
1,239 

 

$
(13)

 

$
22,741 

 

This table provides the remaining contractual maturities and yields of securities within the investment portfolios.  The carrying value of securities at September 30, 2013 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  

 

$
35 

 
3.96 

%

$
1,015 

 
1.00 

%

$
942 

 
2.06 

%

$
4,387 

 
2.19 

%

$
6,379 

 
1.99 

%

State and political subdivisions    

 

 

 -

 

 -

 

 
823 

 
2.56 

 

 
11,442 

 
2.69 

 

 
4,349 

 
2.80 

 

 
16,614 

 
2.71 

 

Residential mortgage-backed securities    

 

 
5 

 
2.59 

 

 
557 

 
4.47 

 

 
714 

 
3.27 

 

 
42,393 

 
2.67 

 

 
43,669 

 
2.70 

 

Commercial mortgage-backed securities    

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 
1,308 

 
2.45 

 

 
1,308 

 
2.45 

 

Corporate and other securities

 

 

 -

 

 -

 

 
402 

 
1.28 

 

 
5,709 

 
1.85 

 

 
6,845 

 
2.49 

 

 
12,956 

 
2.17 

 

Total securities available for sale

 

$
40 

 
3.78 

%

$
2,797 

 
2.19 

%

$
18,807 

 
2.43 

%

$
59,282 

 
2.62 

%

$
80,926 

 
2.56 

%

Held to maturity at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

$

 -

 

 -

%

$

 -

 

 -

%

$

 -

 

 -

%

$
5,928 

 
1.97 

%

$
5,928 

 
1.97 

%

State and political subdivisions    

 

 
326 

 
0.75 

 

 

 -

 

 -

 

 

 -

 

 -

 

 
2,117 

 
4.70 

 

 
2,443 

 
4.17 

 

Residential mortgage-backed securities    

 

 
5 

 
2.88 

 

 
786 

 
4.74 

 

 
370 

 
4.93 

 

 
8,687 

 
2.83 

 

 
9,848 

 
3.06 

 

Commercial mortgage-backed securities    

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 
6,781 

 
3.80 

 

 
6,781 

 
3.80 

 

Corporate and other securities

 

 

 -

 

 -

 

 

 -

 

 -

 

 
980 

 
2.95 

 

 

 -

 

 -

 

 
980 

 
2.95 

 

Total securities held to maturity

 

$
331 

 
0.78 

%

$
786 

 
4.74 

%

$
1,350 

 
3.49 

%

$
23,513 

 
3.06 

%

$
25,980 

 
3.10 

%

 

 

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 September 30, 2013 and December 31, 2012 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013

 

 

 

 

 

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 

 

$
5,555 

 

$
(397)

 

$

 -

 

$

 -

 

$
5,555 

 

$
(397)

State and political subdivisions    

 

 
21 

 

 
10,209 

 

 
(584)

 

 

 -

 

 

 -

 

 
10,209 

 

 
(584)

Residential mortgage-backed securities    

 

 
14 

 

 
15,091 

 

 
(331)

 

 
1,533 

 

 
(86)

 

 
16,624 

 

 
(417)

Commercial mortgage-backed securities    

 

 
2 

 

 
531 

 

 
(3)

 

 

 -

 

 

 -

 

 
531 

 

 
(3)

Corporate and other securities

 

 
8 

 

 
2,432 

 

 
(70)

 

 
2,686 

 

 
(295)

 

 
5,118 

 

 
(365)

Total temporarily impaired securities

 

 
51 

 

$
33,818 

 

$
(1,385)

 

$
4,219 

 

$
(381)

 

$
38,037 

 

$
(1,766)

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored entities  

 

 
3 

 

$
5,465 

 

$
(462)

 

$

 -

 

$

 -

 

$
5,465 

 

$
(462)

State and political subdivisions    

 

 
1 

 

 
659 

 

 
(20)

 

 

 -

 

 

 -

 

 
659 

 

 
(20)

Residential mortgage-backed securities    

 

 
6 

 

 
4,730 

 

 
(145)

 

$
128 

 

 
(5)

 

$
4,858 

 

 
(150)

Commercial mortgage-backed securities    

 

 
2 

 

 
3,738 

 

 
(391)

 

 

 -

 

 

 -

 

 
3,738 

 

 
(391)

Corporate and other securities

 

 
1 

 

 
901 

 

 
(80)

 

 

 -

 

 

 -

 

 
901 

 

 
(80)

Total temporarily impaired securities

 

 
13 

 

$
15,493 

 

$
(1,098)

 

$
128 

 

$
(5)

 

$
15,621 

 

$
(1,103)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

 

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities    

 

 
5 

 

$
3,272 

 

$
(43)

 

$
1,951 

 

$
(80)

 

$
5,223 

 

$
(123)

Commercial mortgage-backed securities    

 

 
4 

 

 
2,351 

 

 
(2)

 

 

 -

 

 

 -

 

 
2,351 

 

 
(2)

Corporate and other securities

 

 
6 

 

 
2,486 

 

 
(26)

 

 
2,994 

 

 
(546)

 

 
5,480 

 

 
(572)

Total temporarily impaired securities

 

 
15 

 

$
8,109 

 

$
(71)

 

$
4,945 

 

$
(626)

 

$
13,054 

 

$
(697)

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities    

 

 
3 

 

$
838 

 

$
(2)

 

$
279 

 

$
(11)

 

$
1,117 

 

$
(13)

Total temporarily impaired securities

 

 
3 

 

$
838 

 

$
(2)

 

$
279 

 

$
(11)

 

$
1,117 

 

$
(13)

 

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.  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 September 30, 2013.  There was no impairment on these securities at December 31, 2012.

 

Residential and commercial mortgage-backed securities:  The unrealized losses on investments in mortgage-backed securities were caused by increases in interest rate spreads or faster prepayment speeds.  The majority of contractual cash flows of these securities are guaranteed by Fannie Mae, Ginnie Mae and the Federal Home Loan Mortgage Corporation.  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 September 30, 2013 or December 31, 2012.

 

 

Corporate and other securities: Included in this category are corporate debt securities, Community Reinvestment Act (“CRA”) investments, asset-backed securities, and trust preferred securities.  The unrealized losses on corporate debt securities were due to widening credit spreads 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 September 30, 2013 or December 31, 2012.  The unrealized losses on asset-backed securities were caused by increases in interest rate spreads.  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 September 30, 2013 or December 31, 2012.  The unrealized losses on trust preferred securities were caused by an inactive trading market and changes in market credit spreads.  At September 30, 2013 and December 31, 2012, 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 September 30, 2013 or December 31, 2012.

 

Realized Gains and Losses

 

Gross realized gains (losses) on securities for the three and nine months ended September 30, 2013  and 2012 are detailed in the table below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

For the nine months ended September 30,

(In thousands)

 

2013

 

2012

 

2013

 

2012

Available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains

 

$
34 

 

$

 -

 

$
371 

 

$
511 

Realized losses

 

 

 -

 

 

 -

 

 
(4)

 

 
(4)

Total securities available for sale

 

 
34 

 

 

 -

 

 
367 

 

 
507 

Held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains

 

 

 -

 

 
7 

 

 

 -

 

 
7 

Realized losses

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Total securities held to maturity

 

 

 -

 

 
7 

 

 

 -

 

 
7 

Net gains on sales of securities

 

$
34 

 

$
7 

 

$
367 

 

$
514 

 

The net realized gains are included in noninterest income in the Consolidated Statements of Income as net security gains.  For the three and nine months ended September 30, 2013, there were gross realized gains of $34 thousand and $371 thousand, respectively.  There were no realized losses during the third quarter of 2013 and gross realized losses of $4 thousand for the year-to-date period.  The net realized gains during 2013 were a result of the following:

 

·

The Company sold approximately  $11.8 million in book value of available for sale asset-backed securities, mortgage-backed securities, and corporate bonds, resulting in pre-tax gains of approximately $371 thousand, partially offset by

·

Losses of $4 thousand on the partial call of $64 thousand in book value of one available for sale municipal security.

 

For the three and nine months ended September 30, 2012, there were gross realized gains of  $7 thousand and $518 thousand, respectively.  There were no realized losses during the third quarter of 2012 and gross realized losses of $4 thousand in the year-to-date period.  The net realized gains during 2012 were a result of the following:

 

·

The Company sold approximately $6.1 million in book value of available for sale mortgage-backed and municipal securities, resulting in pre-tax gains of approximately $511 thousand,

·

The call of a tax-exempt held to maturity municipal security resulted in a $7 thousand gain, partially offset by

·

Losses of $4 thousand on the partial call of $64 thousand in book value of one available for sale municipal security.

 

Pledged Securities

 

Securities with a carrying value of $72.2 million and $78.4 million at September 30, 2013 and December 31, 2012, respectively, were pledged to secure Government deposits, secure other borrowings and for other purposes required or permitted by law.  Included in these figures was $20.0 million and $25.1 million pledged against Government deposits at September 30, 2013 and December 31, 2012, respectively.