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Investment Securities
 6 Months Ended
Jun. 30, 2015
Marketable Securities [Abstract]  
Investment [Text Block]
7. Investment Securities
 
The following is a summary of available-for-sale and held-to-maturity securities:
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
 
 
(In Thousands)
 
At June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-Sale Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
3,000
 
$
-
 
$
(18)
 
$
2,982
 
Mortgage-backed securities – residential
 
 
59,181
 
 
768
 
 
(236)
 
 
59,713
 
REMICs
 
 
1,722
 
 
29
 
 
-
 
 
1,751
 
Collateralized mortgage obligations
 
 
76,556
 
 
1,094
 
 
(363)
 
 
77,287
 
Trust preferred securities and preferred stock
 
 
-
 
 
1
 
 
-
 
 
1
 
Corporate bonds
 
 
5,935
 
 
62
 
 
(4)
 
 
5,993
 
Obligations of state and political subdivisions
 
 
85,731
 
 
3,778
 
 
(224)
 
 
89,285
 
Totals
 
$
232,125
 
$
5,732
 
$
(845)
 
$
237,012
 
 
 
 
Amortized
Cost
 
Gross
Unrecognized
Gains
 
Gross
Unrecognized
Losses
 
Fair Value
 
 
 
(In Thousands)
 
Held-to-Maturity Securities*:
 
 
 
 
 
 
 
 
 
 
 
 
 
FHLMC certificates
 
$
16
 
$
-
 
$
-
 
$
16
 
FNMA certificates
 
 
82
 
 
3
 
 
-
 
 
85
 
GNMA certificates
 
 
35
 
 
1
 
 
-
 
 
36
 
Obligations of state and political subdivisions
 
 
124
 
 
-
 
 
-
 
 
124
 
Totals
 
$
257
 
$
4
 
$
-
 
$
261
 
 
 
 
 
 
 
Gross
 
Gross
 
 
 
 
 
 
Amortized
 
Unrealized
 
Unrealized
 
 
 
 
 
 
Cost
 
Gains
 
Losses
 
Fair Value
 
 
 
(In Thousands)
 
At December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
1,000
 
$
-
 
$
(20)
 
$
980
 
Mortgage-backed securities - residential
 
 
58,380
 
 
1,476
 
 
-
 
 
59,856
 
REMICs
 
 
1,820
 
 
19
 
 
-
 
 
1,839
 
Collateralized mortgage obligations
 
 
80,252
 
 
1,280
 
 
(411)
 
 
81,121
 
Trust preferred stock and preferred stock
 
 
-
 
 
1
 
 
-
 
 
1
 
Corporate bonds
 
 
6,913
 
 
85
 
 
(6)
 
 
6,992
 
Obligations of state and political subdivisions
 
 
83,732
 
 
4,827
 
 
(27)
 
 
88,532
 
Total Available-for-Sale
 
$
232,097
 
$
7,688
 
$
(464)
 
$
239,321
 
 
 
 
Amortized
Cost
 
Gross
Unrecognized
Gains
 
Gross
Unrecognized
Losses
 
Fair Value
 
 
 
(In Thousands)
 
Held-to-Maturity*:
 
 
 
 
 
 
 
 
 
 
 
 
 
FHLMC certificates
 
$
26
 
$
-
 
$
(8)
 
$
18
 
FNMA certificates
 
 
93
 
 
2
 
 
-
 
 
95
 
GNMA certificates
 
 
39
 
 
1
 
 
-
 
 
40
 
Obligations of states and political subdivisions
 
 
155
 
 
-
 
 
-
 
 
155
 
Total Held-to-Maturity
 
$
313
 
$
3
 
$
(8)
 
$
308
 
 
* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.
 
The amortized cost and fair value of the investment securities portfolio at June 30, 2015 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMO”) and REMICs, which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.
 
 
 
Available-for-Sale
 
Held-to-Maturity
 
 
 
Amortized
 
Fair
 
Amortized
 
Fair
 
 
 
Cost
 
Value
 
Cost
 
Value
 
 
 
(In Thousands)
 
Due in one year or less
 
$
1,246
 
$
1,256
 
$
-
 
$
-
 
Due after one year through five years
 
 
14,772
 
 
15,078
 
 
124
 
 
124
 
Due after five years through ten years
 
 
36,311
 
 
38,157
 
 
-
 
 
-
 
Due after ten years
 
 
42,337
 
 
43,770
 
 
-
 
 
-
 
MBS/CMO
 
 
137,459
 
 
138,751
 
 
133
 
 
137
 
 
 
$
232,125
 
$
237,012
 
$
257
 
$
261
 
 
Investment securities with a carrying amount of $134.3 million at June 30, 2015 were pledged as collateral on public deposits, securities sold under repurchase agreements and Federal Reserve discount window.
 
As of June 30, 2015, the Company’s investment portfolio consisted of 366 securities, 78 of which were in an unrealized loss position.
 
The following tables summarize First Defiance’s securities that were in an unrealized loss position at June 30, 2015 and December 31, 2014:
 
 
 
Duration of Unrealized Loss Position
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
 
 
 
 
 
Gross
 
 
 
 
Gross
 
 
 
 
 
 
 
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
 
 
Value
 
Loss
 
Value
 
Loss
 
Value
 
Loses
 
 
 
(In Thousands)
 
At June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
1,994
 
$
(6)
 
$
988
 
$
(12)
 
$
2,982
 
$
(18)
 
Collateralized mortgage obligations
 
 
11,258
 
 
(96)
 
 
10,325
 
 
(267)
 
 
21,583
 
 
(363)
 
Mortgage-backed securities - residential
 
 
33,958
 
 
(236)
 
 
-
 
 
-
 
 
33,958
 
 
(236)
 
Obligations of state and political subdivisions
 
 
14,101
 
 
(208)
 
 
415
 
 
(16)
 
 
14,516
 
 
(224)
 
Corporate bonds
 
 
1,996
 
 
(4)
 
 
-
 
 
-
 
 
1,996
 
 
(4)
 
Total temporarily impaired securities
 
$
63,307
 
$
(550)
 
$
11,728
 
$
(295)
 
$
75,035
 
$
(845)
 
 
 
 
Duration of Unrealized Loss Position
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
 
 
 
 
 
Gross
 
 
 
 
Gross
 
 
 
 
 
 
 
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
 
 
Value
 
Loss
 
Value
 
Loss
 
Value
 
Loses
 
 
 
(In Thousands)
 
At December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
-
 
$
-
 
$
980
 
$
(20)
 
$
980
 
$
(20)
 
Collateralized mortgage obligations
 
 
4,466
 
 
(138)
 
 
14,633
 
 
(273)
 
 
19,099
 
 
(411)
 
Corporate bonds
 
 
-
 
 
-
 
 
994
 
 
(6)
 
 
994
 
 
(6)
 
Obligations of state and political subdivisions
 
 
1,194
 
 
(8)
 
 
1,499
 
 
(19)
 
 
2,693
 
 
(27)
 
Held to maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FHLMC certificates
 
 
18
 
 
(8)
 
 
-
 
 
-
 
 
18
 
 
(8)
 
Total temporarily impaired securities
 
$
5,678
 
$
(154)
 
$
18,106
 
$
(318)
 
$
23,784
 
$
(472)
 
 
With the exception of corporate bonds, the above securities all have fixed interest rates, and all securities have defined maturities. Their fair value is sensitive to movements in market interest rates. First Defiance has the ability and intent to hold these investments for a time necessary to recover the amortized cost without impacting its liquidity position and it is not more than likely that the Company will be required to sell the investments before anticipated recovery.
 
There were no realized gains from the sales of investment securities in the first and second quarters of 2015.
 
Management evaluates securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant such an evaluation. The investment portfolio is evaluated for OTTI by segregating the portfolio into two general segments. Investment securities classified as available-for-sale or held-to-maturity are generally evaluated for OTTI under FASB ASC Topic 320. Certain collateralized debt obligations (“CDOs”) are evaluated for OTTI under FASB ASC Topic 325, Investment – Other.
 
When OTTI occurs under either model, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected compared to the book value of the security and is recognized in earnings. The amount of OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.
 
In the first and second quarters of 2015, management determined there was no OTTI.
 
The Company holds three CDO’s at June 30, 2015 and December 31, 2014 with a zero value.
 
The amount of OTTI recognized in accumulated other comprehensive income (“AOCI”) was zero at June 30, 2015 and December 31, 2014.
 
The proceeds from the sales and calls of securities and the associated gains and losses are listed below:
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
 
 
(In Thousands)
 
Proceeds
 
$
-
 
$
2,128
 
$
-
 
$
3,782
 
Gross realized gains
 
 
-
 
 
1,113
 
 
-
 
 
1,113
 
Gross realized losses
 
 
-
 
 
(642)
 
 
-
 
 
(642)