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Investment Securities
 3 Months Ended
Mar. 31, 2019
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 March 31, 2019
 
 
 
Available-for-Sale Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. federal government corporations and agencies
 
$
3,913
 
 
$
4
 
 
$
(6
)
 
$
3,911
 
Mortgage-backed securities – residential
 
 
77,682
 
 
 
418
 
 
 
(604
)
 
 
77,496
 
REMICs
 
 
2,587
 
 
 
13
 
 
 
-
 
 
 
2,600
 
Collateralized mortgage obligations
 
 
101,524
 
 
 
418
 
 
 
(522
)
 
 
101,420
 
Preferred stock
 
 
-
 
 
 
1
 
 
 
-
 
 
 
1
 
Corporate bonds
 
 
12,909
 
 
 
98
 
 
 
(29
)
 
 
12,978
 
Obligations of state and political subdivisions
 
 
99,282
 
 
 
2,366
 
 
 
(159
)
 
 
101,489
 
Total Available-for-Sale
 
$
297,897
 
 
$
3,318
 
 
$
(1,320
)
 
$
299,895
 
 
 
 
Amortized

Cost
 
 
Gross

Unrecognized

Gains
 
 
Gross

Unrecognized

Losses
 
 
Fair Value
 
 
 
(In Thousands)
 
Held-to-Maturity Securities*:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FHLMC certificates
 
$
7
 
 
$
-
 
 
$
-
 
 
$
7
 
FNMA certificates
 
 
30
 
 
 
-
 
 
 
-
 
 
 
30
 
GNMA certificates
 
 
11
 
 
 
-
 
 
 
-
 
 
 
11
 
Obligations of state and political subdivisions
 
 
475
 
 
 
-
 
 
 
-
 
 
 
475
 
Total Held-to Maturity
 
$
523
 
 
$
-
 
 
$
-
 
 
$
523
 
 
 
 
 
 
 
Gross
 
 
Gross
 
 
 
 
 
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Fair
 
 
 
Cost
 
 
Gains
 
 
Losses
 
 
Value
 
 
 
(In Thousands)
 
At December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
2,519
 
 
$
2
 
 
$
(18
)
 
$
2,503
 
Mortgage-backed securities - residential
 
 
76,165
 
 
 
111
 
 
 
(1,566
)
 
 
74,710
 
REMICs
 
 
2,712
 
 
 
4
 
 
 
(7
)
 
 
2,709
 
Collateralized mortgage obligations - residential
 
 
103,026
 
 
 
124
 
 
 
(1,689
)
 
 
101,461
 
Corporate bonds
 
 
12,910
 
 
 
44
 
 
 
(148
)
 
 
12,806
 
Obligations of state and political  subdivisions
 
 
99,349
 
 
 
1,258
 
 
 
(720
)
 
 
99,887
 
Total Available-for-Sale
 
$
296,681
 
 
$
1,543
 
 
$
(4,148
)
 
$
294,076
 
 
 
 
 
 
Gross
 
 
Gross
 
 
 
 
 
 
Amortized
 
 
Unrecognized
 
 
Unrecognized
 
 
Fair
 
 
 
Cost
 
 
Gains
 
 
Losses
 
 
Value
 
 
 
(In Thousands)
 
Held-to-Maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FHLMC certificates
 
$
8
 
 
$
-
 
 
$
-
 
 
$
8
 
FNMA certificates
 
 
31
 
 
 
-
 
 
 
-
 
 
 
31
 
GNMA certificates
 
 
12
 
 
 
-
 
 
 
-
 
 
 
12
 
Obligations of states and political subdivisions
 
 
475
 
 
 
-
 
 
 
-
 
 
 
475
 
Total Held-to-Maturity
 
$
526
 
 
$
-
 
 
$
-
 
 
$
526
 
 
* FHLMC, FNMA, and GNMA certificates are residential mortgage-backed securities.
 
The amortized cost and fair value of the investment securities portfolio at March 31, 2019, 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
 
$
4,987
 
 
$
5,007
 
 
$
31
 
 
$
31
 
Due after one year through five years
 
 
19,869
 
 
 
20,047
 
 
 
-
 
 
 
-
 
Due after five years through ten years
 
 
34,265
 
 
 
35,050
 
 
 
444
 
 
 
444
 
Due after ten years
 
 
56,983
 
 
 
58,275
 
 
 
-
 
 
 
-
 
MBS/CMO/REMIC
 
 
181,793
 
 
 
181,516
 
 
 
48
 
 
 
48
 
 
 
$
297,897
 
 
$
299,895
 
 
$
523
 
 
$
523
 
 
Investment securities with a carrying amount of $150.2 million at March 31, 2019, were pledged as collateral on public deposits, securities sold under repurchase agreements and the Federal Reserve discount window.
 
As of March 31, 2019, the Company’s investment portfolio consisted of 439 securities, 104 of which were in an unrealized loss position.
 
The following tables summarize First Defiance’s securities that were in an unrealized loss position at March 31, 2019, and December 31, 2018:
 
 
 
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 March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
-
 
 
$
-
 
 
$
513
 
 
$
(6
)
 
$
513
 
 
$
(6
)
Mortgage-backed securities-residential
 
 
-
 
 
 
-
 
 
 
44,304
 
 
 
(604
)
 
 
44,304
 
 
 
(604
)
Collateralized mortgage obligations
 
 
904
 
 
 
(3
)
 
 
48,948
 
 
 
(519
)
 
 
49,852
 
 
 
(522
)
Corporate bonds
 
 
2,859
 
 
 
(29
)
 
 
-
 
 
 
-
 
 
 
2,859
 
 
 
(29
)
Obligations of state and political subdivisions
 
 
-
 
 
 
-
 
 
 
10,124
 
 
 
(159
)
 
 
10,124
 
 
 
(159
)
Total temporarily impaired securities
 
$
3,763
 
 
$
(32
)
 
$
103,889
 
 
$
(1,288
)
 
$
107,652
 
 
$
(1,320
)
 
 
 
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, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government corporations and agencies
 
$
-
 
 
$
-
 
 
$
500
 
 
$
(18
)
 
$
500
 
 
$
(18
)
Mortgage-backed securities-residential
 
 
11,589
 
 
 
(71
)
 
 
48,665
 
 
 
(1,495
)
 
 
60,254
 
 
 
(1,566
)
REMIC’s
 
 
-
 
 
 
-
 
 
 
857
 
 
 
(7
)
 
 
857
 
 
 
(7
)
Collateralized mortgage obligations
 
 
11,613
 
 
 
(53
)
 
 
70,585
 
 
 
(1,636
)
 
 
82,198
 
 
 
(1,689
)
Corporate Bonds
 
 
5,752
 
 
 
(148
)
 
 
-
 
 
 
-
 
 
 
5,752
 
 
 
(148
)
Obligations of state and political subdivisions
 
 
11,974
 
 
 
(69
)
 
 
16,492
 
 
 
(651
)
 
 
28,466
 
 
 
(720
)
Held to maturity securities:
 
 
8
 
 
 
-
 
 
 
26
 
 
 
-
 
 
 
34
 
 
 
-
 
Total temporarily impaired securities
 
$
40,936
 
 
$
(341
)
 
$
137,125
 
 
$
(3,807
)
 
$
178,061
 
 
$
(4,148
)
 
There were no realized gains from the sales and calls of investment securities in the first quarter of 2019 or in the first quarter of 2018.
 
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, Investments-Debt and Equity Securities. 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.
 
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.
 
In the first quarter of 2019 and 2018, management determined there was no OTTI.
 
There were no sales or calls of securities during the three months ended March 31, 2019 or 2018.