v2.4.0.6
Securities
9 Months Ended
Mar. 31, 2012
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 2 – Securities

 

Description of Securities  

Amortized
Cost
 

    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 
March 31, 2012                                
U.S. government-sponsored entities and agencies   $ 9,553     $ 86     $     $ 9,639  
Obligations of state and political subdivisions     32,821       1,479       (93 )     34,207  
Mortgage-backed securities – residential     49,580       1,171       (18 )     50,733  
Collateralized mortgage obligations     15,176       51       (97 )     15,130  
Trust preferred security     202             (138 )     64  
Total securities   $ 107,332     $ 2,787     $ (346 )   $ 109,773  

 

    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 
June 30, 2011                                
U.S. government-sponsored entities and agencies   $ 16,185     $ 98     $ (23 )   $ 16,260  
Obligations of state and political subdivisions     24,725       584       (211 )     25,098  
Mortgage-backed securities - residential     29,424       1,172             30,596  
Collateralized mortgage obligations     19,856       74       (62 )     19,868  
Trust preferred security     202             (135 )     67  
Total securities   $ 90,392     $ 1,928     $ (431 )   $ 91,889  

 

Proceeds from the sale of available-for-sale securities were as follows:

 

    Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
    2012     2011     2012     2011  
Proceeds from sales   $ 4,153     $     $ 11,485     $ 5,123  
Gross realized gains     16             171       97  
Gross realized losses     53             53       27  

  

The amortized cost and fair values of available-for-sale securities at March 31, 2012, by expected maturity, are shown below. 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. Securities not due at a single maturity date, primarily mortgage-backed securities, collateralized mortgage obligations and the trust preferred security are shown separately.

 

    Amortized
Cost
    Estimated Fair
Value
 
Due in one year or less   $ 4,517     $ 4,542  
Due after one year through five years     5,530       5,617  
Due after five years through ten years     8,674       9,074  
Due after ten years     23,653       24,613  
Total     42,374       43,846  
                 
Mortgage-backed securities – residential     49,580       50,733  
Collateralized mortgage obligations     15,176       15,130  
Trust preferred security     202       64  
Total   $ 107,332     $ 109,773  

 

The following table summarizes the securities with unrealized losses at March 31, 2012 and June 30, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

 

    Less than 12 Months     12 Months or more     Total  
Description of Securities   Fair
Value
    Unrealized
Loss
    Fair
Value
    Unrealized
Loss
    Fair
Value
    Unrealized
Loss
 
March 31, 2012                                                
Obligations of states and political subdivisions   $ 2,934     $ (90 )   $ 357     $ (3 )   $ 3,291     $ (93 )
Mortgage-backed securities - residential     9,400       (18 )                 9,400       (18 )
Collateralized mortgage obligations     11,462       (97 )                 11,462       (97 )
Trust preferred security                 64       (138 )     64       (138 )
Total temporarily impaired   $ 23,796     $ (205 )   $ 421     $ (141 )   $ 24,217     $ (346 )

 

    Less than 12 Months     12 Months or more     Total  
Description of Securities   Fair
Value
    Unrealized
Loss
    Fair
Value
    Unrealized
Loss
    Fair
Value
    Unrealized
Loss
 
June 30, 2011                                                
U.S. government-sponsored entities and agencies   $ 3,088     $ (23 )   $     $     $ 3,088     $ (23 )
Obligations of states and political subdivisions     3,656       (81 )     1,221       (130 )     4,877       (211 )
Collateralized mortgage obligations     9,665       (62 )                 9,665       (62 )
Trust preferred security                 67       (135 )     67       (135 )
Total temporarily impaired   $ 16,409     $ (166 )   $ 1,288     $ (265 )   $ 17,697     $ (431 )

  

Management evaluates securities for other-than-temporary impairment (OTTI) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under FASB ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities. However, the trust preferred security is evaluated using the model outlined in FASB ASC Topic 325, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transfer in Securitized Financial Assets.

 

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (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, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

 

Unrealized losses on obligations of state and political subdivisions, residential mortgage-backed securities and collateralized mortgage obligations have not been recognized into income because the decline in fair value is not attributed to credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The fair value is expected to recover as the securities approach maturity.

 

Under the ASC Topic 325 model, the present value of the remaining cash flows as estimated at the preceding evaluation date are compared to the current expected remaining cash flows. An OTTI is deemed to have occurred if there has been an adverse change in the remaining expected future cash flows. The analysis of the trust preferred security falls within the scope of ASC Topic 325.

 

The Corporation owns a trust preferred security, which represents collateralized debt obligations (CDOs) issued by other financial and insurance companies. The security is part of a pool of issuers that support a more senior tranche of securities. Due to the illiquidity in the market, it is unlikely the Corporation would be able to recover its investment in this security if the Corporation sold the security at this time.

  

Due to an increase in principal and/or interest deferrals by the issuers of the underlying securities, the cash interest payments for the trust preferred security are being deferred. On March 31, 2012, the lowest credit rating on this security was Fitch’s rating of C, which is defined as highly speculative. The issuers in this security are primarily banks, bank holding companies and a limited number of insurance companies. The investment security is evaluated using a model to compare the present value of expected cash flows to prior periods expected cash flows to determine if there has been an adverse change in cash flows during the period. The discount rate used to calculate the cash flows is the coupon rate of the security, based on the forward LIBOR curve. The OTTI model considers the structure and term of the CDO and the financial condition of the underlying issuers. Specifically, the model details interest rates, principal balances of note classes and underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. Assumptions used in the model include expected future default rates and prepayments. We assume no recoveries on defaults and all interest payment deferrals are treated as defaults with an assumed recovery rate of 15% on deferrals. In addition we use the model to “stress” the CDO, or make assumptions more severe than expected activity, to determine the degree to which assumptions could deteriorate before the CDO could no longer fully support repayment of the Corporation’s note class. According to the March 31, 2012 analysis, the expected cash flows were above the recorded amortized cost of the trust preferred security. The accumulated other-than-temporary impairment loss that has been recognized in earnings was $780 at March 31, 2012 and June 30, 2011. If there is further deterioration in the underlying collateral of this security, other-than-temporary impairments may also occur in future periods.