v2.4.0.6
Securities
6 Months Ended
Dec. 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
 
December 31, 2012                                
Obligations of U.S. government-sponsored entities and agencies   $ 5,870     $ 48     $     $ 5,918  
Obligations of state and political subdivisions     38,521       1,795       (74 )     40,242  
Mortgage-backed securities – residential     52,011       1,070       (123 )     52,958  
Collateralized mortgage obligations     10,093       147       (18 )     10,222  
Trust preferred security     202             (64 )     138  
Total securities   $ 106,697     $ 3,060     $ (279 )   $ 109,478  

 

    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 
June 30, 2012                                
Obligations of U.S. government-sponsored entities and agencies   $ 8,487     $ 80     $     $ 8,567  
Obligations of state and political subdivisions     33,808       1,577       (109 )     35,276  
Mortgage-backed securities - residential     48,255       1,108       (32 )     49,331  
Collateralized mortgage obligations     12,154       25       (82 )     12,097  
Trust preferred security     202             (138 )     64  
Total securities   $ 102,906     $ 2,790     $ (361 )   $ 105,335  

 

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

 

    Three Months Ended
December 31,
    Six Months Ended
December 31,
 
    2012     2011     2012     2011  
Proceeds from sales   $ 149     $ 2,381     $ 679     $ 7,332  
Gross realized gains     2       106       23       155  

 

The amortized cost and fair values of available-for-sale securities at December 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   $ 4,061     $ 4,096  
Due after one year through five years     3,713       3,775  
Due after five years through ten years     11,687       12,294  
Due after ten years     24,930       25,995  
Total     44,391       46,160  
                 
Mortgage-backed securities – residential     52,011       52,958  
Collateralized mortgage obligations     10,093       10,222  
Trust preferred security     202       138  
Total   $ 106,697     $ 109,478  

 

The following table summarizes the securities with unrealized losses at December 31, 2012 and June 30, 2012, 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
 
December 31, 2012                                                
Obligations of states and political subdivisions   $ 5,143     $ (74 )   $     $     $ 5,143     $ (74 )
Mortgage-backed securities - residential     10,317       (123 )                 10,317       (123 )
Collateralized mortgage obligations     1,606       (18 )                 1,606       (18 )
Trust preferred security                 138       (64 )     138       (64 )
Total temporarily impaired   $ 17,066     $ (215 )   $ 138     $ (64 )   $ 17,204     $ (279 )

 

    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, 2012                                                
Obligations of states and political subdivisions   $ 6,002     $ (109 )   $     $     $ 6,022     $ (109 )
Mortgage-backed securities - residential     11,135       (32 )                 11,135       (32 )
Collateralized mortgage obligations     6,411       (62 )     2,314       (20 )     8,725       (82 )
Trust preferred security                 64       (138 )     64       (138 )
Total temporarily impaired   $ 23,548     $ (203 )   $ 2,378     $ (158 )   $ 25,926     $ (361 )

 

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. The decline in fair value of the residential mortgage-backed securities and collateralized mortgage obligations is attributable to higher than projected prepayment speeds increasing the premium amortization and the decline in fair value of obligations of state and political subdivisions is largely due to spreads for these securities being wider at December 31, 2012 than when the securities were purchased. 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 with an adjusted amortized cost of $202 and a fair value of $138, which represents collateralized debt obligations (CDOs) issued by other financial institutions, bank holding companies and a limited number of insurance companies. The security is part of a pool of issuers that support a more senior tranche of securities. Due to 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 December 31, 2012, the lowest credit rating on this security was Fitch’s rating of C, which is defined as highly speculative. 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. 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 December 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 December 31, 2012 and June 30, 2012. If there is further deterioration in the underlying collateral of this security, other-than-temporary impairments may also occur in future periods. 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.