v2.4.0.6
SECURITIES
12 Months Ended
Jun. 30, 2013
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
NOTE 2—SECURITIES
 
The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at June 30, 2013 and 2012 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:
 
Available-for-sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government-sponsored entities and agencies
 
$
4,700
 
$
6
 
$
(48)
 
$
4,658
 
Obligations of state and political subdivisions
 
 
39,777
 
 
805
 
 
(770)
 
 
39,812
 
Mortgage-backed securities - residential
 
 
46,834
 
 
552
 
 
(497)
 
 
46,889
 
Collateralized mortgage obligations
 
 
5,740
 
 
11
 
 
(43)
 
 
5,708
 
Trust preferred security
 
 
202
 
 
 
 
(40)
 
 
162
 
Total available-for-sale securities
 
$
97,253
 
$
1,374
 
$
(1,398)
 
$
97,229
 
 
Held-to-maturity
 
Amortized
Cost
 
Gross
Unrecognized
Gains
 
Gross
Unrecognized
Losses
 
Fair
Value
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of state and political subdivisions
 
$
3,000
 
$
 
$
(74)
 
$
2,926
 
Total held-to-maturity securities
 
$
3,000
 
$
 
$
(74)
 
$
2,926
 
 
Available-for-sale
 
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 available-for-sale securities
 
$
102,906
 
$
2,790
 
$
(361)
 
$
105,335
 
 
Proceeds from sales of debt securities during 2013 and 2012 were as follows:
 
 
2013
 
2012
 
Proceeds from sales
 
$
7,798
 
$
14,568
 
Gross realized gains
 
 
181
 
 
204
 
Gross realized losses
 
 
24
 
 
60
 
 
The amortized cost and fair values of debt securities at June 30, 2013 by contractual 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.
 
Available-for-sale
 
Amortized
Cost
 
Fair Value
 
Due after one year through five years
 
$
4,969
 
$
5,084
 
Due after five years through ten years
 
 
15,420
 
 
15,484
 
Due after ten years
 
 
24,088
 
 
23,902
 
Total
 
 
44,477
 
 
44,470
 
Mortgage-backed securities – residential
 
 
46,834
 
 
46,889
 
Collateralized mortgage obligations
 
 
5,740
 
 
5,708
 
Trust preferred security
 
 
202
 
 
162
 
Total
 
$
97,253
 
$
97,229
 
 
Held-to-maturity
 
Amortized
Cost
 
Fair Value
 
Due after ten years
 
$
3,000
 
$
2,926
 
Total
 
$
3,000
 
$
2,926
 
 
Securities with a carrying value of approximately $27,781 and $35,411 were pledged at June 30, 2013 and 2012, respectively, to secure public deposits and commitments as required or permitted by law. At June 30, 2013 and 2012, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, with an aggregate book value greater than 10% of shareholders’ equity.
 
The following table summarizes the securities with unrealized and unrecognized losses at June 30, 2013 and 2012, aggregated by investment category and length of time the individual securities have been in a continuous unrealized or unrecognized loss position:
 
 
 
Less than 12 Months
 
12 Months or more
 
Total
 
Available-for-sale
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of US government-sponsored entities and agencies
 
$
4,418
 
$
(48)
 
$
 
$
 
$
4,418
 
$
(48)
 
Obligations of states and political subdivisions
 
 
17,826
 
 
(766)
 
 
107
 
 
(4)
 
 
17,933
 
 
(770)
 
Mortgage-backed securities - residential
 
 
28,836
 
 
(497)
 
 
 
 
 
 
28,836
 
 
(497)
 
Collateralized mortgage obligations
 
 
4,696
 
 
(43)
 
 
 
 
 
 
4,696
 
 
(43)
 
Trust preferred security
 
 
 
 
 
 
162
 
 
(40)
 
 
162
 
 
(40)
 
Total temporarily impaired
 
$
55,776
 
$
(1,354)
 
$
269
 
$
(44)
 
$
56,045
 
$
(1,398)
 
 
 
 
Less than 12 Months
 
12 Months or more
 
Total
 
Held-to-maturity
 
Fair
Value
 
Unrecognized
Loss
 
Fair
Value
 
Unrecognized
Loss
 
Fair
Value
 
Unrecognized
Loss
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
 
$
3,000
 
$
(74)
 
$
 
$
 
$
2,926
 
$
(74)
 
Total temporarily impaired
 
$
3,000
 
$
(74)
 
$
 
$
 
$
2,926
 
$
(74)
 
 
 
 
Less than 12 Months
 
12 Months or more
 
Total
 
Available-for-sale
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. government-sponsored entities
 
$
6,002
 
$
(109)
 
$
 
$
 
$
6,002
 
$
(109)
 
Obligations of states and political subdivisions
 
 
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.
 
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.
 
As of June 30, 2013, the Corporation’s securities portfolio consisted of $97,229 available-for-sale securities, of which $56,045 were in an unrealized loss position and a $3,000 held-to-maturity security with a $74 unrecognized loss. The majority of the unrealized losses are related to the Corporation’s obligations of states and political subdivisions and residential mortgage-backed securities, as discussed below:
 
Obligations of States and Political Subdivisions: At June 30, 2013, approximately 95.7% of the obligations of states and political subdivisions classified as available-for-sale were general obligation bonds and 4.3% were revenue bonds. The $3,000 security held-to-maturity is a revenue bond made to a local municipality. The unrealized and unrecognized losses were mainly attributable to the spreads for these types of securities being wider at June 30, 2013 than when these securities were purchased and changes in interest rates. Management monitors the financial data of the individual municipalities to ensure they meet minimum credit standards. Since the Corporation does not intend to sell these securities and it is not likely the Corporation will be required to sell these securities at an unrealized loss position prior to any anticipated recovery in fair value, which may be maturity, management does not believe there is any other-than-temporary impairment related to these securities at June 30, 2013.
 
Mortgage-Backed Securities and Collateralized Mortgage Obligations: At June 30, 2013, all of the mortgage-backed securities and collateralized mortgage obligations held by the Corporation were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to higher interest rates and higher than projected prepayment speeds increasing the premium amortization, and not credit quality, and because the Corporation does not have the intent to sell nor is it likely that it will be required to sell the securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired.
 
Trust Preferred Security: The Corporation owns a trust preferred security, which represents collateralized debt obligations (CDOs) issued by other banks, bank holding companies and insurance companies. The security is part of a pool of issuers that support a more senior tranche of securities. The cash interest payments for the trust preferred security are being deferred as a result of an increase in principal and/or interest deferrals by the issuers of the underlying securities during the period of 2008 through 2011. The accumulated other-than-temporary impairment loss recognized in earnings in periods prior to 2012 was $780. According to the June 30, 2013 cash flow analysis, the expected cash flows were above the recorded amortized cost of the trust preferred security and the Corporation has received pricing indications that are very near the securities adjusted amortized cost of $202. Therefore, management does not believe there is any additional other-than-temporary impairment related to this security at June 30, 2013.