v2.3.0.9
Securities
3 Months Ended
Sep. 30, 2011
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
Note 2 – Securities
 
         
Gross
   
Gross
       
Description of Securities  
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
    Cost    
Gains
   
Losses
   
Value
 
September 30, 2011
                       
U.S. government-sponsored entities and agencies
  $ 9,701     $ 122     $ (4 )   $ 9,819  
Obligations of state and political subdivisions
    25,229       1,044       (64 )     26,209  
Mortgage-backed securities – residential
    41,774       1,108       (160 )     42,722  
Collateralized mortgage obligations
    19,871       85       (99 )     19,857  
Trust preferred security
    202             (138 )     64  
Total securities
  $ 96,777     $ 2,359     $ (465 )   $ 98,671  
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
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
 
   
September 30,
 
   
2011
   
2010
 
Proceeds from sales
  $ 4,951       2,553  
Gross realized gains
    49       44  
Gross realized losses
          27  
 
The amortized cost and fair values of available-for-sale securities at September 30, 2011, 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
   
Estimated Fair
 
   
Cost
   
Value
 
Due in one year or less
  $ 3,525     $ 3,552  
Due after one year through five years
    7,220       7,360  
Due after five years through ten years
    5,835       6,162  
Due after ten years
    18,350       18,954  
Total
    34,930       36,028  
                 
Mortgage-backed securities – residential
    41,774       42,722  
Collateralized mortgage obligations
    19,871       19,857  
Trust preferred security
    202       64  
Total
  $ 96,777     $ 98,671  
 
The following table summarizes the securities with unrealized losses at September 30, 2011 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
 
 
 
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
Description of Securities  
Value
   
Loss
   
Value
   
Loss
   
Value
   
Loss
 
                                     
September 30, 2011
                                   
U.S. government-sponsored entities and agencies
  $ 996     $ (4 )   $     $     $ 996     $ (4 )
Obligations of states and political subdivisions
    241             1,436       (64 )     1,677       (64 )
Mortgage-backed securities - residential
    14,288       (160 )                 14,288       (160 )
Collateralized mortgage obligations
    12,117       (99 )                 12,117       (99 )
Trust preferred security
                64       (138 )     64       (138 )
                                                 
Total temporarily impaired
  $ 27,642     $ (263 )   $ 1,500     $ (202 )   $ 29,142     $ (465 )
 
 
   
Less than 12 Months
   
12 Months or more
   
Total
 
 
 
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
Description of Securities
 
Value
   
Loss
   
Value
   
Loss
   
Value
   
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 U.S. government-sponsored entities and agencies, 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 September 30, 2011, 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 September 30, 2011 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 September 30, 2011 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.