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Securities Available For Sale | 6 Months Ended
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Jun. 30, 2014
Securities Available For Sale [Abstract] |
Securities Available For Sale | Note 5: Securities Available For Sale The following tables summarize the securities available for sale portfolio as of June 30, 2014, and December 31, 2013:
June 30, 2014 |  |  |  | Gross |  | Gross |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Estimated
Available for Sale: |  | Cost |  | Gains |  | Losses |  | Fair Value
Mortgage-backed securities: |  |  |  |  |  |  |  |
US Government-sponsored |  |  |  |  |  |  |  |
enterprises | $ | 286,494 | $ | 6,287 | $ | 3,595 | $ | 289,186
US Government agency |  | 86,475 |  | 1,389 |  | 749 |  | 87,115
Private label |  | 4,315 |  | 834 |  | 5 |  | 5,144
Obligations of states and political |  |  |  |  |  |  |  |
subdivisions thereof |  | 95,237 |  | 2,670 |  | 1,548 |  | 96,359
Total | $ | 472,521 | $ | 11,180 | $ | 5,897 | $ | 477,804
December 31, 2013 |  |  |  | Gross |  | Gross |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Estimated
Available for Sale: |  | Cost |  | Gains |  | Losses |  | Fair Value
Mortgage-backed securities: |  |  |  |  |  |  |  |
US Government-sponsored |  |  |  |  |  |  |  |
enterprises | $ | 277,838 | $ | 4,386 | $ | 8,592 | $ | 273,632
US Government agency |  | 83,153 |  | 833 |  | 2,457 |  | 81,529
Private label |  | 5,423 |  | 825 |  | 78 |  | 6,170
Obligations of states and political |  |  |  |  |  |  |  |
subdivisions thereof |  | 95,221 |  | 1,121 |  | 7,503 |  | 88,839
Total | $ | 461,635 | $ | 7,165 | $ | 18,630 | $ | 450,170
Securities Maturity Distribution: The following table summarizes the maturity distribution of the amortized cost and estimated fair value of securities available for sale as of June 30, 2014. Actual maturities may differ from the final maturities noted below because issuers may have the right to prepay or call certain securities. In the case of MBS, actual maturities may also differ from expected maturities due to the amortizing nature of the underlying mortgage collateral, and the fact that borrowers have the right to prepay.
|  |  | Amortized |  |  | Estimated
Securities Available for Sale |  |  | Cost |  |  | Fair Value
Due one year or less | $ | - | -- | $ | - | --
Due after one year through five years |  |  | 4,251 |  |  | 4,360
Due after five years through ten years |  |  | 15,601 |  |  | 16,173
Due after ten years |  |  | 452,669 |  |  | 457,271
Total | $ |  | 472,521 | $ |  | 477,804
Securities Impairment: As a part of the Company's ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired ("OTTI"). For the six months ended June 30, 2014, the Company did not have any OTTI losses recognized in earnings (before taxes), compared with $115 for the same period in 2013. Upon initial impairment of a security, total OTTI losses represent the excess of the amortized cost over the fair value. For subsequent impairments of the same security, total OTTI losses represent additional credit losses and or declines in fair value subsequent to the previously recorded OTTI losses, if applicable. Unrealized OTTI losses recognized in accumulated other comprehensive income ("OCI") represent the non-credit component of OTTI losses on debt securities. Net impairment losses recognized in earnings represent the credit component of OTTI losses on debt securities. As of June 30, 2014, the Company held twelve private label MBS (debt securities) with a total amortized cost (i.e. carrying value) of $1,938 for which OTTI losses have previously been recognized in pre-tax earnings (dating back to the fourth quarter of 2008). For all twelve of these securities, the Company previously recognized credit losses in excess of the unrealized losses in accumulated OCI, creating an unrealized gain of $493, net of tax, as included in accumulated OCI as of June 30, 2014. As of June 30, 2014, the total net unrealized gains included in accumulated OCI for securities held where OTTI has been historically recognized in pre-tax earnings amounted to $493, net of tax, compared with net unrealized gains of $488, net of tax, at December 31, 2013. The OTTI losses previously recognized in earnings represented management's best estimate of credit losses inherent in the securities based on discounted, bond-specific future cash flow projections using assumptions about cash flows associated with the pools of mortgage loans underlying each security. In estimating those cash flows the Company takes a variety of factors into consideration including, but not limited to, loan level credit characteristics, current delinquency and non-performing loan rates, current levels of subordination and credit support, recent default rates and future constant default rate estimates, original and current loan to collateral value ratios, recent collateral loss severities and future collateral loss severity estimates, recent and historical conditional prepayment rates and future conditional prepayment rate assumptions, and other estimates of future collateral performance. Despite elevated levels of delinquencies, defaults and losses in the underlying residential mortgage loan collateral, given credit enhancements resulting from the structures of the individual securities, the Company currently expects that as of June 30, 2014 it will recover the amortized cost basis of its private label MBS as depicted in the table below and has therefore concluded that such securities were not OTTI as of that date. Nevertheless, given recent market conditions, it is possible that adverse changes in repayment performance and fair value could occur in future periods that would change the Company's current best estimates. The following table displays the beginning balance of OTTI related to historical credit losses on debt securities held by the Company at the beginning of the current reporting period, as well as changes in credit losses recognized in pre-tax earnings for the three and six months ending June 30, 2014, and 2013.
|  | 2014 |  | 2013
Estimated credit losses as of March 31, | $ | 3,413 | $ | 3,675
Additions for credit losses for securities on which |  |  |  |
OTTI has been previously recognized | - | -- |  | 115
Additions for credit losses for securities on which |  |  |  |
OTTI has not been previously recognized | - | -- | - | --
Reductions for securities paid off during the period | - | -- | - | --
Estimated credit losses as of June 30, | $ | 3,413 | $ | 3,790
|  | 2014 |  | 2013
Estimated credit losses as of prior year-end, | $ | 3,923 | $ | 4,366
Additions for credit losses for securities on which |  |  |  |
OTTI has been previously recognized | - | -- |  | 115
Additions for credit losses for securities on which |  |  |  |
OTTI has not been previously recognized | - | -- | - | --
Reductions for securities paid off during the period |  | 510 |  | 691
Estimated credit losses as of June 30, | $ | 3,413 | $ | 3,790
As of June 30, 2014, based on a review of the remaining securities in the securities portfolio, the Company concluded that it expects to recover its amortized cost basis for such securities. This conclusion was based on the issuers' continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that they will continue to do so through the maturity of the security, the expectation that the Company will receive the entire amount of future contractual cash flows, as well as the evaluation of the fundamentals of the issuers' financial condition and other objective evidence. Accordingly, the Company concluded that any declines in the values of those securities were temporary and that any additional OTTI charges were not appropriate at June 30, 2014. As of that date, the Company did not intend to sell nor anticipated that it would more-likely-than-not be required to sell any of its impaired securities, that is, where fair value is less than the cost basis of the security. The following table summarizes the fair value of securities with continuous unrealized losses for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer as of June 30, 2014 and December 31, 2013. All securities referenced are debt securities.
|  | Less than 12 months |  |  |  |  |  | 12 months or longer |  |  |  |  | Total |  |
|  | Estimated |  |  |  |  |  | Estimated |  |  |  |  | Estimated |  |  |
June 30, 2014 |  | Fair | Number of |  |  | Unrealized |  | Fair | Number of |  | Unrealized |  | Fair | Number of |  | Unrealized
|  | Value | Investments |  |  | Losses |  | Value | Investments |  | Losses |  | Value | Investments |  | Losses
Description of Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
US Government- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
sponsored enterprises | $ | 27,684 | 36 | $ |  | 472 | $ | 75,106 | 89 | $ | 3,123 | $ | 102,790 | 125 | $ | 3,595
US Government agency |  | 11,138 | 16 |  |  | 151 |  | 23,718 | 28 |  | 598 |  | 34,856 | 44 |  | 749
Private label | - | -- | 0 |  | - | -- |  | 156 | 4 |  | 5 |  | 156 | 4 |  | 5
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
thereof |  | 3,162 | 7 |  |  | 15 |  | 45,633 | 103 |  | 1,533 |  | 48,795 | 110 |  | 1,548
Total | $ | 41,984 | 59 | $ |  | 638 | $ | 144,613 | 224 | $ | 5,259 | $ | 186,597 | 283 | $ | 5,897
|  | Less than 12 months |  | 12 months or longer |  |  | Total |  |
|  | Estimated |  |  |  |  | Estimated |  |  |  |  | Estimated |  |  |
December 31, 2013 |  | Fair | Number of |  | Unrealized |  | Fair | Number of |  | Unrealized |  | Fair | Number of |  | Unrealized
|  | Value | Investments |  | Losses |  | Value | Investments |  | Losses |  | Value | Investments |  | Losses
Description of Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
US Government- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sponsored enterprises | $ | 111,169 | 140 | $ | 4,801 | $ | 40,563 | 40 | $ | 3,791 | $ | 151,732 | 180 | $ | 8,592
US Government agency |  | 36,356 | 47 |  | 1,982 |  | 9,156 | 12 |  | 475 |  | 45,512 | 59 |  | 2,457
Private label |  | 826 | 12 |  | 61 |  | 449 | 7 |  | 17 |  | 1,275 | 19 |  | 78
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
thereof |  | 61,174 | 135 |  | 5,601 |  | 8,464 | 30 |  | 1,902 |  | 69,638 | 165 |  | 7,503
Total | $ | 209,525 | 334 | $ | 12,445 | $ | 58,632 | 89 | $ | 6,185 | $ | 268,157 | 423 | $ | 18,630
- For securities with unrealized losses, the following information was considered in determining that the impairments were not other-than-temporary: Mortgage-backed securities issued by U.S. Government-sponsored enterprises: As of June 30, 2014, the total unrealized losses on these securities amounted to $3,595, compared with $8,592 at December 31, 2013. All of these securities were credit rated "AA+" by the major credit rating agencies. Company management believes these securities have minimal credit risk, as these Government-sponsored enterprises play a vital role in the nation's financial markets. Management's analysis indicates that the unrealized losses at June 30, 2014 were attributed to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be OTTI at June 30, 2014. Mortgage-backed securities issued by U.S. Government agencies: As of June 30, 2014, the total unrealized losses on these securities amounted to $749, compared with $2,457 at December 31, 2013. All of these securities were credit rated "AA+" by the major credit rating agencies. Management's analysis indicates that these securities bear little or no credit risk because they are backed by the full faith and credit of the United States. The Company attributes the unrealized losses at June 30, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be OTTI at June 30, 2014. Private label mortgage-backed securities: As of June 30, 2014, the total unrealized losses on the Bank's private label MBS amounted to $5, compared with $78 at December 31, 2013. The Company attributes the unrealized losses at June 30, 2014 to the current illiquid market for non- agency MBS, a still recovering housing market, risk-related market pricing discounts for non- agency MBS and credit rating downgrades on certain private label MBS owned by the Company. Based upon the foregoing considerations and the expectation that the Company will receive all of the future contractual cash flows related to amortized cost on these securities, the Company does not consider there to be any additional OTTI with respect to these securities at June 30, 2014. Obligations of states of the U.S. and political subdivisions thereof: As of June 30, 2014, the total unrealized losses on the Bank's municipal securities amounted to $1,548, compared with $7,503 at December 31, 2013. The Bank's municipal securities primarily consist of general obligation bonds and to a lesser extent, revenue bonds. General obligation bonds carry less risk, as they are supported by the full faith, credit and taxing authority of the issuing government and in the cases of school districts, are additionally supported by state aid. Revenue bonds are generally backed by municipal revenue streams generated through user fees or lease payments associated with specific municipal projects that have been financed. Municipal bonds are frequently supported with insurance, which guarantees that in the event the issuer experiences financial problems, the insurer will step in and assume payment of both principal and interest. Historically, insurance support has strengthened an issuer's underlying credit rating to AAA or AA status. Starting in 2008 and continuing through 2014, many of the insurance companies providing municipal bond insurance experienced financial difficulties and, accordingly, were downgraded by at least one of the major credit rating agencies. Consequently, a portion of the Bank's municipal bond portfolio was downgraded by at least one of the major credit rating agencies. Notwithstanding the credit rating downgrades, at June 30, 2014, the Bank's municipal bond portfolio did not contain any below investment grade securities as reported by major credit rating agencies. In addition, at June 30, 2014, all municipal bond issuers were current on contractually obligated interest and principal payments. The Company attributes the unrealized losses at June 30, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased and, to a lesser extent, changes in credit ratings on certain securities. The Company also attributes the unrealized losses to ongoing media attention and market concerns about the prolonged recovery from the national economic recession and the impact it might have on the future financial stability of municipalities throughout the country. Accordingly, the Company does not consider these municipal securities to be other-than-temporarily impaired at June 30, 2014. At June 30, 2014, the Company had no intent to sell nor believed it is more-likely-than-not that it would be required to sell any of its impaired securities as identified and discussed immediately above, and therefore did not consider these securities to be other OTTI as of that date. Securities Gains and Losses: The following table summarizes realized gains and losses and OTTI losses on securities available for sale for the three and six months ended June 30, 2014 and 2013.
  |  | Proceeds |  |  |  |  |  | Other |  |
  |  | from Sale of |  |  |  |  |  | Than |  |
  |  | Securities |  |  |  |  |  | Temporary |  |
  |  | Available |  | Realized |  | Realized |  | Impairment |  |
  |  | for Sale |  | Gains |  | Losses |  | Losses |  | Net
  Three months ended June 30, |  |  |  |  |  |  |  |  |  |
  2014 | $ | 11,908 | $ | 385 | $ | 35 | $ | --- | $ | 350
  2013 | $ | 3,568 | $ | 256 | $ | --- | $ | 115 | $ | 141
  Six months ended June 30, |  |  |  |  |  |  |  |  |  |
  2014 | $ | 22,221 | $ | 782 | $ | 35 | $ | --- | $ | 747
  2013 | $ | 9,629 | $ | 529 | $ | 8 | $ | 115 | $ | 406

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- Definition Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27290-111563 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27357-111563 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27337-111563 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27198-111563 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62586-112803 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=27724398&loc=d3e27161-111563 + Details
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