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Securities
 3 Months Ended
Mar. 31, 2013
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
Note 3: Securities

 

Securities at March 31, 2013 and December 31, 2012 are as follows:

 

    March 31, 2013  
    Amortized     Gross Unrealized     Fair  
  Cost     Gains     Losses     Value  
Securities available for sale                                
U.S. government-sponsored enterprises   $ 49,495     $ 918     $ (28 )   $ 50,385  
Municipals     37,671       2,261       (76 )     39,856  
Mortgage-backed and asset-backed securities – government-sponsored enterprises     47,957       1,475       (34 )     49,398  
Mortgage-backed and asset-backed securities – private labeled     2,300       13       (114 )     2,199  
Other securities     24,226       138       (1,927 )     22,437  
Total available for sale   $ 161,649     $ 4,805     $ (2,179 )   $ 164,275  

 

    December 31, 2012  
    Amortized     Gross Unrealized     Fair  
    Cost     Gains     Losses     Value  
Securities available for sale                                
U.S. government-sponsored enterprises   $ 18,666     $ 953     $ (1 )   $ 19,618  
Municipals     39,999       2,685       (144 )     42,540  
Mortgage-backed and asset-backed securities – government-sponsored enterprises     75,782       1,884       (177 )     77,489  
Mortgage-backed and asset-backed securities – private labeled     2,696       17       (260 )     2,453  
Other securities     16,753       105       (2,265 )     14,593  
Total available for sale   $ 153,896     $ 5,644     $ (2,847 )   $ 156,693  

 

The carrying value of securities at March 31, 2013 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

    Available for Sale  
    Amortized
Cost		     Fair
Value		  
Within one year   $ 2,056     $ 2,101  
One to five years     26,213       26,343  
Five to ten years     30,813       31,279  
After ten years     52,310       52,955  
      111,392       112,678  
Mortgage-backed and asset-backed securities – government-sponsored enterprises     47,957       49,398  
Mortgage-backed and asset-backed securities – private labeled     2,300       2,199  
Totals   $ 161,649     $ 164,275  

 

Gross gains of $102 and $40, and gross losses of $287 and $0 resulting from sales of available-for-sale securities were realized for March 31, 2013 and 2012, respectively.

 

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2013 and December 31, 2012 was $31,079 and $41,986, which is approximately 19% and 27%, respectively, of the Company’s available-for-sale investment portfolio. These declines primarily resulted from fluctuations in market interest rates after purchase.

 

Except as discussed below, management believes the declines in fair value for these securities are temporary.

 

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment (“OTTI”) is identified.

 

The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2013 and December 31, 2012:

 

    March 31, 2013  
    Less Than 12 Months     12 Months or Longer     Total  
    Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		  
Securities available for sale:                                                
U.S. government-sponsored enterprises   $ 11,443     $ (28 )   $ 22     $ —     $ 11,465     $ (28 )
Municipals     1,046       (68 )     1,068       (8 )     2,114       (76 )
Mortgage-backed and asset-backed securities - government-sponsored enterprises     4,962       (34 )     —       —       4,962       (34 )
Mortgage-backed and asset-backed securities – private labeled     —       —       1,405       (114 )     1,405       (114 )
Other securities     7,984       (41 )     3,149       (1,886 )     11,133       (1,927 )
    $ 25,435     $ (171 )   $ 5,644     $ (2,008 )   $ 31,079     $ (2,179 )

 

    December 31, 2012  
    Less Than 12 Months     12 Months or Longer     Total  
    Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		  
Securities available for sale:                                                
U.S. government-sponsored enterprises   $ —     $ —     $ 119     $ (1 )   $ 119     $ (1 )
Municipals     470   (4 )     2,618       (140 )     3,088       (144 )
Mortgage-backed and asset-backed securities - government-sponsored enterprises     28,505       (177 )     —       —       28,505       (177 )
Mortgage-backed and asset-backed securities – private labeled     —       —       1,504       (260 )     1,504       (260 )
Other securities     5,947       (53 )     2,823       (2,212 )     8,770       (2,265 )
    $ 34,922     $ (234 )   $ 7,064     $ (2,613 )   $ 41,986     $ (2,847 )

 

Municipals

 

The unrealized losses on the Company’s investments in municipal securities were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is unlikely the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other than temporarily impaired at March 31, 2013.

 

Mortgage-Backed Securities

 

The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate changes. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is unlikely the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other than temporarily impaired at March 31, 2013.

 

Other Securities

 

The Company’s unrealized loss on investments in other securities is primarily made up of two investments. The first investment is a $2,000 par investment in I-PreTSL I B-2 pooled trust security. The unrealized loss was primarily caused by a sector downgrade by several industry analysts. The Company currently expects to recover the entire amortized cost basis of the investment. The determination of no credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. Because the Company does not intend to sell the investment and it is unlikely the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, it does not consider the remainder of the investment to be other than temporarily impaired at March 31, 2013. The second investment is discussed in the next section.

 

Other-Than-Temporary Impairment

 

The Company routinely conducts periodic reviews to identify and evaluate investment securities to determine whether an OTTI has occurred. For certain investments, economic models are used to determine whether an OTTI has occurred on these securities.

 

An OTTI has been recognized on a $2,000 par investment in ALESCO IV Series B2 pooled trust security. The unrealized loss was primarily caused by (a) a decrease in performance and (b) a sector downgrade by several industry analysts. The Company currently expects ALESCO IV to settle the security at a price less than the contractual amount of the investment (that is, the Company expects to recover less than the entire amortized cost basis of the security). The Company has recognized a loss equal to the credit loss, establishing a new, lower amortized cost basis. The credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. Because the Company does not intend to sell the investment and it is unlikely the Company will be required to sell the investment before recovery of its new, lower amortized cost basis, which may be maturity, it does not consider the remainder of the investment in ALESCO IV to be other than temporarily impaired at March 31, 2013.

  

For identified mortgage-backed securities in the investment portfolio, an extensive, quarterly review is conducted to determine if an OTTI has occurred. Various inputs to the economic models are used to determine if an unrealized loss is other than temporary. The most significant inputs are voluntary prepay rates, default rates, liquidation rates and loss severity.

 

To determine if the unrealized loss for mortgage-backed securities is other than temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates the current credit enhancement underlying the bond to determine the impact on cash flows. If the Company determines that a given mortgage-backed security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

 

The credit losses recognized in earnings during the three months ended March 31, 2013 and 2012 were as follows:

 

    Three Months Ended March 31,  
    2013     2012  
ALESCO IV Series B2   $ —     $ —  
I-PreTSL I B-2     —       —  
Mortgage-backed and asset-backed securities – private labeled     34       —  
    $ 34     $ —  

 

Credit Losses Recognized on Investments

 

Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other than temporarily impaired.

 

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive loss.

 

    Accumulated Credit
Losses		  
Credit losses on debt securities held        
January 1, 2013   $ 1,737  
Realized losses related to other-than-temporary impairments     (266 )
Additions related to other-than-temporary losses not previously recognized     31  
Additions related to increases in previously recognized other-than-temporary losses     3  
March 31, 2013   $ 1,505  
         
      Accumulated Credit
Losses		  
Credit losses on debt securities held        
January 1, 2012   $ 1,835  
Realized losses related to other-than-temporary impairments     —  
Additions related to other-than-temporary losses not previously recognized     —  
Additions related to increases in previously recognized other-than-temporary losses     —  
March 31, 2012   $ 1,835  

 

Amounts reclassified from accumulated other comprehensive income and the affected line items in the statements of income during the three months ended March 31, 2013 and 2012, were as follows:

 

  Amounts Reclassified
from Accumulated Other Comprehensive Income for the Three Months Ended March 31,		     Affected Line Item in the Statements of
    2013     2012     Income
Securities available for sale                    
Gain (loss) realized in earnings   $ (185 )   $ 40     Gain (loss) on sale of securities
OTTI losses recognized in earnings     (34 )     —     Other-than-temporary impairment loss recognized in net income
Total reclassified amount before tax     (219 )     40     Income Before Income Taxes
Tax (expense) benefit     77       (14 )   Income Tax Provision
Total reclassifications out of Accumulated Other Comprehensive Income   $ (142 )   $ 26     Net Income