INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 6. INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the investment securities and the corresponding amounts of unrealized gains and losses therein as of December 31, 2017 and 2016:

	Amortized Cost		Unrealized/ Unrecognized Gains		Unrealized/ Unrecognized Losses		Fair Value		Carrying Amount
	(Dollars in Thousands)
December 31, 2017
State and municipal	$	5,500	$	34	$	(8)	$	5,526	$	5,526
Mortgage-backed securities – residential		24,175		–		(647)		23,528		23,528
Collateralized mortgage obligations – U.S. Government		2,390		–		(89)		2,301		2,301
Corporate debt		6,536		34		(242)		6,328		6,328
Total investment securities	$	38,601	$	68	$	(986)	$	37,683	$	37,683

December 31, 2016
U.S. Government–sponsored enterprises	$	19,999	$	–	$	(2)	$	19,997	$	19,997
State and municipal		5,024		2		(35)		4,991		4,991
Mortgage-backed securities – residential		28,515		–		(1,187)		27,328		27,328
Collateralized mortgage obligations – U.S. Government		3,152		–		(93)		3,059		3,059
Corporate debt		10,000		226		(308)		9,918		9,918
Total investment securities	$	66,690	$	228	$	(1,625)	$	65,293	$	65,293

The amortized cost and fair value of investment securities, segregated by contractual maturity as of December 31, 2017, are shown below:

	Amortized Cost		Fair Value
	(Dollars in Thousands)
Due in one year or less	$	–	$	–
Due from more than one to five years		967		964
Due from more than five to ten years		10,263		10,066
Due after ten years		806		824
Mortgage-backed securities – residential		24,175		23,528
Collateralized mortgage obligations – U.S. Government		2,390		2,301
	$	38,601	$	37,683

Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Investment securities not due at a single maturity date, including mortgage-backed securities and collateralized mortgage obligations, are shown separately.

The following table summarizes the investment securities with unrealized losses as of December 31, 2017 and 2016, aggregated by investment category and length of time in a continuous unrealized loss position:

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in Thousands)

December 31, 2017
State and municipal	$	2,051	$	(8)	$	–	$	–	$	2,051	$	(8)
Mortgage-backed securities – residential		–		–		23,500		(647)		23,500		(647)
Collateralized mortgage obligations – U.S. Government		–		–		2,302		(89)		2,302		(89)
Corporate debt		–		–		4,758		(242)		4,758		(242)
	$	2,051	$	(8)	$	30,560	$	(978)	$	32,611	$	(986)

December 31, 2016
U.S. Government–sponsored enterprises	$	19,997	$	(2)	$	–	$	–	$	19,997	$	(2)
State and municipal		3,921		(36)		–		–		3,921		(36)
Mortgage-backed securities – residential		27,291		(1,187)		–		–		27,291		(1,187)
Collateralized mortgage obligations – U.S. Government		–		–		3,059		(92)		3,059		(92)
Corporate debt		4,692		(308)		–		–		4,692		(308)
	$	55,901	$	(1,533)	$	3,059	$	(92)	$	58,960	$	(1,625)

Other-Than-Temporary Impairment

Management evaluates investment securities for OTTI on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation. As of December 31, 2017, the Company’s security portfolio consisted of 23 investment securities (all classified as available-for-sale), 14 of which were in an unrealized loss position. All unrealized losses were related to debt securities whose underlying collateral is residential mortgages and all of these debt securities were issued by government sponsored organizations, as discussed below.

As of December 31, 2017, $25.8 million, or approximately 68.5% of the debt securities held by the Company, including 9 of the Company’s debt securities in an unrealized loss position, were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, which are institutions the U.S. government has affirmed its commitment to support.

The decline in fair value of the Company’s debt securities in an unrealized loss position was attributable to changes in interest rates and not credit quality. It is not more likely than not the Company will be required to sell these securities before their anticipated recovery; however, from time to time the Company makes decisions to sell securities available-for-sale as part of its balance sheet and risk management strategies. Therefore, the Company does not consider these debt securities to be other-than-temporarily impaired as of December 31, 2017.

The Company did not hold any non-agency collateralized mortgage-backed securities or collateralized mortgage obligations as of December 31, 2017 and 2016, and did not record OTTI related to such securities during the years ended December 31, 2017, 2016 and 2015.

Proceeds from Investment Securities

Proceeds from sales, payments, maturities, and calls of securities available-for-sale were $85.4 million, $85.7 million and $15.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Gross gains of $0.4 million were realized during the year ended December 31, 2017, while no gross losses were realized during the year ended December 31, 2017. The net gain on sale of securities available-for-sale for the year ended December 31, 2017, includes $0.4 million of accumulated other comprehensive income reclassifications from unrealized holding gains. Gross gains of $1.5 million were realized during the year ended December 31, 2016. Gross losses of $0.2 million were realized during the year ended December 31, 2016. The net gain on sale of securities available-for-sale for the year ended December 31, 2016, includes $1.3 million of accumulated other comprehensive income reclassifications from unrealized holding gains. No gross gains were realized during the year ended December 31, 2015. Gross losses of $9,000 were realized during the year ended December 31, 2015. The net loss on sale of securities available-for-sale for the year ended December 31, 2015, includes $9,000 of accumulated other comprehensive loss reclassifications from unrealized holding gains.

On February 18, 2016, the Company sold $15.8 million of investment securities previously classified as held-to-maturity, which were reclassified to available-for-sale as of December 31, 2015. Therefore, there were no proceeds from payments, maturities, and calls of securities held-to-maturity for the years ended December 31, 2017 and 2016. Proceeds from payments, maturities, and calls of securities held-to-maturity were $1.9 million for the year ended December 31, 2015. The Company did not sell any investment securities classified as held-to-maturity during the years ended December 31, 2015.

Gains and losses on sales of investment securities are recorded on the trade date and are determined using the specific identification method. There were no unsettled investment securities transactions at December 31, 2017 and 2016.

Atlantic Coast Financial CORP 10-K