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Securities
 9 Months Ended
Sep. 30, 2012
Securities  
Securities

Note 7 – Securities

 

The book values and approximate fair values of investment securities at September 30, 2012 and December 31, 2011 are summarized as follows:

 

   September 30, 2012   December 31, 2011 
   Amortized   Fair   Unrealized   Amortized   Fair   Unrealized 
($ in thousands)  Cost   Value   Gains   (Losses)   Cost   Value   Gains   (Losses) 
                                 
Securities available for sale:                                        
Government-sponsored enterprise securities  $20,500    20,614    114    —    34,511    34,665    170   (16)
Mortgage-backed securities   124,164    128,533    4,369    —    120,032    124,105    4,164    (91)
Corporate bonds   3,997    3,857    100    (240)   13,189    12,488    279    (980)
Equity securities   7,952    8,403    473    (22)   10,998    11,368    409    (39)
Total available for sale  $156,613    161,407    5,056    (262)   178,730    182,626    5,022    (1,126)
                                         
Securities held to maturity:                                        
State and local governments  $56,123    61,877    5,754    —    57,988    62,754    4,766    — 
Total held to maturity  $56,123    61,877    5,754    —    57,988    62,754    4,766    — 

 

Included in mortgage-backed securities at September 30, 2012 were collateralized mortgage obligations with an amortized cost of $515,000 and a fair value of $532,000. Included in mortgage-backed securities at December 31, 2011 were collateralized mortgage obligations with an amortized cost of $1,462,000 and a fair value of $1,515,000. All of the Company’s mortgage-backed securities, including collateralized mortgage obligations, were issued by government-sponsored corporations.

 

The Company owned Federal Home Loan Bank (FHLB) stock with a cost and fair value of $7,859,000 at September 30, 2012 and $10,904,000 at December 31, 2011, which is included in equity securities above and serves as part of the collateral for the Company’s line of credit with the FHLB. The investment in this stock is a requirement for membership in the FHLB system.

 

The following table presents information regarding securities with unrealized losses at September 30, 2012:

 

 

($ in thousands)

  Securities in an Unrealized
Loss Position for
Less than 12 Months		   Securities in an Unrealized
Loss Position for
More than 12 Months		   Total 
   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		 
Government-sponsored enterprise securities  $—    —    —    —    —    — 
Mortgage-backed securities   —    —    —    —    —    — 
Corporate bonds   —    —    760    240    760    240 
Equity securities   —    —    30    22    30    22 
State and local governments   —    —    —    —    —    — 
Total temporarily impaired securities  $—    —    790    262    790    262 

 

The following table presents information regarding securities with unrealized losses at December 31, 2011:

 

 

($ in thousands)

  Securities in an Unrealized
Loss Position for
Less than 12 Months		   Securities in an Unrealized
Loss Position for
More than 12 Months		   Total 
   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		 
Government-sponsored enterprise securities  $8,984    16    —    —    8,984    16 
Mortgage-backed securities   14,902    61    9,302    30    24,204    91 
Corporate bonds   4,588    458    2,773    522    7,361    980 
Equity securities   4    2    22    37    26    39 
State and local governments   —    —    —    —    —    — 
Total temporarily impaired securities  $28,478    537    12,097    589    40,575    1,126 

 

In the above tables, all of the non-equity securities that were in an unrealized loss position at September 30, 2012 and December 31, 2011 are bonds that the Company has determined are in a loss position due to interest rate factors, the overall economic downturn in the financial sector, and the broader economy in general. The Company has evaluated the collectability of each of these bonds and has concluded that there is no other-than-temporary impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. The Company has also concluded that each of the equity securities in an unrealized loss position at September 30, 2012 and December 31, 2011 was in such a position due to temporary fluctuations in the market prices of the securities. The Company’s policy is to record an impairment charge for any of these equity securities that remains in an unrealized loss position for twelve consecutive months unless the amount is insignificant.

 

The aggregate carrying amount of cost-method investments was $7,859,000 at September 30, 2012 and $10,904,000 at December 31, 2011, respectively, which was the FHLB stock discussed above. The Company determined that none of its cost-method investments were impaired at either period end.

 

The book values and approximate fair values of investment securities at September 30, 2012, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   Securities Available for Sale   Securities Held to Maturity 
   Amortized   Fair   Amortized   Fair 
($ in thousands)  Cost   Value   Cost   Value 
                 
Debt securities                    
Due within one year  $3,000    3,007    350    355 
Due after one year but within five years   20,497    20,704    3,208    3,484 
Due after five years but within ten years   —    —    29,677    32,653 
Due after ten years   1,000    760    22,888    25,385 
Mortgage-backed securities   124,164    128,533    —    — 
Total debt securities   148,661    153,004    56,123    61,877 
                     
Equity securities   7,952    8,403    —    — 
Total securities  $156,613    161,407    56,123    61,877 

 

At September 30, 2012 investment securities with a book value of $83,557,000 were pledged as collateral for public deposits. At December 31, 2011, investment securities with a book value of $47,418,000 were pledged as collateral for public and private deposits and securities sold under agreements to repurchase.

 

There were $9,641,000 in sales of securities during the nine months ended September 30, 2012, which resulted in a net gain of $439,000. There were $2,518,000 in sales during the nine months ended September 30, 2011, which resulted in a net gain of $8,000. During the nine months ended September 30, 2012 and 2011, the Company recorded a net gain of $200,000 and $71,000, respectively, related to the call of several municipal and corporate bond securities. Also, during the nine months ended September 30, 2012 and 2011, the Company recorded net losses of $1,000 and $5,000, respectively, related to write-downs of the Company’s equity portfolio.