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Securities
 12 Months Ended
Dec. 31, 2012
Securities [Abstract]  
Securities

Note 3—Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

 

                                 
    (In Thousands)  
    2012  
          Gross     Gross     Estimated  
    Amortized     Unrealized     Unrealized     Market  
    Cost     Gains     Losses     Value  

Available-for-Sale:

                                

U.S. Treasury

   $ 10,604     $ —       $ (36 )    $ 10,568  

U.S. Government agency

     216,466       3,905       (171 )      220,200  

Mortgage-backed securities

     51,581       1,425       —         53,006  

State and local governments

     68,022       4,129       (20 )      72,131  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total available-for-sale securities

   $ 346,673     $ 9,459     $ (227 )    $ 355,905  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

                                 
    (In Thousands)  
    2011  
          Gross     Gross     Estimated  
    Amortized     Unrealized     Unrealized     Market  
    Cost     Gains     Losses     Value  

Available-for-Sale:

                                

U.S. Treasury

   $ 26,050     $ 641     $  —       $ 26,691  

U.S. Government agency

     174,545       3,270       (18 )      177,797  

Mortgage-backed securities

     54,113       1,318       (18 )      55,413  

State and local governments

     63,143       4,476       (1 )      67,618  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total available-for-sale securities

   $ 317,851     $ 9,705     $ (37 )    $ 327,519  
   

 

 

    

 

 

    

 

 

    

 

 

  

Investment securities will at times depreciate to an unrealized loss position. The Bank utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as an other than temporary impairment.

 

  1. The fair value of the security has significantly declined from book value.

 

  2. A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

 

  3. Dividends have been reduced or eliminated or scheduled interest payments have not been made.

 

  4. The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

 

  5. Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Bank currently does not hold any securities with other than temporary impairment.

 

Information pertaining to securities with gross unrealized losses at December 31, 2012 and 2011, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

 

                                 
    2012  
    (In Thousands)     (In Thousands)  
    Less Than Twelve
Months		     Twelve Months &
Over		  
    Gross           Gross        
    Unrealized     Fair     Unrealized     Fair  
    Losses     Value     Losses     Value  

U.S. Treasury

   $ (36 )    $ 10,568     $ —       $ —    

U.S. Government agency

     (171 )      33,034       —         —    

Mortgage-backed securities

     —         —         —         —    

State and local governments

     (20 )      2,903       —         —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total available-for-sales securities

   $ (227 )    $ 46,505     $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  
   
    2011  
    (In Thousands)     (In Thousands)  
    Less Than Twelve
Months		     Twelve Months &
Over		  
    Gross           Gross        
    Unrealized     Fair     Unrealized     Fair  
    Losses     Value     Losses     Value  

U.S. Treasury

   $ —       $ —        $  —       $  —    

U.S. Government agency

     (18 )      12,192       —         —    

Mortgage-backed securities

     (18 )      —         —         —    

State and local governments

     (1 )      652       —         —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total available-for-sales securities

   $ (37 )    $ 12,844     $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality and the Bank has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

Sales of $60.5, $30.3 and $55.7 million for 2012, 2011 and 2010 respectively, generated gross realized gains and losses for the years ended December 31, as presented below:

 

                         
    (In Thousands)  
    2012     2011     2010  

Gross realized gains

   $ 852     $ 504     $ 956  

Gross realized losses

     —         —         —    
   

 

 

    

 

 

    

 

 

  

Net realized gains

   $ 852     $ 504     $ 956  
   

 

 

    

 

 

    

 

 

  

Tax expense related to net realized gains

   $ 290     $ 171     $ 325  
   

 

 

    

 

 

    

 

 

  

The amortized cost and fair value of debt securities at December 31, 2012, by contractual 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.

 

 

                 
    (In Thousands)  
    Amortized        
    Cost     Fair Value  

One year or less

   $ 43,350     $ 43,633  

After one year through five years

     152,321       156,763  

After five years through ten years

     90,278       91,978  

After ten years

     9,143       10,525  
   

 

 

    

 

 

  

Total

   $ 295,092     $ 302,899  

Mortgage-backed securities

     51,581       53,006  
   

 

 

    

 

 

  

Total

   $ 346,673     $ 355,905  
   

 

 

    

 

 

  

Investments with a carrying value and fair value of $196.9 million at December 31, 2012 and $194.7 million at December 31, 2011 were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Indianapolis stock and Farmer Mac stock as of December 31, 2012. The stock is carried at cost, which approximates fair value.