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Investment Secruities Available for Sale
 6 Months Ended
Jun. 30, 2011
Investment Securities Available for Sale [Abstract]  
INVESTMENT SECURITIES AVAILABLE FOR SALE
NOTE 6 — INVESTMENT SECURITIES AVAILABLE FOR SALE
The amortized cost and fair values of securities available for sale are as follows:
                                 
    June 30, 2011  
            Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
(Dollar amounts in thousands)   Cost     Gains     Losses     Value  
 
                               
U.S. government agency securities
  $ 27,107     $ 224     $ (92 )   $ 27,239  
Obligations of states and political subdivisions:
                               
Taxable
    7,893       256       —       8,149  
Tax-exempt
    70,726       2,102       (127 )     72,701  
Mortgage-backed securities in government sponsored entities
    68,915       1,788       (182 )     70,521  
Private-label mortgage-backed securities
    13,971       764       (278 )     14,457  
 
                       
Total debt securities
    188,612       5,134       (679 )     193,067  
Equity securities in financial institutions
    907       —       (153 )     754  
 
                       
Total
  $ 189,519     $ 5,134     $ (832 )   $ 193,821  
 
                       
                                 
    December 31, 2010  
            Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
    Cost     Gains     Losses     Value  
 
                               
U.S. government agency securities
  $ 33,332     $ 111     $ (840 )   $ 32,603  
Obligations of states and political subdivisions:
                               
Taxable
    7,371       80       (34 )     7,417  
Tax-exempt
    69,363       1,058       (958 )     69,463  
Mortgage-backed securities in government sponsored entities
    73,390       2,270       (654 )     74,043  
Private-label mortgage-backed securities
    16,636       55       (328 )     17,326  
 
                       
Total debt securities
    200,092       3,574       (2,814 )     200,852  
Equity securities in financial institutions
    944       80       (104 )     920  
 
                       
Total
  $ 201,036     $ 3,654     $ (2,918 )   $ 201,772  
 
                       
The amortized cost and fair value of debt securities at June 30, 2011, 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.
                 
    Amortized     Fair  
(Dollar amounts in thousands)   Cost     Value  
 
               
Due in one year or less
  $ 1,125     $ 1,137  
Due after one year through five years
    5,915       6,239  
Due after five years through ten years
    18,974       19,820  
Due after ten years
    162,598       165,871  
 
           
 
               
Total
  $ 188,612     $ 193,067  
 
           
Proceeds from sales of investment securities available for sale were $10.1 and $1.2 million during the quarters ended June 30, 2011 and June 30, 2010, respectively. Gross losses realized were $37,000 and gross gains realized were $18,000 for the quarters ended June 30, 2011 and June 30, 2010, respectively.
Proceeds from sales of investment securities available for sale were $10.1 and $5.1 million during the six-months ended June 30, 2011 and June 30, 2010, respectively. Gross losses realized were $22,000 and gross gains realized were $27,000 for the six months ended June 30, 2011 and June 30, 2010, respectively.
Investment securities with an approximate carrying value of $55,809,000 and $49,999,000 at June 30, 2011 and 2010, respectively, were pledged to secure deposits and other purposes as required by law.
The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
                                                 
    June 30, 2011  
    Less than Twelve Months     Twelve Months or Greater     Total  
            Gross             Gross             Gross  
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
(Dollar amounts in thousands)   Value     Losses     Value     Losses     Value     Losses  
 
                                               
U.S. government agency securities
  $ 12,908     $ (92 )   $ —     $ —     $ 12,908     $ (92 )
Obligations of states and political subdivisions
    6,173       (85 )     448       (42 )     6,621       (127 )
Mortgage-backed securities in government sponsored entities
    16,963       (182 )     —       —       16,963       (182 )
Private-label mortgage-backed securities
    2,179       (51 )     2,002       (227 )     4,181       (278 )
Equity securities in financial institutions
    174       (85 )     580       (68 )     754       (153 )
 
                                   
Total
  $ 38,397     $ (495 )   $ 3,030     $ (337 )   $ 41,427     $ (832 )
 
                                   
                                                 
    December 31, 2010  
    Less than Twelve Months     Twelve Months or Greater     Total  
            Gross             Gross             Gross  
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
    Value     Losses     Value     Losses     Value     Losses  
 
                                               
U.S. government agency securities
  $ 24,406     $ (840 )   $ —     $ —     $ 24,406     $ (840 )
Obligations of states and political subdivisions
    35,846       (940 )     439       (52 )     36,285       (992 )
Mortgage-backed securities in government sponsored entities
    27,792       (654 )     —       —       27,792       (654 )
Private-label mortgage-backed securities
    510       (11 )     2,480       (317 )     2,990       (328 )
Equity securities in financial institutions
    —       —       590       (104 )     590       (104 )
 
                                   
Total
  $ 88,554     $ (2,445 )   $ 3,509     $ (473 )   $ 92,063     $ (2,918 )
 
                                   
On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (OTTI) pursuant to FASB ASC Topic 320 “Investments — Debt and Equity Securities. A security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The accounting literature requires the Company to assess whether the unrealized loss is other-than-temporary. Prior to the adoption of FSP FAS 115-2 which was subsequently incorporated into FASB ASC Topic 320 “Investments — Debt and Equity Securities, unrealized losses that were determined to be temporary were recorded, net of tax, in other comprehensive income for available for sale securities, whereas unrealized losses related to held-to-maturity securities determined to be temporary were not recognized. Regardless of whether the security was classified as available for sale or held to maturity, unrealized losses that were determined to be other-than-temporary were recorded to earnings. An unrealized loss was considered other-than-temporary if (i) it was probable that the holder would not collect all amounts due according to the contractual terms of the security, or (ii) the fair value was below the amortized cost of the security for a prolonged period of time and the Company did not have the positive intent and ability to hold the security until recovery or maturity.
OTTI losses are recognized in earnings if the Company’s intent is to sell the debt security or it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if the Company does not expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.
An unrealized loss is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. As a result the credit loss component of an OTTI is recorded as a component of investment securities gains (losses) in the accompanying consolidated statement of income, while the remaining portion of the impairment loss is recognized in other comprehensive income, provided the Company does not intend to sell the underlying debt security and it is “more likely than not” that the Company will not have to sell the debt security prior to recovery.
Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for more than 92% of the total available-for-sale portfolio as of June 30, 2011 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of significant unrealized loss positions within the obligations of state and political subdivisions security portfolio. The Company’s assessment was concentrated mainly on private-label collateralized mortgage obligations of approximately $14.5 million for which the Company evaluates credit losses on a quarterly basis. The gross unrealized gain position related to these private-label collateralized mortgage obligations amounted to $764,000 and the gross unrealized loss position was $278,000 on June 30, 2011. The Company considered the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:
  •  
The length of time and the extent to which the fair value has been less than the amortized cost basis.
 
  •  
Changes in the near term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions;
 
  •  
The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and
 
  •  
Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.
For the six months ended June 30, 2011, there were no available-for-sale debt securities with an unrealized loss that suffered OTTI.