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Investment Securities

9 Months Ended

Sep. 30, 2011

Investment Securities [Abstract]

Investment Securities

7. Investment Securities

The cost basis and fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale (AFS):

		September 30, 2011
		Cost Basis				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
U.S. Agency		$	8,568			$	47			$	(21	)		$	8,594
U.S. Agency mortgage- backed securities			169,567				7,122				(6	)			176,683
Total		$	178,135			$	7,169			$	(27	)		$	185,277

Investment securities held to maturity (HTM):

		September 30, 2011
		Cost Basis				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
U.S. Agency mortgage- backed securities		$	7,507			$	654			$	—			$	8,161
Other securities			3,000				—				(11	)			2,989
Total		$	10,507			$	654			$	(11	)		$	11,150

Investment securities available for sale (AFS):

		December 31, 2010
		Cost Basis				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
U.S. Agency		$	15,956			$	57			$	(69	)		$	15,944
U.S. Agency mortgage- backed securities			145,727				3,714				(574	)			148,867
Total		$	161,683			$	3,771			$	(643	)		$	164,811

Investment securities held to maturity (HTM):

		December 31, 2010
		Cost Basis				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
U.S. Agency mortgage- backed securities		$	6,824			$	452			$	—			$	7,276
Other securities			1,000				—				(9	)			991
Total		$	7,824			$	452			$	(9	)		$	8,267

Maintaining investment quality is a primary objective of the Company's investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody's Investor's Service or Standard & Poor's rating of "A." At September 30, 2011 and December 31, 2010, 98.4% of the portfolio was rated "AAA". None of the portfolio was rated below "A" or unrated at September 30, 2011. At September 30, 2011, the Company's consolidated investment securities portfolio had a modified duration of approximately 1.55 years. Total proceeds from the sale of AFS securities were $16.5 million in the first nine months of 2011 compared to $2.7 million for the first nine months of 2010. The gross losses on investment security sales in the first nine months of 2011 were $358,000 compared to $157,000 of gross investment security gains for the first nine months of 2010.

The following tables present information concerning investments with unrealized losses as of September 30, 2011 and December 31, 2010 (in thousands):

Investment securities available for sale:

		September 30, 2011
		Less than 12 months								12 months or longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
U.S. Agency		$	5,047			$	(21	)		$	—			$	—			$	5,047			$	(21	)
U.S. Agency mortgage-backed securities			721				(6	)			—				—				721				(6	)
Total		$	5,768			$	(27	)		$	—			$	—			$	5,768			$	(27	)

Investment securities held to maturity:

		September 30, 2011
		Less than 12 months								12 months or longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
Other securities		$	1,990			$	(10	)		$	999			$	(1	)		$	2,989			$	(11	)
Total		$	1,990			$	(10	)		$	999			$	(1	)		$	2,989			$	(11	)

Investment securities available for sale:

		December 31, 2010
		Less than 12 months								12 months or longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
U.S. Agency		$	4,204			$	(69	)		$	—			$	—			$	4,204			$	(69	)
U.S. Agency mortgage-backed securities			38,202				(574	)			—				—				38,202				(574	)
Total		$	42,406			$	(643	)		$	—			$	—			$	42,406			$	(643	)

Investment securities held to maturity:

		December 31, 2010
		Less than 12 months								12 months or longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
Other securities		$	—			$	—			$	991			$	(9	)		$	991			$	(9	)
Total		$	—			$	—			$	991			$	(9	)		$	991			$	(9	)

The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are five positions that are considered temporarily impaired at September 30, 2011. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, we do not intend to sell these securities and do not believe we will be required to sell these securities before they recover in value.

Contractual maturities of securities at September 30, 2011, are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties.

Maturity		Available for Sale								Held to Maturity
		Cost Basis				Fair Value				Cost Basis				Fair Value
0-1 year		$	—			$	—			$	1,000			$	999
1-5 years			8,568				8,594				2,000				1,990
5-10 years			16,606				17,600				—				—
10-15 years			77,922				80,891				—				—
Over 15 years			75,039				78,192				7,507				8,161
Total		$	178,135			$	185,277			$	10,507			$	11,150

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- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

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