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Investment Securities

12 Months Ended

Dec. 31, 2011

Investment Securities [Abstract]

Investment Securities

3. INVESTMENT SECURITIES

The cost basis and fair values of investment securities are summarized as follows:

Investment securities available for sale:

		AT DECEMBER 31, 2011
		COST BASIS				GROSS UNREALIZED GAINS				GROSS UNREALIZED LOSSES				FAIR VALUE
		(IN THOUSANDS)
U.S. Agency		$	10,689			$	48			$	(28	)		$	10,709
U.S. Agency mortgage-backed securities			165,484				6,737				(7	)			172,214
Total		$	176,173			$	6,785			$	(35	)		$	182,923
Investment securities held to maturity:
		AT DECEMBER 31, 2011
		COST BASIS				GROSS UNREALIZED GAINS				GROSS UNREALIZED LOSSES				FAIR VALUE
		(IN THOUSANDS)
U.S. Agency mortgage-backed securities		$	9,280			$	643			$	—			$	9,923
Other securities			3,000				—				(9	)			2,991
Total		$	12,280			$	643			$	(9	)		$	12,914
Investment securities available for sale:
		AT DECEMBER 31, 2010
		COST BASIS				GROSS UNREALIZED GAINS				GROSS UNREALIZED LOSSES				FAIR VALUE
		(IN THOUSANDS)
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:
		AT DECEMBER 31, 2010
		COST BASIS				GROSS UNREALIZED GAINS				GROSS UNREALIZED LOSSES				FAIR VALUE
		(IN THOUSANDS)
U.S. Agency mortgage-backed securities		$	6,824			$	452			$	—			$	7,276
Other securities			1,000				—				(9	)			991
Total		$	7,824			$	452			$	(9	)		$	8,267

Realized gains and losses are calculated by the specific identification method.

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 Investors Service or Standard & Poor's rating of A. At December 31, 2011, 98.4% of the portfolio was rated AAA as compared to 99.4% at December 31, 2010. None of the portfolio was rated below A or unrated on December 31, 2011. The Company and its subsidiaries, collectively, did not hold securities of any single issuer, excluding U.S. Treasury and U.S. Agencies, that exceeded 10% of shareholders' equity at December 31, 2011.

The book value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits, and certain Federal Home Loan Bank borrowings was $83,235,000 at December 31, 2011 and $86,894,000 at December 31, 2010.

The Company realized $358,000 of gross investment losses and no investment security gains in 2011, and $157,000 of gross investment gains and no investment security losses in 2010, and $164,000 of gross investment gains and no investment security losses in 2009. On a net basis, the realized loss for 2011 was $236,000, after factoring the tax benefit of $122,000, and the realized gain for 2010 was $104,000, after factoring the tax expense of $53,000, and the realized gains in 2009 amounted to $108,000, after factoring in tax expense of $56,000. Proceeds from sales of investment securities available for sale were $16.5 million for 2011, $2.7 million for 2010, and $4.7 million during 2009.

The following table sets forth the contractual maturity distribution of the investment securities, cost basis and fair market values, and the weighted average yield for each type and range of maturity as of December 31, 2011. Yields are not presented on a tax-equivalent basis, but are based upon the cost basis and are weighted for the scheduled maturity. The Company's consolidated investment securities portfolio had a modified duration of approximately 1.76 years. The weighted average expected maturity for available for sale securities at December 31, 2011 for U.S. Agency and U.S. Agency Mortgage-Backed was 3.57, and 3.72 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2011 for U.S. Agency Mortgage-Backed and other securities were 5.00 and 1.64 years.

Investment securities available for sale:

		AT DECEMBER 31, 2011
		U. S. AGENCY								U.S. AGENCY MORTGAGE- BACKED SECURITIES								TOTAL INVESTMENT SECURITIES AVAILABLE FOR SALE
		(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year		$	—				—	%		$	—				—	%		$	—				—	%
After 1 year but within 5 years			10,689				1.87				—				—				10,689				1.87
After 5 years but within 10 years			—				—				15,403				3.95				15,403				3.95
After 10 years but within 15 years			—				—				76,272				2.96				76,272				2.96
Over 15 years			—				—				73,809				3.27				73,809				3.27
Total		$	10,689				1.87			$	165,484				3.19			$	176,173				3.11
FAIR VALUE
Within 1 year		$	—							$	—							$	—
After 1 year but within 5 years			10,709								—								10,709
After 5 years but within 10 years			—								16,313								16,313
After 10 years but within 15 years			—								79,085								79,085
Over 15 years			—								76,816								76,816
Total		$	10,709							$	172,214							$	182,923

Investment securities held to maturity:

		AT DECEMBER 31, 2011
		U.S. AGENCY MORTGAGE- BACKED SECURITIES								OTHER								TOTAL INVESTMENT SECURITIES HELD TO MATURITY
		(IN THOUSANDS, EXCEPT YIELDS)
COST BASIS
Within 1 year		$	—				—	%		$	1,000				0.64	%		$	1,000				0.64	%
After 1 year but within 5 years			—				—				2,000				1.46				2,000				1.46
After 5 years but within 10 years			—				—				—				—				—				—
After 10 years but within 15 years			—				—				—				—				—				—
Over 15 years			9,280				4.45				—				—				9,280				4.45
Total		$	9,280				4.45			$	3,000				1.19			$	12,280				3.69
FAIR VALUE
Within 1 year		$	—							$	1,000							$	1,000
After 1 year but within 5 years			—								1,991								1,991
After 5 years but within 10 years			—								—								—
After 10 years but within 15 years			—								—								—
Over 15 years			9,923								—								9,923
Total		$	9,923							$	2,991							$	12,914

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

Investment securities available for sale:

		LESS THAN 12 MONTHS								12 MONTHS OR LONGER								TOTAL
		FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES
U.S. Agency		$	3,161			$	(28	)		$	—			$	—			$	3,161			$	(28	)
U.S. Agency mortgage-backed securities			613				(7	)			—				—				613				(7	)
Total investment securities available for sale		$	3,774			$	(35	)		$	—			$	—			$	3,774			$	(35	)

Investment securities held to maturity:

		LESS THAN 12 MONTHS								12 MONTHS OR LONGER								TOTAL
		FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES
Other securities		$	1,991			$	(9	)		$	—			$	—			$	1,991			$	(9	)
Total investment securities held to maturity		$	1,991			$	(9	)		$	—			$	—			$	1,991			$	(9	)

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

Investment securities available for sale:

		LESS THAN 12 MONTHS								12 MONTHS OR LONGER								TOTAL
		FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES
U.S. Agency		$	4,204			$	(69	)		$	—			$	—			$	4,204			$	(69	)
U.S. Agency mortgage-backed securities			38,202				(574	)			—				—				38,202				(574	)
Total investment securities available for sale		$	42,406			$	(643	)		$	—			$	—			$	42,406			$	(643	)

Investment securities held to maturity:

		LESS THAN 12 MONTHS								12 MONTHS OR LONGER								TOTAL
		FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES				FAIR VALUE				UNREALIZED LOSSES
Other securities		$	—			$	—			$	991			$	(9	)		$	991			$	(9	)
Total investment securities held to maturity		$	—			$	—			$	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 December 31, 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, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.

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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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