Investment Securities Available For Sale

9 Months Ended

Sep. 30, 2011

Investment Securities Available For Sale [Abstract]

Investment Securities Available For Sale

Note 3. Investment Securities Available for Sale

The amortized cost and estimated market value of investment securities available for sale at September 30, 2011 and December 31, 2010 are as follows (in thousands):

		$(13,706)		$(13,706)		$(13,706)			$(13,706)
September 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
U.S. agency obligations	$	96,899	$	851	$	(77	)	$	97,673
State and municipal obligations		17,738		31		(8	)		17,761
Corporate debt securities		55,000		—		(13,621	)		41,379
Equity investments		222		—		—			222
	$	169,859	$	882	$	(13,706	)	$	157,035

		$(13,706)		$(13,706)		$(13,706)			$(13,706)
December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
U.S. agency obligations	$	41,146	$	41	$	(55	)	$	41,132
State and municipal obligations		10,690		—		(75	)		10,615
Corporate debt securities		55,000		—		(15,144	)		39,856
Equity investments		370		—		(55	)		315
	$	107,206	$	41	$	(15,329	)	$	91,918

There were no realized gains or losses on the sale of investment securities available for sale for the three and nine months ended September 30, 2011 and 2010. The Company recognized an other-than-temporary impairment loss on equity investments of $148,000 for the three and nine months ended September 30, 2011.

The amortized cost and estimated market value of investment securities available for sale, excluding equity investments, at September 30, 2011 by contractual maturity, are shown below (in thousands). Actual maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2011, investment securities available for sale with an amortized cost and estimated market value of $55.0 million and $41.4 million, respectively, were callable prior to the maturity date.

September 30, 2011	Amortized Cost		Estimated Market Value
Less than one year	$	21,579	$	21,596
Due after one year through five years		93,058		93,838
Due after five years through ten years		—		—
Due after ten years		55,000		41,379
	$	169,637	$	156,813

The estimated market value and unrealized loss for investment securities available for sale at September 30, 2011 and December 31, 2010 segregated by the duration of the unrealized loss are as follows (in thousands):

		$(13,627)		$(13,627)			$(13,627)		$(13,627)			$(13,627)		$(13,627)
	Less than 12 months					12 months or longer					Total
September 30, 2011	Estimated Market Value		Unrealized Losses			Estimated Market Value		Unrealized Losses			Estimated Market Value		Unrealized Losses
U.S. agency obligations	$	15,461	$	(77	)	$	—	$	—		$	15,461	$	(77	)
State and municipal obligations		409		(2	)		1,845		(6	)		2,254		(8	)
Corporate debt securities		—		—			41,379		(13,621	)		41,379		(13,621	)
Equity investments		—		—			—		—			—		—
	$	15,870	$	(79	)	$	43,224	$	(13,627	)	$	59,094	$	(13,706	)

		$(13,627)		$(13,627)			$(13,627)		$(13,627)			$(13,627)		$(13,627)
	Less than 12 months					12 months or longer					Total
December 31, 2010	Estimated Market Value		Unrealized Losses			Estimated Market Value		Unrealized Losses			Estimated Market Value		Unrealized Losses
U.S. agency obligations	$	20,742	$	(55	)	$	—	$	—		$	20,742	$	(55	)
State and municipal obligations		9,738		(75	)		—		—			9,738		(75	)
Corporate debt securities		—		—			39,856		(15,144	)		39,856		(15,144	)
Equity investments		104		(16	)		211		(39	)		315		(55	)
	$	30,584	$	(146	)	$	40,067	$	(15,183	)	$	70,651	$	(15,329	)

At September 30, 2011, the amortized cost, estimated market value and credit rating of the individual corporate debt securities in an unrealized loss position for greater than one year are as follows (in thousands):

Security Description	Amortized Cost		Estimated Market Value		Credit  Rating Moody's/S&P
BankAmerica Capital	$	15,000	$	9,188	Ba1/BB+
Chase Capital		10,000		7,361	A2/BBB+
Wells Fargo Capital		5,000		4,166	A3/A-
Huntington Capital		5,000		4,054	Ba1/BB-
Keycorp Capital		5,000		4,163	Baa3/BB
PNC Capital		5,000		4,329	Baa2/BBB
State Street Capital		5,000		4,214	A3/BBB+
SunTrust Capital		5,000		3,904	Baa3/BB
	$	55,000	$	41,379

At September 30, 2011, the market value of each corporate debt security was below cost. The corporate debt securities are issued by other financial institutions with credit ratings ranging from a high of A2 to a low of BB- as rated by one of the internationally-recognized credit rating services. These floating-rate securities were purchased in 1998 and have paid coupon interest continuously since issuance. Floating-rate debt securities such as these pay a fixed interest rate spread over the London Interbank Offered Rate ("LIBOR"). Following the purchase of these securities, the required spread increased for these types of securities causing a decline in the market price. The Company concluded that unrealized losses on available for sale securities were only temporarily impaired at September 30, 2011. In concluding that the impairments were only temporary, the Company considered several factors in its analysis. The Company noted that each issuer made all the contractually due payments when required. There were no defaults on principal or interest payments and no interest payments were deferred. All of the financial institutions were also considered well-capitalized. Based on management's analysis of each individual security, the issuers appear to have the ability to meet debt service requirements for the foreseeable future. Furthermore, although these investment securities are available for sale, the Company does not have the intent to sell these securities and it is more likely than not that the Company will not be required to sell the securities. The Company has held the securities continuously since 1998 and expects to receive its full principal at maturity in 2028 or prior if called by the issuer. The Company has historically not actively sold investment securities and does not utilize the securities portfolio as a source of liquidity. The Company's long range liquidity plans indicate adequate sources of liquidity outside the securities portfolio.

Capital markets in general and the market for these corporate securities in particular have been disrupted since the second half of 2007. In its analysis, the Company considered that the severity and duration of unrecognized losses was at least partly due to the illiquidity caused by market disruptions. Since that time, markets have stabilized partly due to steps taken by the U.S. Treasury, the Federal Reserve Board, the Federal Deposit Insurance Corporation and foreign central banks to restore liquidity and confidence in the capital markets. Each of these issuers has been able to raise capital in recent years and the fair values of these securities have increased since the lows reached in the second half of 2007.

Due to the reasons noted above, especially the continuing restoration of the capital markets, the improved valuation of the corporate securities portfolio since December 31, 2010, the capital position of the issuers, the uninterrupted payment of all contractually due interest, management has determined that only a temporary impairment existed at September 30, 2011.