Mortgage-Backed Securities Available For Sale

9 Months Ended

Sep. 30, 2011

Mortgage-Backed Securities Available For Sale [Abstract]

Mortgage-Backed Securities Available For Sale

Note 4. Mortgage-Backed Securities Available for Sale

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

September 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
FHLMC	$	35,130	$	807	$	(48	)	$	35,889
FNMA		298,704		10,561		(2	)		309,263
GNMA		975		165		—			1,140
	$	334,809	$	11,533	$	(50	)	$	346,292

December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
FHLMC	$	19,225	$	386	$	(13	)	$	19,598
FNMA		315,024		5,344		—			320,368
GNMA		1,037		172		—			1,209
	$	335,286	$	5,902	$	(13	)	$	341,175

There were no gains or losses realized on the sale of mortgage-backed securities available for sale for the three and nine months ended September 30, 2011 and 2010.

The contractual maturities of mortgage-backed securities available for sale vary; however, the effective lives are expected to be shorter than the contractual maturity date due to principal prepayments.

The estimated market value and unrealized loss for mortgage-backed 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):

		$10,557		$10,557			$10,557		$10,557		$10,557		$10,557
	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
FHLMC	$	10,381	$	(48	)	$	—	$	—	$	10,381	$	(48	)
FNMA		176		(2	)		—		—		176		(2	)
	$	10,557	$	(50	)	$	—	$	—	$	10,557	$	(50	)

		$10,557		$10,557			$10,557		$10,557		$10,557		$10,557
	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
FHLMC	$	4,982	$	(13	)	$	—	$	—	$	4,982	$	(13	)

The mortgage-backed securities are issued and guaranteed by either FHLMC or FNMA, corporations which are chartered by the United States Government and whose debt obligations are typically rated AAA by one of the internationally-recognized credit rating services. On July 13, 2011, Moody's Investors Service ("Moody's") placed the Aaa ratings of FHLMC and FNMA on review for possible downgrade in conjunction with its ratings review of the government of the United States. Standard & Poor's ("S&P's") took similar action on July 14, 2011. On August 2, 2011, Moody's confirmed the Aaa rating of the United States with a negative outlook. Moody's also confirmed the Aaa ratings of FHLMC and FNMA. S&P's lowered the credit rating of the United States to AA+ on August 5, 2011 and lowered the ratings of FHLMC and FNMA to AA+ on August 8, 2011. FHLMC and FNMA have been under the conservatorship of the Federal Housing Finance Agency since September 8, 2008. The conservatorships have no specified termination date. Also, FHLMC and FNMA have entered into Stock Purchase Agreements, which following the issuance of Senior Preferred Stock and Warrants to the United States Treasury, provide FHLMC and FNMA funding commitments from the United States Treasury. The Company considers the unrealized losses to be the result of changes in interest rates which over time can have both a positive and negative impact on the estimated market value of the mortgage-backed securities. Although these mortgage-backed securities are available for sale, the Company does not intend to sell these securities and it is more likely than not that the Bank will not be required to sell the securities before recovery of their amortized cost. As a result, the Company concluded that unrealized losses on these available for sale securities were only temporarily impaired at September 30, 2011.