Investment Securities

12 Months Ended

Dec. 31, 2011

Investment Securities

Investment Securities

3. Investment Securities

The amortized cost and estimated fair value of securities were as follows:

	December 31, 2011
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value
	(in thousands)
Investment securities available for sale:
U.S. Treasury	$	147	$	15	$	—		$	162
Municipal bonds	23,354		788		(3		)	24,139
Mortgage-backed securities	91,605		634		(895		)	91,344
Total securities available for sale	115,106		1,437		(898		)	115,645
FHLB stock	10,456		—		—			10,456
Federal Reserve Bank stock	2,019		—		—			2,019
Total equities held at cost	12,475		—		—			12,475
Total securities	$	127,581	$	1,437	$	(898	)	$	128,120

	December 31, 2010
	Amortized		Unrealized		Unrealized			Estimated
	cost		Gain		Loss			Fair Value
	(in thousands)
Investment securities available for sale:
U.S. Treasury	$	148	$	11	$	—		$	159
Municipal bonds	20,555		7		(803		)	19,759
Mortgage-backed securities	135,944		1,292		(2,060		)	135,176
Total securities available for sale	156,647		1,310		(2,863		)	155,094
FHLB stock	11,315		—		—			11,315
Federal Reserve Bank stock	2,019		—		—			2,019
Total equities held at cost	13,334		—		—			13,334
Total securities	$	169,981	$	1,310	$	(2,863	)	$	168,428

At December 31, 2011, the Company had a $10.5 million investment in FHLB stock carried at cost. In January 2009, the FHLB announced that it suspended excess FHLB stock redemptions.  During the years ended December 31, 2010 and 2011, the FHLB has repurchased $3.4 million of our excess FHLB stock through their stock repurchase program.

At December 31, 2011, MBS with an estimated par value of $37.0 million and a book value of $38.4 million were pledged as collateral for the Bank’s three inverse putable reverse repurchases totaling $28.5 million.

The Company reviewed individual securities classified as available-for-sale to determine whether a decline in fair value below the amortized cost basis is other-than-temporary.  If it is probable that the Company will be unable to collect all amounts due according to contractual terms of the debt security not impaired at acquisition, an OTTI shall be considered to have occurred.  If an OTTI occurs, the cost basis of the security would have been written down to its fair value as the new cost basis and the write down accounted for as a realized loss.  Securities with OTTI at December 31, 2011 consisted of 24 private label MBS with a book value of $1.2 million.  The Company realized OTTI losses of $617,000 in 2011.  Additionally, the Bank took an OTTI charges in 2010 of $1.1 million and in 2009 of $2.0 million.

The table below shows the number, fair value and gross unrealized holding losses of the Company’s investment securities by investment category and length of time that the securities have been in a continuous loss position.

	December 31, 2011
	Less than 12 months						12 months or Longer						Total
				Gross						Gross						Gross
				Unrealized						Unrealized						Unrealized
		Fair		Holding				Fair		Holding				Fair		Holding
	Number	Value		Losses			Number	Value		Losses			Number	Value		Losses
	(dollars in thousands)
Municipal bonds	1	$	1,175	$	(3	)	—	$	—	$	—		1	$	1,175	$	(3	)
Mortgage-backed securities	18	24,583		(167		)	42	1,443		(728		)	60	26,026		(895		)
Total	19	$	25,758	$	(170	)	42	$	1,443	$	(728	)	61	$	27,201	$	(898	)

	December 31, 2010
	Less than 12 months						12 months or Longer						Total
				Gross						Gross						Gross
				Unrealized						Unrealized						Unrealized
		Fair		Holding				Fair		Holding				Fair		Holding
	Number	Value		Losses			Number	Value		Losses			Number	Value		Losses
	(dollars in thousands)
Municipal bonds	27	$	19,316	$	(803	)	—	$	—	$	—		27	$	19,316	$	(803	)
Mortgage-backed securities	15	39,851		(886		)	55	2,561		(1,174		)	70	42,412		(2,060		)
Total	42	$	59,167	$	(1,689	)	55	$	2,561	$	(1,174	)	97	$	61,728	$	(2,863	)

The amortized cost and estimated fair value of investment securities available for sale at December 31, 2011, by contractual maturity are shown in the table below.

	One Year				More than One				More than Five Years				More than
	or Less				to Five Years				to Ten Years				Ten Years				Total
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value
	(dollars in thousands)
Investement securities available for sale:
U.S. Treasury	$	—	$	—	$	73	$	76	$	74	$	86	$	—	$	—	$	147	$	162
Municipal bonds	—		—		—		—		1,203		1,261		22,151		22,878		23,354		24,139
Mortgage-backed securities	—		—		144		147		73		77		91,388		91,120		91,605		91,344
Total investment securities available for sale	—		—		217		223		1,350		1,424		113,539		113,998		115,106		115,645
Stock:
FHLB	10,456		10,456		—		—		—		—		—		—		10,456		10,456
Federal Reserve Bank	2,019		2,019		—		—		—		—		—		—		2,019		2,019
Total stock	12,475		12,475		—		—		—		—		—		—		12,475		12,475
Total securities	$	12,475	$	12,475	$	217	$	223	$	1,350	$	1,424	$	113,539	$	113,998	$	127,581	$	128,120

The temporary impairment in both years is a result of the change in market interest rates and not the underlying issuers’ ability to repay.  The Company has the intent and ability to hold these securities until the temporary impairment is eliminated.  Accordingly, the Company has not recognized the temporary impairment in earnings of either year.

Unrealized gains and losses on investment securities available for sale are recognized in stockholders’ equity as accumulated other comprehensive income (loss).  At December 31, 2011, the Company had accumulated other comprehensive income of $539,000, or $318,000 net of tax, compared to accumulated other comprehensive loss of $1.6 million or $914,000 net of tax, at December 31, 2010.