Securities

9 Months Ended

Sep. 30, 2011

Securities [Abstract]

Securities

Note 2 – Securities

The amortized cost and approximate fair value of securities available-for-sale and held-to-maturity as of September 30, 2011 and December 31, 2010 are summarized as follows:

		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
(Dollars in thousands)	Cost	Gains	Losses	Value
September 30, 2011
Available-for-Sale
U.S. government agencies	$4,000	$4	$-	$4,004
State and political subdivisions	26,953	943	(55)	27,841
Mortgage-backed securities:
U.S. government-sponsored enterprises	41,759	704	(74)	42,389
Private mortgage-backed securities	3,020	67	-	3,087
Equity securities-financial services industry and other	1,646	3	(357)	1,292
	77,378	1,721	(486)	78,613
Held-to-Maturity Securities
State and political subdivisions	3,287	137	-	3,424
Total Securities	$80,665	$1,858	$(486)	$82,037
December 31, 2010
Available-for-Sale
U.S. government agencies	$  21,158	$          78	$       (47)	$  21,189
State and political subdivisions	29,353	97	(715)	28,735
Mortgage-backed securities:
U.S. government-sponsored enterprises	32,560	747	(21)	33,286
Private mortgage-backed securities	4,592	215	-	4,807
Equity securities-financial services industry and other	1,638	9	(284)	1,363
	89,301	1,146	(1,067)	89,380
Held-to-Maturity Securities
State and political subdivisions	1,000	7	-	1,007
Total Securities	$  90,301	$     1,153	$  (1,067)	$  90,387

The amortized cost and fair value of securities at September 30, 2011 are shown below by contractual maturity. Actual maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale		Held-to-Maturity
	Amortized	Fair	Amortized	Fair
(Dollars in thousands)	Cost	Value	Cost	Value
Due in one year or less	$2,581	$2,585	$1,219	$1,224
Due after one year through five years	3,000	3,002	-	-
Due after five years through ten years	197	200	1,068	1,088
Due after ten years	25,175	26,058	1,000	1,112
Total bonds and obligations	30,953	31,845	3,287	3,424
Mortgage-backed securities:
U.S. government-sponsored enterprises	41,759	42,389	-	-
Private mortgage-backed securities	3,020	3,087	-	-
Equity securities-financial services industry and other	1,646	1,292	-	-
Total securities	$77,378	$78,613	$3,287	$3,424

Temporarily Impaired Securities and Other-Than-Temporary Impairment

The following table shows the gross unrealized losses and fair value for securities in our portfolio that are not deemed to be other than temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2011 and December 31, 2010.

	Less Than Twelve Months		Twelve Months or More		Total
		Gross		Gross		Gross
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
(Dollars in thousands)	Value	Losses	Value	Losses	Value	Losses
September 30, 2011
Available-for-sale securities:
U.S. government agencies	$         -	$         -	$        -	$           -	$         -	$          -
State and political subdivisions	-	-	897	(55)	897	(55)
Mortgage-backed securities:
U.S. government-sponsored enterprises	12,469	(74)	-	-	12,469	(74)
Equity securities-financial services industry and other	888	(19)	488	(338)	1,376	(357)
Total Temporarily Impaired Securities	$13,357	$      (93)	$ 1,385	$    (393)	$14,742	$   (486)
December 31, 2010
Available-for-sale securities:
U.S. government agencies	$ 6,962	$       (47)	$         -	$            -	$6,962	$       (47)
State and political subdivisions	18,006	(578)	1,071	(137)	19,077	(715)
Mortgage-backed securities:
U.S. government-sponsored enterprises	4,536	(21)	-	-	4,536	(21)
Equity securities-financial services industry and other	820	(50)	445	(234)	1,265	(284)
Total Temporarily Impaired Securities	$30,324	$     (696)	$ 1,516	$     (371)	$31,840	$  (1,067)

As of September 30, 2011, we reviewed our investment portfolio for indications of impairment. This review included analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and the intent and likelihood of selling the security. The intent and likelihood of sale of debt and equity securities is evaluated based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. For each security (including but not limited to those whose fair value is less than their amortized cost basis), an extensive, regular review is conducted to determine if an other-than-temporary impairment has occurred.

At September 30, 2011, the market value of and the unrealized losses for our state and political subdivisions investment portfolio were caused by changes in interest rates and spreads and were not the result of credit quality. At September 30, 2011, there were 3 securities that had an unrealized loss, compared to 44 securities at December 31, 2010. These securities typically have maturity dates greater than ten years and the fair values are more sensitive to changes in market interest rates. As of September 30, 2011, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore none of our state and political subdivision securities at September 30, 2011 were deemed to be other than temporarily impaired.

At September 30, 2011, the decline in market value and the unrealized losses for our mortgaged-backed securities that are backed by U.S. government-sponsored enterprises were caused by changes in interest rates and spreads and were not the result of credit quality. At both September 30, 2011 and December 31, 2010, there were 2 securities that had an unrealized loss. The decline in market value and the unrealized losses were primarily due to changes in spreads and market conditions and not credit quality. As of September 30, 2011, we did not intend to sell and it was not more-likely-than-not that we would be required to sell any of these securities before recovery of their amortized cost basis. Therefore none of our mortgaged-backed securities at September 30, 2011 were deemed to be other than temporarily impaired. At September 30, 2011, our private mortgage-backed securities portfolio all had unrealized gains and was rated investment grade.

Our investments in marketable equity securities consist primarily of a mutual fund, one equity portfolio fund and common stock of entities in the financial services and insurance industries. These securities, other than the mutual fund, which had a fair value of $850 thousand and an unrealized loss of $7 thousand at September 30, 2011, have been adversely impacted by the effects of the current economic environment on the financial services and insurance industries. We evaluated each of the underlying banks for credit impairment based on its financial condition and performance. Based on our evaluation and our ability and intent to hold those investments for a reasonable period of time sufficient for a forecasted recovery of amortized cost, we do not consider these investments to be other-than-temporarily impaired at September 30, 2011. At September 30, 2011, there were 14 of 20 securities that had an unrealized loss, including an equity portfolio fund with a market value of $111 thousand and an unrealized loss of $139 thousand. We continue to closely monitor the performance of the securities we own as well as the impact from any further deterioration in the economy or in the banking industry that may adversely affect these securities. We will continue to evaluate them for other-than-temporary impairment, which could result in a future non-cash charge to earnings.

During the second quarter of 2010, we recognized $171 thousand pre-tax ($113 thousand after-tax, or $0.03 per share) non-cash other-than-temporarily impaired charge related to an equity portfolio fund that had an amortized cost of $250 thousand and a termination date of October 2010.  The impairment was recognized because the market value of this security was below our amortized cost for an extended period of time along with credit deterioration in some of the underlying collateral and it was not believed the market value of this security would recover to our amortized cost before its termination date.  The fund was comprised of common stocks of bank holding companies.  During the third quarter of 2010, management decided to execute a redemption in kind provision for this investment prior to the termination date of October 22, 2010.  We received its pro-rata share of the underlying bank securities. We received seventeen different equity securities totaling $76 thousand. In October of 2010 the securities which then were recorded at market value resulted in an additional $3 thousand pre-tax charge related to the exchange.  As of September 30, 2011, we held 16 equity securities and their current market value was $63 thousand with a net unrealized loss of $9 thousand.