Securities

3 Months Ended

Mar. 31, 2012

Securities [Abstract]

SECURITIES

2. SECURITIES

The amortized cost and fair value of available for sale securities and the related pre-tax gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2012
U.S. Government agency debt obligations	$	70,734,000	$	1,505,000	$	(310,000	)	$	71,929,000
Mortgage-backed securities		28,833,000		2,478,000		0			31,311,000
Michigan Strategic Fund bonds		13,755,000		0		0			13,755,000
Municipal general obligation bonds		26,215,000		1,003,000		0			27,218,000
Municipal revenue bonds		4,300,000		107,000		0			4,407,000
Mutual funds		1,321,000		40,000		0			1,361,000
	$	145,158,000	$	5,133,000	$	(310,000	)	$	149,981,000
December 31, 2011
U.S. Government agency debt obligations	$	86,783,000	$	1,872,000	$	(59,000	)	$	88,596,000
Mortgage-backed securities		31,851,000		2,759,000		0			34,610,000
Michigan Strategic Fund bonds		16,700,000		0		0			16,700,000
Municipal general obligation bonds		26,212,000		1,097,000		0			27,309,000
Municipal revenue bonds		4,300,000		123,000		0			4,423,000
Mutual funds		1,312,000		42,000		0			1,354,000
	$	167,158,000	$	5,893,000	$	(59,000	)	$	172,992,000

Securities with unrealized losses at March 31, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
March 31, 2012
U.S. Government agency debt obligations	$	27,689,000	$	(301,000	)	$	1,547,000	$	(9,000	)	$	29,236,000	$	(310,000	)
Mortgage-backed securities		0		0			0		0			0		0
Michigan Strategic Fund bonds		0		0			0		0			0		0
Municipal general obligation bonds		0		0			0		0			0		0
Municipal revenue bonds		0		0			0		0			0		0
Mutual funds		0		0			0		0			0		0
	$	27,689,000	$	(301,000	)	$	1,547,000	$	(9,000	)	$	29,236,000	$	(310,000	)
December 31, 2011
U.S. Government agency debt obligations	$	9,765,000	$	(33,000	)	$	9,526,000	$	(26,000	)	$	19,291,000	$	(59,000	)
Mortgage-backed securities		0		0			0		0			0		0
Michigan Strategic Fund bonds		0		0			0		0			0		0
Municipal general obligation bonds		0		0			0		0			0		0
Municipal revenue bonds		0		0			0		0			0		0
Mutual funds		0		0			0		0			0		0
	$	9,765,000	$	(33,000	)	$	9,526,000	$	(26,000	)	$	19,291,000	$	(59,000	)

We evaluate securities for other-than-temporary impairment at least on a quarterly basis. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability we have to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. For those debt securities whose fair value is less than their amortized cost basis, we also consider our intent to sell the security, whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to recover the entire amortized cost basis of the security. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.

At March 31, 2012, 20 debt securities with a fair value totaling $29.2 million have unrealized losses with aggregate depreciation of $0.3 million, or 0.2% from the amortized cost basis of total securities. At March 31, 2012, 210 debt securities and a mutual fund with a fair value totaling $101.0 million have unrealized gains with aggregate appreciation of $5.1 million, or 3.5% from the amortized cost basis of total securities. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that unrealized losses were due to changing interest rate environments. As we do not intend to sell our debt securities before recovery of their cost basis and we believe it is more likely than not that we will not be required to sell our debt securities before recovery of the cost basis, no declines are deemed to be other-than-temporary.

The amortized cost and fair value of debt securities at March 31, 2012, by contractual maturity, are shown below. The contractual maturity is utilized below for U.S. Government agency debt obligations and municipal bonds. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

The maturities of securities and their weighted average yields at March 31, 2012 are also shown in the following table. The yields for municipal securities are included at their tax equivalent yield.

	Weighted Average Yield			Amortized Cost		Fair Value
Due in 2012		6.47	%	$	1,878,000	$	1,886,000
Due in 2013 through 2017		4.29			8,979,000		9,303,000
Due in 2018 through 2022		3.91			31,831,000		32,076,000
Due in 2023 and beyond		4.72			58,561,000		60,289,000
Mortgage-backed securities		5.16			28,833,000		31,311,000
Michigan Strategic Fund bonds		2.57			13,755,000		13,755,000
Mutual funds		2.58			1,321,000		1,361,000
		4.41	%	$	145,158,000	$	149,981,000

At March 31, 2012, and December 31, 2011, the amortized cost of securities issued by the State of Michigan and all its political subdivisions totaled $30.5 million with estimated market values of $31.6 million and $31.7 million, respectively. Total securities of any other specific issuer, other than the U.S. Government and its agencies, did not exceed 10% of shareholders’ equity.

The carrying value of U.S. Government agency debt obligations and mortgage-backed securities that are pledged to secure repurchase agreements and letters of credit issued on behalf of our customers was $92.5 million and $109.0 million at March 31, 2012 and December 31, 2011, respectively. In addition, substantially all of our municipal bonds have been pledged to the Discount Window of the Federal Reserve Bank of Chicago. Investments in Federal Home Loan Bank stock are restricted and may only be resold or redeemed by the issuer.