Investment Securities

9 Months Ended

Sep. 30, 2011

Investments, Debt and Equity Securities [Abstract]

Investment Securities

NOTE 2 - Investment Securities

The amortized costs and fair value of investment securities at September 30, 2011 and December 31, 2010 are as follows:

		September 30, 2011
		Amortized	Gross Unrealized		Fair
(dollars in thousands)		Cost	Gains	Losses	Value
Available for sale
State and political subdivisions	$	12,480	473	24	12,929
Governmental agencies		994	7	-	1,001
Mortgage-backed securities:
FHLMC		22,191	254	39	22,406
FNMA		43,752	345	69	44,028
GNMA		585	63	-	648
Total mortgage-backed securities		66,528	662	108	67,082
Total investment securities available for sale	$	80,002	1,142	132	81,012

		December 31, 2010
		Amortized	Gross Unrealized		Fair
		Cost	Gains	Losses	Value
Available for sale
State and political subdivisions	$	11,331	12	177	11,166
Mortgage-backed securities:
FHLMC		17,985	-	288	17,697
FNMA		31,780	112	463	31,429
GNMA		888	88	-	976
Private-label collateralized mortgage obligations		2,865	-	350	2,515
Total mortgage-backed securities		53,518	200	1,101	52,617
Total investment securities available for sale	$	64,849	212	1,278	63,783

Other investments are comprised of the following and are recorded at cost which approximates fair value.

(dollars in thousands)		September 30, 2011	December 31, 2010
Federal Reserve Bank stock	$	1,485	1,485
Federal Home Loan Bank stock		6,041	6,333
Certificates of deposit with other banks		99	849
Investment in Trust Preferred securities		403	403
Total other investments	$	8,028	9,070

Contractual maturities and yields on our investment securities at September 30, 2011 and December 31, 2010 are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. We had no securities with maturities less than one year at September 30, 2011 or December 31, 2010.

											September 30, 2011
		One to Five Years			Five to Ten Years			Over Ten Years				Total
(dollars in thousands)		Amount	Yield		Amount	Yield		Amount	Yield			Amount	Yield
Available for Sale
State and political subdivisions	$	-	-		3,209	3.24	%	9,720	3.37	%		12,929	3.34	%
Governmental agencies		-	-		1,001	2.42	%	-	-			1,001	2.42	%
Mortgage-backed securities		54	3.93	%	6,708	1.89	%	60,320	3.12	%		67,082	3.00	%
Total	$	54	3.93	%	10,918	2.33	%	70,040	3.16	%		81,012	3.05	%

											December 31, 2010
		One to Five Years			Five to Ten Years			Over Ten Years			Total
		Amount	Yield		Amount	Yield		Amount	Yield		Amount	Yield
Available for Sale
State and political subdivisions	$	-	-	%	5,719	3.10	%	5,447	3.66	%	11,166	3.37	%
Mortgage-backed securities		95	3.98	%	-	-	%	52,522	2.58	%	52,617	2.59	%
Total	$	95	3.98	%	5,719	3.10	%	57,969	2.71	%	63,783	2.74	%

The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities at September 30, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

							September 30, 2011
	Less than 12 months			12 months or longer			Total
(dollars in thousands)	#	Fair value	Unrealized losses	#	Fair value	Unrealized losses	#	Fair value	Unrealized losses
Available for sale
State and political subdivisions	5	$  2,345	24	-	-	-	5	2,345	24
Mortgage-backed
FHLMC	2	4,715	39	-	-	-	2	4,715	39
FNMA	6	15,410	69	-	-	-	6	15,410	69
Total	13	$22,470	132	-	-	-	13	22,470	132

								December 31, 2010
	Less than 12 months				12 months or longer			Total
	#	Fair value	Unrealized losses	#	Fair value	Unrealized losses	#	Fair value	Unrealized losses
Available for sale
State and political subdivisions	16	$  8,101	177	-	-	-	16	8,101	177
Mortgage-backed
FHLMC	5	17,697	288	-	-	-	5	17,697	288
FNMA	6	24,301	463	-	-	-	6	24,301	463
Collateral mortgage obligations	-	-	-	1	2,515	350	1	2,515	350
Total	27	$50,099	928	1	2,515	350	28	52,614	1,278

Other-than-temporary impairment ("OTTI")

As prescribed by FASB ASC 320-10-35, the Company recognizes the credit component of OTTI on debt securities through earnings and the non-credit component in other comprehensive income ("OCI") for those securities in which the Company does not intend to sell the security and it is more-likely-than-not that the Company will not be required to sell the security in the foreseeable future.

At September 30, 2011, the Company had 13 individual investments that were in an unrealized loss position for less than 12 months.  The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality.  The majority of these securities are government or agency securities currently rated AA or AAA by Moody's or Standard and Poor's, and therefore, pose minimal credit risk.  The Company considers the length of time and extent to which the fair value of available-for-sale debt securities have been less than cost to conclude whether such securities are other-than-temporarily impaired. We also consider other factors such as the financial condition of the issuer including credit ratings and specific events affecting the operations of the issuer, volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions. As the Company has no intent to sell securities with unrealized losses and it is not more-likely-than-not that the Company will be required to sell these securities before recovery of amortized cost, we have concluded that the securities are not impaired on an other-than-temporary basis.

During the second quarter of 2011, the Company recorded a $25,000 OTTI charge to earnings on its one private-label collateralized mortgage obligation ("CMO") which had been in an unrealized loss position for over 12 months. During the third quarter of 2011, the Company sold the $2.5 million CMO as part of an investment portfolio restructuring and recognized an additional loss of $512,000 on the security. In addition to the CMO, the Company sold $25.9 million of securities during the third quarter of 2011, recognizing a gain on sale of $527,000.