SECURITIES

6 Months Ended

Jun. 30, 2011

SECURITIES

SECURITIES

4. SECURITIES

The following table summarizes the amortized cost and fair value of the available for sale and held to maturity investment securities portfolio at June 30, 2011 and December 31, 2010 and the corresponding amounts of unrealized gains and losses therein:

	June 30, 2011
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	95,050	$	471	$	(229	)	$	95,292
State and municipal obligations	40,000		1,234		(74		)	41,160
U.S. GSE residential mortgage-backed securities	77,472		3,731		(59		)	81,144
U.S. GSE residential collateralized mortgage obligations	165,800		2,647		(133		)	168,314
Total available for sale	378,322		8,083		(495		)	385,910
Held to maturity:
U.S. GSE securities	14,989		51		(4		)	15,036
State and municipal obligations	79,318		803		(195		)	79,926
U.S. GSE residential collateralized mortgage obligations	40,500		1,215		—			41,715
Corporate Bonds	18,000		—		(105		)	17,895
Total held to maturity	152,807		2,069		(304		)	154,572
Total securities	$	531,129	$	10,152	$	(799	)	$	540,482

	December 31, 2010
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available for sale:
U.S. GSE securities	$	41,463	$	213	$	(343	)	$	41,333
State and municipal obligations	47,175		1,173		(283		)	48,065
U.S. GSE residential mortgage-backed securities	76,814		3,481		(124		)	80,171
U.S. GSE residential collateralized mortgage obligations	152,202		2,618		(850		)	153,970
Total available for sale	317,654		7,485		(1,600		)	323,539
Held to maturity:
U.S. GSE securities	24,973		118		(199		)	24,892
State and municipal obligations	64,728		439		(922		)	64,245
U.S. GSE residential collateralized mortgage obligations	40,264		954		(53		)	41,165
Corporate Bonds	18,000		—		(158		)	17,842
Total held to maturity	147,965		1,511		(1,332		)	148,144
Total securities	$	465,619	$	8,996	$	(2,932	)	$	471,683

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at June 30, 2011. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2011
	Amortized		Fair
(In thousands)	Cost		Value
Maturity
Available for sale:
Within one year	$	8,263	$	8,350
One to five years	53,422		54,336
Five to ten years	104,663		106,173
Beyond ten years	211,974		217,051
Total	$	378,322	$	385,910
Held to maturity:
Within one year	$	33,746	$	33,794
One to five years	39,195		39,766
Five to ten years	19,771		19,712
Beyond ten years	60,095		61,300
Total	$	152,807	$	154,572

Securities with unrealized losses at June 30, 2011 and December 31, 2010, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 months				Greater than 12 months
June 30, 2011			Unrealized				Unrealized
(In thousands)	Fair Value		losses		Fair Value		losses
Available for sale:
U.S. GSE securities	$	40,252	$	229	$	—	$	—
State and municipal obligations	8,615		74		—		—
U.S. GSE residential mortgage-backed securities	7,182		59		—		—
U.S. GSE residential collateralized mortgage obligations	39,891		133		—		—
Total available for sale	$	95,940	$	495	$	—	$	—
Held to maturity:
U.S. GSE securities	$	4,995	$	4	$	—	$	—
State and municipal obligations	20,601		195		—		—
Corporate Bonds	17,895		105		—		—
Total held to maturity	$	43,491	$	304	$	—	$	—

	Less than 12 months				Greater than 12 months
December 31, 2010			Unrealized				Unrealized
(In thousands)	Fair Value		losses		Fair Value		losses
Available for sale:
U.S. GSE securities	$	25,145	$	343	$	—	$	—
State and municipal obligations	11,927		283		—		—
U.S. GSE residential mortgage-backed securities	7,591		124		—		—
U.S. GSE residential collateralized mortgage obligations	55,906		850		—		—
Total available for sale	$	100,569	$	1,600	$	—	$	—
Held to maturity:
U.S. GSE securities	$	9,800	$	199	$	—	$	—
State and municipal obligations	27,416		922		—		—
U.S. GSE residential collateralized mortgage obligations	4,952		53		—		—
Corporate Bonds	17,842		158		—		—
Total held to maturity	$	60,010	$	1,332	$	—	$	—

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320, Accounting for Certain Investments in Debt and Equity Securities. In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

At June 30, 2011, the majority of unrealized losses on available for sale securities are related to the Company’s residential collateralized mortgage obligations and U.S. GSE securities and the majority of unrealized losses on held to maturity securities are related to State and municipal obligations and corporate bonds.  The decline in fair value is attributable to changes in interest rates and not credit quality, and the Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2011.

Proceeds from sales of securities available for sale were $14.1 million and $9.4 million for the three months ended June 30, 2011 and 2010, respectively. Proceeds from sales of securities available for sale were $14.1 million and $31.4 million for the six months ended June 30, 2011 and 2010, respectively. Gross gains of $0.1 million were realized on these sales during the three and six months ended June 30, 2011.  Gross gains of $0.4 million and $1.3 million were realized on these sales during the three and six months ended June 30, 2010, respectively. Proceeds from calls of securities available for sale were $17.2 million and $40.6 million for the three months ended June 30, 2011 and 2010, respectively.  Proceeds from calls of securities available for sale were $27.2 million and $45.6 million for the six months ended June 30, 2011 and 2010, respectively.

Securities having a fair value of approximately $252.8 million and $277.9 million at June 30, 2011 and December 31, 2010, respectively, were pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings.  The Bank did not hold any trading securities during the six months ended June 30, 2011 or the year ended December 31, 2010.

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of New York. Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the Federal Reserve Bank (“FRB”) system and required to own FRB stock.  FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.  The Bank owned approximately $1.5 million in FHLB, ACBB and FRB stock at June 30, 2011 and approximately $1.3 million at December 31, 2010.  These amounts were reported as restricted securities in the consolidated balance sheets.