Note 2 - Investment Securities

9 Months Ended

Sep. 30, 2012

NOTE 2 – INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of September 30, 2012 and December 31, 2011 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
September 30, 2012:
Securities held to maturity:
Other bonds	$	650,000	$	-	$	-		$	650,000

Securities available for sale:
U.S. govt. sponsored agency securities	$	340,538,125	$	2,712,996	$	(7,499	)	$	343,243,622
Residential mortgage-backed and related securities		151,264,044		4,450,612		(24,081	)		155,690,575
Municipal securities		87,579,277		2,478,687		(26,333	)		90,031,631
Trust preferred securities		86,200		44,200		-			130,400
Other securities		1,329,191		301,728		(25,698	)		1,605,221
	$	580,796,837	$	9,988,223	$	(83,611	)	$	590,701,449

December 31, 2011:
Securities held to maturity:
Other bonds	$	200,000	$	-	$	-		$	200,000

Securities available for sale:
U.S. govt. sponsored agency securities	$	426,581,913	$	2,428,994	$	(55,687	)	$	428,955,220
Residential mortgage-backed and related securities		105,373,614		3,488,350		(8,215	)		108,853,749
Municipal securities		23,937,118		1,752,246		-			25,689,364
Trust preferred securities		86,200		-		(5,400	)		80,800
Other securities		1,354,940		140,022		(44,804	)		1,450,158
	$	557,333,785	$	7,809,612	$	(114,106	)	$	565,029,291

The Company’s residential mortgage-backed and related securities portfolio consists entirely of government sponsored or government guaranteed securities. The Company has not invested in commercial mortgage-backed securities or pooled trust preferred securities.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2012 and December 31, 2011, are summarized as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
September 30, 2012:
Securities available for sale:
U.S. govt. sponsored agency securities	$	10,988,570	$	(7,499	)	$	-	$	-		$	10,988,570	$	(7,499	)
Residential mortgage-backed and related securities		5,430,389		(24,081	)		-		-			5,430,389		(24,081	)
Municipal securities		3,455,797		(26,333	)		-		-			3,455,797		(26,333	)
Other securities		-		-			215,000		(25,698	)		215,000		(25,698	)
	$	19,874,756	$	(57,913	)	$	215,000	$	(25,698	)	$	20,089,756	$	(83,611	)

December 31, 2011:
Securities available for sale:
U.S. govt. sponsored agency securities	$	59,979,620	$	(55,687	)	$	-	$	-		$	59,979,620	$	(55,687	)
Residential mortgage-backed and related securities		4,906,398		(8,215	)		-		-			4,906,398		(8,215	)
Trust preferred securities		-		-			80,800		(5,400	)		80,800		(5,400	)
Other securities		251,957		(44,332	)		2,778		(472	)		254,735		(44,804	)
	$	65,137,975	$	(108,234	)	$	83,578	$	(5,872	)	$	65,221,553	$	(114,106	)

At September 30, 2012, the investment portfolio included 360 securities. Of this number, 13 securities had current unrealized losses with aggregate depreciation of less than 1% from the amortized cost basis. Of these 13, only one had unrealized losses for twelve months or more. All of the debt securities in unrealized loss positions are considered acceptable credit risks. Based upon an evaluation of the available evidence, including the recent changes in market rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary. In addition, the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these debt securities before their anticipated recovery. At September 30, 2012 and December 31, 2011, equity securities represented less than 1% of the total portfolio.

The Company did not recognize other-than-temporary impairment on any debt securities for the three and nine months ended September 30, 2012 and 2011.

The Company did not recognize other-than-temporary impairment on any equity securities for the three months ended September 30, 2012 and 2011.

During the second quarter of 2012, the Company’s evaluation determined that one privately held equity security experienced a decline in fair value that was other-than-temporary. As a result, the Company wrote down the value of this security and recognized a loss in the amount of $62,400. The Company did not recognize other-than-temporary impairment on any of its equity securities during the first quarter of 2012.

During the second quarter of 2011, the Company’s evaluation determined that two privately held equity securities experienced declines in fair value that were other-than-temporary. As a result, the Company wrote down the value of these securities and recognized losses in the amount of $118,847. The Company did not recognize other-than-temporary impairment on any of its equity securities during the first quarter of 2011.

All sales of securities, as applicable, for the three and nine months ended September 30, 2012 and 2011, respectively, were from securities identified as available for sale. Information on proceeds received, as well as pre-tax gross gains from sales of those securities is as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011

Proceeds from sales of securities	$	-	$	8,601,107	$	19,215,075	$	54,326,191
Pre-tax gross gains from sales of securities		-		443,614		104,600		1,472,528

The amortized cost and fair value of securities as of September 30, 2012 by contractual maturity are shown below. A portion of the Company’s U.S. government sponsored agency securities contain call options which allow the issuer, at its discretion, to call the security at predetermined dates prior to the contractual maturity date. Expected maturities of residential mortgage-backed and related securities may differ from contractual maturities because the residential mortgages underlying the residential mortgage-backed and related securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table. “Other securities” are excluded from the maturity categories as there is no fixed maturity date.

	Amortized Cost		Fair Value
Securities held to maturity:
Due in one year or less	$	100,000	$	100,000
Due after one year through five years		550,000		550,000
	$	650,000	$	650,000

Securities available for sale:
Due in one year or less	$	2,251,717	$	2,257,998
Due after one year through five years		40,236,390		40,681,663
Due after five years		385,715,495		390,465,992
	$	428,203,602	$	433,405,653
Residential mortgage-backed and related securities		151,264,044		155,690,575
Other securities		1,329,191		1,605,221
	$	580,796,837	$	590,701,449

- Definition

The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts).

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