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Investments
 12 Months Ended
Dec. 31, 2011
Investments:  
Investments

 

 

3.  INVESTMENTS

 

 

The amortized cost, gross unrealized holding gains and losses, and estimated fair value of the available-for-sale and held-to-maturity investment securities by major security type at December 31, 2011 and 2010 are as follows:

 

(In 000’s)

 

2011

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

unrealized

 

 

unrealized

 

 

Fair

 

 

 

Cost

 

 

gains

 

 

losses

 

 

value

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

Government Sponsored Enterprises  residential mortgage-backed securities

 

$

1,094

 

 

$

58

 

 

$

-

 

 

$

1,152

 

Investments in money market funds

 

 

129,

 

 

 

-

 

 

 

-

 

 

 

129

 

 

 

$

1,223

 

 

$

58

 

 

$

-

 

 

$

1,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agency securities

 

$

7,531

 

 

$

158

 

 

$

-

 

 

$

7,689

 

Government Sponsored Enterprises residential mortgage-backed securities

 

 

9,678

 

 

 

373

 

 

 

(2

)

 

 

10,049

 

 

 

$

17,209

 

 

$

531

 

 

$

(2

)

 

$

17,738

 

 

 

 

 

 

 

 2010

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

unrealized

 

 

unrealized

 

 

Fair

 

 

 

Cost

 

 

gains

 

 

losses

 

 

Value

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government Sponsored Enterprises residential mortgage-backed securities

 

$

1,144

 

 

$

66

 

 

$

-

 

 

$

1,210

 

Investments in money market funds

 

 

129

 

 

 

-

 

 

 

-

 

 

 

129

 

 

 

$

1,273

 

 

$

66

 

 

$

-

 

 

$

1,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agency securities

 

$

10,402

 

 

$

90

 

 

$

(145

)

 

$

10,347

 

Government Sponsored Enterprises residential mortgage-backed securities

 

 

4,736

 

 

 

166

 

 

 

(6

)

 

 

4,896

 

 

 

$

15,138

 

 

$

256

 

 

$

(151

)

 

$

15,243

 

 

In 2011, $8,863,000 in U.S. Government agencies securities were called.  In 2010, $10,047,000 in U.S. Government agencies securities were called.  There were no gross gains or losses realized from these transactions during 2011 or 2010. No securities were sold during 2011 or 2010.

 

 

The table below indicates the length of time individual securities held-to-maturity have been in a continuous unrealized loss position at December 31, 2011 (in thousands):

 

 

 

Number

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

Description of

 

of

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

Securities

 

securities

 

 

value

 

 

Losses

 

 

Value

 

 

losses

 

 

value

 

 

losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  securities

 

 

4

 

 

$

1,018

 

 

 

(2

)

 

 

-

 

 

 

-

 

 

$

1,018

 

 

 

(2

)

Total temporarily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  impaired investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  securities

 

 

4

 

 

$

1,018

 

 

$

(2

)

 

$

-

 

 

$

-

 

 

$

1,018

 

 

$

(2

)

 

The table below indicates the length of time individual held-to-maturity securities have been in a continuous unrealized loss position at December 31, 2010 (in thousands):

 

 

 

Number

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

Description of

 

of

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

Securities

 

securities

 

 

value

 

 

Losses

 

 

Value

 

 

losses

 

 

value

 

 

losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  agency securities

 

 

14

 

 

$

5,398

 

 

$

(145

)

 

$

-

 

 

$

-

 

 

$

5,398

 

 

$

(145

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage backed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  securities

 

 

4

 

 

 

536

 

 

 

(6

)

 

 

-

 

 

 

-

 

 

 

536

 

 

 

(6

)

Total temporarily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  impaired investment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  securities

 

 

18

 

 

$

5,934

 

 

$

(151

)

 

$

-

 

 

$

-

 

 

$

5,934

 

 

$

(151

)

 

U.S. Government and Agency Obligations. Unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2011 and 2010.

 

Residential Federal Agency Mortgage-Backed Securities. Unrealized losses on the Company’s investment in federal agency mortgage-backed securities may be caused by interest rate increases. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company’s investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2011 and 2010.

 

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  On a quarterly basis, we review all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. We consider relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value.

 

Maturities of investment securities classified as available-for-sale and held-to-maturity at December 31, 2011 were as follows. Expected maturities may differ from contractual maturities because the U.S. agencies may be called or underlying mortgages supporting mortgage backed securities may be prepaid without any penalties. Consequently, mortgage-backed securities are not presented by maturity category.

(In 000’s)

 

 

Amortized

 

 

Fair

 

 

 

Cost

 

 

Value

 

Available-for-sale:

 

 

 

 

 

 

Due in one year

 

$

-

 

 

$

-

 

Due after one year through five years

 

 

-

 

 

 

-

 

Due after five years through ten years

 

 

-

 

 

 

-

 

Government-sponsored enterprises

     residential mortgage-backed securities

 

 

1,094

 

 

 

1,152

 

Total debt securities

 

 

1,094

 

 

 

1,152

 

Investments in mutual funds

 

 

129

 

 

 

129

 

 

 

$

1,223

 

 

$

1,281

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

Due in one year

 

$

-

 

 

$

-

 

Due after one year through five years

 

 

250

 

 

 

251

 

Due after five years through ten years

 

 

6,504

 

 

 

6,659

 

Due after ten years

 

 

777

 

 

 

779

 

Government-sponsored enterprises

     residential mortgage-backed securities

 

 

9,678

 

 

 

10,049

 

 

 

$

17,209

 

 

$

17,738

 

 

As of December 31, 2011 and 2010, investment securities with a carrying value of $17,953,933 and $16,173,972, respectively, were pledged as collateral to secure public deposits and contingent borrowing at the Discount Window.