Investments

12 Months Ended

Dec. 31, 2012

Notes

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, 2012 and 2011 are as follows:

(In 000’s)	2012
		Gross	Gross
	Amortized	unrealized	unrealized	Fair
	Cost	gains	losses	value
Available-for-sale:
Government Sponsored Enterprises residential mortgage-backed securities	$847	$51	-	$898
Investments in money market funds	129	-	-	129
	$976	$51	-	$1,027

Held-to-maturity:
U.S. Government agency securities	$3,605	$159	$(4)	$3,760
Government Sponsored Enterprises residential mortgage-backed securities	8,290	437	(1)	8,726
	$11,895	$596	$(5)	$12,486

	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

In 2012, $7,725,000 in U.S. Government agencies securities were called.  In 2011, $8,863,000 in U.S. Government agencies securities were called.  There was $2,571 in gross losses from these transactions during 2012. There were no gross gains or losses realized from these transactions during 2011. No securities were sold during 2012 or 2011.

The table below indicates the length of time individual securities held-to-maturity have been in a continuous unrealized loss position at December 31, 2012 (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		3	$	746	$	(4)	$	-	$	-	$	746	$	(4)
Mortgage backed securities		2	$	253	$	(1)	$	-	$	-	$	253	$	(1)
Total temporarily
impaired investment
securities		5	$	999	$	(5)	$	-	$	-	$	999	$	(5)

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)

U.S. Government and Agency Securities. 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, 2012.

Residential Government Sponsored Enterprise Mortgage-Backed Securities. Unrealized losses on the Company’s investment in government sponsored enterprise 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, 2012 and 2011.

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 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 Cost	Fair 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	847	898
Total debt securities	847	89
Investments in money market funds	129	129
	$976	$1,027
Held-to-maturity:
Due in one year	-	-
Due after one year through five years	250	269
Due after five years through ten years	3,355	3,491
Due after ten years	-	-
Government-sponsored enterprises residential mortgage-backed securities	8,290	8,726
	$11,895	$12,486

As of December 31, 2012 and 2011, investment securities with a carrying value of $10,041,655 and $17,953,933, respectively, were pledged as collateral to secure public deposits and contingent borrowing at the Discount Window.