SECURITIES

12 Months Ended

Dec. 31, 2011

Securities

SECURITIES

NOTE 3 SECURITIES

The amortized cost and estimated fair value of investment securities are as follows:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2011
Securities available for sale
U.S. Treasury securities and obligations of U.S. government
corporations and agencies	$	501	$	17	$	0	$	518
U.S. agency issued residential mortgage-backed securities		18,754		1,068		6		19,816
U.S. agency issued residential collateralized mortgage obligations		37,774		806		7		38,573
Privately issued residential collateralized mortgage obligations		418		11		0		429
Other equity securities		47		0		0		47
Totals	$	57,494	$	1,902	$	13	$	59,383
Securities held to maturity
Obligations of states and political subdivisions	$	47,404	$	1,636	$	30	$	49,010
Nonrated trust preferred securities		1,487		40		195		1,332
Nonrated senior subordinated notes		403		6		0		409
Totals	$	49,294	$	1,682	$	225	$	50,751
December 31, 2010
Securities available for sale
U.S. Treasury securities and obligations of U.S. government
corporations and agencies	$	1,003	$	38	$	0	$	1,041
U.S. agency issued residential mortgage-backed securities		16,580		1,110		0		17,690
U.S. agency issued residential collateralized mortgage obligations		34,934		652		75		35,511
Privately issued residential collateralized mortgage obligations		964		18		2		980
Other equity securities		51		0		0		51
Totals	$	53,532	$	1,818	$	77	$	55,273
Securities held to maturity
Obligations of states and political subdivisions	$	51,234	$	7	$	1,435	$	49,806
Nonrated trust preferred securities		1,468		25		37		1,456
Nonrated senior subordinated notes		404		0		4		400
Totals	$	53,106	$	32	$	1,476	$	51,662

Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible future interest rates could change considerably resulting in a material change in the estimated fair value.

Nonrated trust preferred securities at December 31, 2011 and 2010 consist of separate obligations issued by three holding companies headquartered in Wisconsin. One of the issuers with par value totaling $750 elected to defer payment of interest beginning in 2011, and that obligation is maintained on nonaccrual status at December 31, 2011.

Nonrated senior subordinated notes at December 31, 2011 and 2010, consist of one obligation issued by a Wisconsin state chartered bank.

The following table indicates the number of months securities that are considered to be temporarily impaired have been in an unrealized loss position at December 31:

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss
2011
Securities available for sale
U.S. agency issued residential
mortgage backed securities	$	2,441	$	6	$	0	$	0	$	2,441	$	6
U.S. agency issued residential
collateralized mortgage obligations		1,300		7		0		0		1,300		7
Totals	$	3,741	$	13	$	0	$	0	$	3,741	$	13
Securities held to maturity
Obligations of states and political subdivisions	$	156	$	1	$	1,138	$	29	$	1,294	$	30
Nonrated trust preferred securities		0		0		450		195		450		195
Totals	$	156	$	1	$	1,588	$	224	$	1,744	$	225
2010
Securities available for sale
U.S. agency issued residential
collateralized mortgage obligations	$	7,836	$	75	$	0	$	0	$	7,836	$	75
Privately issued residential
collateralized mortgage obligations		253		2		0		0		253		2
Totals	$	8,089	$	77	$	0	$	0	$	8,089	$	77
Securities held to maturity
Obligations of states and political subdivisions	$	43,627	$	1,435	$	0	$	0	$	43,627	$	1,435
Nonrated trust preferred securities		0		0		596		37		596		37
Nonrated senior subordinated notes		400		4		0		0		400		4
Totals	$	44,027	$	1,439	$	596	$	37	$	44,623	$	1,476

At December 31, 2011, 11 debt securities had unrealized losses with aggregate depreciation of 4.16% from the amortized cost basis, compared to 177 debt and equity securities which had unrealized losses with aggregate depreciation of 2.86% from amortized cost basis at December 31, 2010. These unrealized losses relate principally to an increase in interest rates relative to interest rates in effect at the time of purchase or reclassification from available-for-sale to held-to-maturity classification and are not due to changes in the financial condition of the issuers. However, the unrealized loss on nonrated trust preferred securities is due to an increase in credit spreads for risk on such investments demanded in the market and election by one issuer to defer interest payments. In analyzing an issuer’s financial condition, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, industry analysts’ reports, and internal review of issuer financial statements. Since management does not intend to sell and has the ability to hold debt securities until maturity (or the foreseeable future for securities available for sale), no declines are deemed to be other than temporary.

The amortized cost and estimated fair value of debt securities and nonrated trust preferred securities and senior subordinated notes at December 31, 2011, by contractual maturity, are shown below. 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.

	Available for Sale				Held to Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	501	$	518	$	2,749	$	2,755
Due after one year through five years		0		0		14,850		15,071
Due after five years through ten years		0		0		28,368		29,652
Due after ten years		0		0		3,327		3,273
Subtotals		501		518		49,294		50,751
Mortgage-backed securities and collateralized mortgage obligations		56,946		58,818		0		0
Totals	$	57,447	$	59,336	$	49,294	$	50,751

Securities with a fair value of $56,659 and $60,111 at December 31, 2011 and 2010, respectively, were pledged to secure public deposits, other borrowings, and for other purposes required by law.

During 2011, PSB realized a gain of $32 ($19 after tax expense) from the sale of its remaining investment in FNMA preferred stock generating proceeds of $37. There was no sale of securities during 2010. During 2010, PSB realized a loss of $20 ($12 after tax benefits) on recognition of other than temporary impairment to the amortized cost basis of its investment in FNMA preferred stock. During 2009, proceeds from the sale of securities totaled $10,146 with a gross gain of $531 ($322 after tax expense) and a gross loss of $10 ($6 after tax benefits).

During 2010, PSB transferred all of its municipal, trust preferred, and senior subordinated note securities from the available-for-sale classification to the held-to-maturity classification to better reflect its intent and practice to hold these long-term debt securities until maturity. Fair value of the securities was $54,130 at the time of the transfer, which included a $2,552 unrealized gain over the existing amortized cost basis. The unrealized gain will be amortized against the new cost basis (equal to transfer date fair value) over the remaining life of the securities. Scheduled amortization at December 31, 2011, of the remaining unrealized gain is as follows:

2012	$	458
2013		396
2014		335
2015		274
2016		194
Thereafter		227
Total	$	1,884