Note 3 - Investment Securities Available for Sale

9 Months Ended

Sep. 30, 2012

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3. Investment Securities Available for Sale

Amortized cost and estimated fair value of securities available for sale are summarized as follows:

September 30, 2012	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(dollars in thousands)
U. S. Government agency securities	$	44,718	$	1,545	$	-	$	46,263
Residential mortgage backed securities		168,439		3,240		305		171,374
Municipal bonds		72,755		5,646		30		78,371
Other equity investments		407		-		52		355
	$	286,319	$	10,431	$	387	$	296,363

December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
(dollars in thousands)
U. S. Government agency securities	$	102,283	$	1,547	$	77	$	103,753
Residential mortgage backed securities		145,451		2,767		240		147,978
Municipal bonds		57,548		4,227		2		61,773
Other equity investments		404		-		97		307
	$	305,686	$	8,541	$	416	$	313,811

Gross unrealized losses and fair value by length of time that the individual available for sale securities have been in a continuous unrealized loss position are as follows:

	Less than 12 Months				12 Months or Greater				Total
September 30, 2012	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
(dollars in thousands)
Residential mortgage backed securities	$	42,588	$	305	$	-	$	-	$	42,588	$	305
Municipal bonds		2,312		30		-		-		2,312		30
Other equity investments		-		-		126		52		126		52
	$	44,900	$	335	$	126	$	52	$	45,026	$	387

	Less than 12 Months				12 Months or Greater				Total
December 31, 2011	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
(dollars in thousands)
U. S. Government agency securities	$	25,313	$	77	$	-	$	-	$	25,313	$	77
Residential mortgage backed securities		35,017		240		-		-		35,017		240
Municipal bonds		510		2		-		-		510		2
Other equity investments		-		-		81		97		81		97
	$	60,840	$	319	$	81	$	97	$	60,921	$	416

The unrealized losses that exist are generally the result of changes in market interest rates and interest spread relationships since original purchases. The weighted average duration of debt securities, which comprise 99.9% of total investment securities, is relatively short at 3.6 years. The gross unrealized loss on other equity investments represents common stock of one local banking company owned by the Company, and traded on a broker “bulletin board” exchange. The estimated fair value is determined by broker quoted prices. The unrealized loss is deemed a result of generally weak valuations for many smaller community bank stocks. The individual banking company is profitable, has good financial trends and has a satisfactory capital position. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not believe that the investment securities that were in an unrealized loss position as of September 30, 2012 represent an other-than-temporary impairment for the reasons noted. The Company does not intend to sell the investments and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be maturity.  In addition, at September 30, 2012, the Company held $12.0 million in equity securities in a combination of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stocks, which are required to be held for regulatory purposes and are not marketable.

The amortized cost and estimated fair value of investments available for sale by contractual maturity are shown in the table 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.

	September 30, 2012				December 31, 2011
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
U. S. Government agency securities maturing:
One year or less	$	-	$	-	$	15,783	$	15,906
After one year through five years		41,840		43,071		83,638		84,740
After five years through ten years		2,878		3,192		2,862		3,107
Residential mortgage backed securities		168,439		171,374		145,451		147,978
Municipal bonds maturing:
After one year through five years		12,876		13,545		10,089		10,539
Five years through ten years		59,879		64,826		47,459		51,234
Other equity investments		407		355		404		307
	$	286,319	$	296,363	$	305,686	$	313,811

The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at September 30, 2012 was $215.6  million. As of September 30, 2012 and December 31, 2011, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. Government agency securities that exceeded ten percent of shareholders’ equity.