Investment Securities

9 Months Ended

Sep. 30, 2011

(4) Investment Securities

The following table presents the amortized cost, unrealized gains, unrealized losses and fair value of investment securities available for sale at September 30, 2011 and December 31, 2010. At September 30, 2011 and December 31, 2010, there were no investment securities as held to maturity or trading.

(dollars in thousands)	September 30, 2011
	Amortized cost		Unrealized gains		Unrealized losses			Fair value
U.S. government agencies	$	66,006	$	1,210	$	(64	)	$	67,152
U.S. Treasuries		52,101		602		-			52,703
Pass-through securities		96,385		1,124		(100	)		97,409
Taxable state and political subdivisions		9,149		511		-			9,660
Tax exempt state and political subdivisions		34,198		1,832		(87	)		35,943
Corporate obligations		12,000		5		(143	)		11,862
Investments in mutual funds and other equities		4,043		-		(411	)		3,632
Total investment securities available for sale	$	273,882	$	5,284	$	(805	)	$	278,361

(dollars in thousands)	December 31, 2010
	Amortized cost		Unrealized gains		Unrealized losses			Fair value
U.S. government agencies	$	103,109	$	695	$	(814	)	$	102,990
U.S. Treasuries		54,175		530		(62	)		54,643
Pass-through securities		1,216		24		(1	)		1,239
Taxable state and political subdivisions		6,090		33		(356	)		5,767
Tax exempt state and political subdivisions		22,312		603		(304	)		22,611
Corporate obligations		9,001		24		(51	)		8,974
Investments in mutual funds and other equities		4,044		-		(712	)		3,332
Total investment securities available for sale	$	199,947	$	1,909	$	(2,300	)	$	199,556

(a) Other-Than-Temporarily Impaired Debt Securities: At September 30, 2011 and December 31, 2010, there were 9 and 52 investment securities in unrealized loss positions, respectively. For each security in an unrealized loss position, the Company assesses whether it intends to sell the security, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. For debt securities that are considered other-than-temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of its amortized cost basis, the Company will separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is calculated as the difference between the security's amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security's fair value and the present value of future expected cash flows is deemed to be due to factors that are not credit related and is recognized in other comprehensive income.

The Company does not intend to sell the securities that are temporarily impaired, and it is more likely than not that the Company will not have to sell those securities before recovery of the cost basis. Additionally, the Company has evaluated the credit ratings of its investment securities and their issuers and/or insurers, as applicable. Based on the Company's evaluation, management has determined that no investment security in the Company's investment portfolio was other-than-temporarily impaired at September 30, 2011 or December 31, 2010.

The following table shows gross unrealized losses and fair value of securities with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2011 and December 31, 2010:

(dollars in thousands)	September 30, 2011
	Less than 12 Months					12 Months or Longer				Total
	Fair value		Unrealized losses			Fair value		Unrealized losses		Fair value		Unrealized losses
U.S. government agencies	$	10,479	$	(64	)	$	-	$	-	$	10,479	$	(64	)
Pass-through securities		20,662		(100	)						20,662		(100	)
Tax exempt state and political subdivisions		3,164		(87	)		-		-		3,164		(87	)
Corporate obligations		10,858		(142	)		-		-		10,858		(142	)
Investments in mutual funds and other equities		4,043		(411	)		-		-		4,043		(411	)
Total investment securities available for sale	$	49,206	$	(804	)	$	-	$	-	$	49,206	$	(804	)

(dollars in thousands)	December 31, 2010
	Less than 12 Months					12 Months or Longer				Total
	Fair value		Unrealized losses			Fair value		Unrealized losses		Fair value		Unrealized losses
U.S. government agencies	$	52,196	$	(814	)	$	-	$	-	$	52,196	$	(814	)
U.S. Treasuries		4,988		(62	)		-		-		4,988		(62	)
Pass-through securities		200		(1	)		-		-		200		(1	)
Taxable state and political subdivisions		4,221		(356	)		-		-		4,221		(356	)
Tax exempt state and political subdivisions		6,004		(304	)		-		-		6,004		(304	)
Corporate obligations		7,949		(51	)		-		-		7,949		(51	)
Investments in mutual funds and other equities		4,044		(712	)		-		-		4,044		(712	)
Total investment securities available for sale	$	79,602	$	(2,300	)	$	-	$	-	$	79,602	$	(2,300	)

The unrealized losses associated with U.S. government agency and treasury debt securities are primarily driven by changes in interest rates and not due to the credit quality of the securities. Further, the pass-through securities backed by GNMA, FNMA or FHLMC have the guarantee of the full faith and credit of the U.S. Federal Government. Obligations of U.S. states and political subdivisions in our portfolio are all investment grade without delinquency history.

The amortized cost and fair value of collateralized mortgage backed securities are presented by expected average life, rather than contractual maturity at September 30, 2011, are shown in the table below. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

(dollars in thousands)	September 30, 2011
	Amortized		Fair
	Cost		Value
Three months or less	$	13,369	$	13,388
Over three months to one year		45,887		45,968
After one year through three years		31,164		31,850
After three years through five years		63,066		64,066
After five years through ten years		92,174		93,950
After ten years		28,222		29,139
Total	$	273,882	$	278,361

The following table presents investment securities which were pledged to secure borrowings and public deposits as permitted or required by law:

(dollars in thousands)	September 30, 2011
	Amortized cost		Fair value
To state and local governments to secure public deposits	$	60,169	$	62,380
To Federal Reserve Bank to secure borrowings		27,790		28,438
To Federal Home Loan Bank to secure borrowings		1,693		1,725
Other securities pledged, principally to secure deposits		13,234		13,834
Total pledged investment securities	$	102,886	$	106,377

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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