SECURITIES

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

SECURITIES

NOTE 2 - SECURITIES

The composition of securities is as follows:

(in thousands)	Amortized cost (1)	Gross un- realized gains	Gross un-realized losses	Fair value
December 31, 2012
Available-for-sale
U.S. Treasury notes	$ 2,496	$ 237	$ -	$ 2,733
U.S. Government Agency notes	7,515	211	-	7,726
Municipal bonds	45,395	2,138	(168)	47,365
Mortgage backed securities
U.S. Government Agencies	47,465	1,284	(20)	48,729
Collateralized mortgage obligations
U.S. Government Agencies	5,131	66	-	5,197
Non-agency	11,081	494	(68)	11,507
SBA bonds	2,781	82	-	2,863
Preferred Stock	20	147	-	167
Total securities available-for-sale	$ 121,884	$ 4,659	$ (256)	$ 126,287
Non-marketable securities
Federal Home Loan Bank of Boston stock	$ 5,747	$ -	$ -	$ 5,747

(1) Net of other-than-temporary impairment write-down recognized in earnings.

(in thousands)	Amortized cost (1)	Gross un- realized gains	Gross un-realized losses	Fair value
December 31, 2011
Available-for-sale
U.S. Treasury notes	$ 5,000	$ 528	$ -	$ 5,528
U.S. Government Agency notes	14,544	380	-	14,924
Municipal bonds	50,881	1,067	(1,152)	50,796
Mortgage backed securities
U.S. Government Agencies	57,193	1,126	(19)	58,300
Collateralized mortgage obligations
U.S. Government Agencies	7,077	76	-	7,153
Non-agency	14,300	355	(488)	14,167
SBA bonds	3,629	77	-	3,706
Corporate bonds	1,100	4	-	1,104
Preferred Stock	20	96	-	116
Total securities available-for-sale	$ 153,744	$ 3,709	$ (1,659)	$ 155,794
Held-to-maturity
Mortgage backed security	$ 50	$ 2	$ -	$ 52
Non-marketable securities
Federal Home Loan Bank of Boston stock	$ 6,032	$ -	$ -	$ 6,032

Sales of securities available-for-sale and gains realized are as follows:

Years ended December 31, (in thousands)	2012	2011	2010
Proceeds	$ 2,771	$ -	$ -
Gains realized	267	-	-
Losses realized	-	-	-
Net gains realized	267	-	-
Income tax provision	91	-	-

The following table summarizes, for all securities, including debt securities for which a portion of other-than-temporary impairment has been recognized in other comprehensive income, in an unrealized loss position, the aggregate fair value and gross unrealized loss of securities that have been in a continuous unrealized loss position as of the dates presented:

	Less than 12 Months		12 Months or Longer		Total
(in thousands)	Fair value	Unrealized  losses	Fair value	Unrealized  losses	Fair Value	Unrealized losses
December 31, 2012
Available-for-sale
Municipal Bonds	$ 839	$ 20	$ 2,360	$ 148	$ 3,199	$ 168
Mortgage backed securities	3,021	19	44	1	3,065	20
Collateralized mortgage obligations
Non-agency	612	2	901	17	1,513	19
Total temporarily impaired securities	4,472	41	3,305	166	7,777	207
Other-than-temporarily impaired securities
Collateralized mortgage obligations
Non-agency	535	6	1,963	43	2,498	49
Total temporarily impaired and other-than-
temporarily impaired securities	$ 5,007	$ 47	$ 5,268	$ 209	$ 10,275	$ 256
December 31, 2011
Available-for-sale
Municipal Bonds	$ -	$ -	$ 11,526	$ 1,152	$ 11,526	$ 1,152
Mortgage backed securities	14,881	18	56	1	14,937	19
Collateralized mortgage obligations
Non-agency	2,129	113	1,074	134	3,203	247
Total temporarily impaired securities	17,010	131	12,656	1,287	29,666	1,418
Other-than-temporarily impaired securities
Collateralized mortgage obligations
Non-agency	2,585	93	1,559	148	4,144	241
Total temporarily impaired and other-than-
temporarily impaired securities	$ 19,595	$ 224	$ 14,215	$ 1,435	$ 33,810	$ 1,659

Securities amortized cost; fair value and tax equivalent yield by maturity are as follows:

December 31, 2012 (dollars in thousands)		Amortized cost	Fair value	Yield(1)
U.S. Treasury notes	After 1 year but within 5 years	$ 2,496	$ 2,733	3.00%
U.S. Government Agency notes	Within 1 year	5,000	5,010	0.80
	After 15 years	2,515	2,716	5.38
	Total	7,515	7,726	2.33
Municipal bonds	After 5 years but within 10 years	1,414	1,494	6.04
	After 10 years but within 15 years	2,174	2,238	6.52
	After 15 years	41,807	43,633	6.63
	Total	45,395	47,365	6.61
Mortgage backed securities	U.S. Government Agency	47,465	48,729	3.55
Collateralized mortgage obligations	U.S. Government Agency	5,131	5,197	1.29
	Non-agency	11,081	11,507	4.84
SBA bonds		2,781	2,863	2.45
Preferred Stock		20	167	0.00
Securities available-for-sale		$ 121,884	$ 126,287	4.60

(1) Yield is based on amortized cost.

Salisbury evaluates securities for OTTI where the fair value of a security is less than its amortized cost basis at the balance sheet date. As part of this process, Salisbury considers its intent to sell each debt security and whether it is more likely than not that it will be required to sell the security before its anticipated recovery. If either of these conditions is met, Salisbury recognizes an OTTI charge to earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date. For securities that meet neither of these conditions, an analysis is performed to determine if any of these securities are at risk for OTTI.

The following summarizes, by security type, the basis for evaluating if the applicable securities were OTTI at December 31, 2012.

U.S Government Agency notes, U.S. Government Agency mortgage-backed securities and U.S. Government Agency CMOs: The contractual cash flows are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Changes in fair values are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, Salisbury does not intend to sell these securities and it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be maturity. Therefore, management does not consider these securities to be OTTI at December 31, 2012.

Municipal bonds: Contractual cash flows are performing as expected. Salisbury purchased substantially all of these securities during 2006-to-2008 as bank qualified, insured, AAA rated general obligation or revenue bonds. Salisbury’s portfolio is mostly comprised of tax-exempt general obligation bonds or public-purpose revenue bonds for schools, municipal offices, sewer infrastructure and fire houses, for small towns and municipalities across the United States. In the wake of the financial crisis, most monoline bond insurers had their ratings downgraded or withdrawn because of excessive exposure to insurance for collateralized debt obligations. Where appropriate Salisbury performs credit underwriting reviews of issuers, including some that have had their ratings withdrawn and are insured by insurers that have had their ratings withdrawn, to assess default risk. Management expects to recover the entire amortized cost basis of these securities. Salisbury does not intend to sell these securities and it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be maturity. Management does not consider these securities to be OTTI at December 31, 2012.

Non-agency CMOs: Salisbury monitors detailed cash flow data and projections for its non-agency CMOs, including at December 31, 2012, to assess whether any of the securities were OTTI. Salisbury uses third party provided cash flow forecasts for each security based on a variety of market driven assumptions and securitization terms, including prepayment speed, default or delinquency rate, and default severity for losses including interest, legal fees, property repairs, expenses and realtor fees, that, together with the loan amount are subtracted from collateral sales proceeds to determine severity. In 2009 Salisbury determined that five non-agency CMO securities reflected OTTI and recognized losses for deterioration in credit quality of $1,128,000. Salisbury judged the four remaining securities not to have additional OTTI and all other CMO securities not to be OTTI as of December 31, 2012. It is possible that future loss assumptions could change necessitating Salisbury to recognize future OTTI for further deterioration in credit quality. Salisbury does not intend to sell these securities and it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis.

Securities for which an OTTI has been recognized are as follows:

Years ended December 31, (in thousands)	2012	2011
Non-Agency CMOs
OTTI losses (unrealized and realized)	$ -	$ -
Less: unrealized OTTI recognized in other comprehensive loss	-	-
Net impairment losses recognized in earnings	$ -	$ -

The following table presents activity related to credit losses recognized into earnings on the non-agency CMOs held by Salisbury for which a portion of an OTTI charge was recognized in accumulated other comprehensive income:

Years ended December 31, (in thousands)	2012	2011
Balance, beginning of period	$ 1,128	$ 1,128
Credit component on debt securities in which OTTI was not previously recognized	-	-
Balance, end of period	$ 1,128	$ 1,128