Investment Securities

6 Months Ended

Jun. 30, 2012

Investment Securities [Abstract]

Investment Securities

4.InvestmentSecurities

The carrying values and approximate fair values of investment securities at the periods indicated are presented below: 

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(In Thousands)
June 30, 2012
Securities available for sale
U.S. Treasury and government sponsored entities	$	119,002	$	504	$	3	$	119,503
Municipal securities		18,970		699		1		19,668
U.S. Agency mortgage-backed securities		47		3		-		50
Corporate bonds		46,518		515		186		46,847
Preferred stock		3,037		142		-		3,179
Total securities available for sale	$	187,574	$	1,863	$	190	$	189,247
Securities held to maturity
Municipal securities	$	3,601	$	242	$	-	$	3,843
Total securities held to maturity	$	3,601	$	242	$	-	$	3,843
December 31, 2011
Securities available for sale
U.S. Treasury and government sponsored entities	$	160,529	$	625	$	50	$	161,104
Municipal securities		16,260		675		-		16,935
U.S. Agency mortgage-backed securities		52		2		-		54
Corporate bonds		43,767		343		1,119		42,991
Preferred stock		996		3		-		999
Total securities available for sale	$	221,604	$	1,648	$	1,169	$	222,083
Securities held to maturity
Municipal securities	$	3,819	$	258	$	-	$	4,077
Total securities held to maturity	$	3,819	$	258	$	-	$	4,077
June 30, 2011
Securities available for sale
U.S. Treasury and government sponsored entities	$	137,256	$	874	$	4	$	138,126
Municipal securities		14,023		379		-		14,402
U.S. Agency mortgage-backed securities		58		2		-		60
Corporate bonds		29,553		785		48		30,290
Total securities available for sale	$	180,890	$	2,040	$	52	$	182,878
Securities held to maturity
Municipal securities	$	5,142	$	196	$	-	$	5,338
Total securities held to maturity	$	5,142	$	196	$	-	$	5,338

The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.  There were five securities with unrealized losses as of June 30, 2012 and 2011, respectively, that have been in a loss position for less than twelve months.  There were no securities with unrealized losses as of June 30, 2012 and June 30, 2011 that have been in an unrealized loss position for more than twelve months.  Because the Company does not intend to sell, nor is it required to sell these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired. 

At June 30, 2012, $33.2 million in securities, or 17%, of the investment portfolio was pledged, as compared to $32.1 million, or 14%, at December 31, 2011, and $24.2 million, or 13%, at June 30, 2011.  We held no securities of any single issuer (other than government sponsored entities) that exceeded 10% of our shareholders’ equity at June 30, 2012,  December 31, 2011 or June 30, 2011.

The amortized cost and fair values of debt securities at June 30, 2012, are distributed by contractual maturity as shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Although preferred stock has no stated maturity, it is aggregated in the calculation of weighted average yields presented below in the category of investments that mature in ten years or more.

	Amortized Cost		Fair Value		Weighted Average Yield
		(In Thousands)
US Treasury and government sponsored entities
Within 1 year	$	29,996	$	30,034	0.76	%
1-5 years		89,006		89,469	0.73	%
Total	$	119,002	$	119,503	0.74	%
U.S. Agency mortgage-backed securities
5-10 years	$	47	$	50	4.45	%
Total	$	47	$	50	4.45	%
Corporate bonds
Within 1 year	$	3,160	$	3,195	2.88	%
1-5 years		43,358		43,652	2.45	%
Total	$	46,518	$	46,847	2.48	%
Preferred stock
Over 10 years		3,037		3,179	5.88	%
Total	$	3,037	$	3,179	5.88	%
Municipal securities
Within 1 year	$	2,414	$	2,422	1.79	%
1-5 years		9,897		10,137	2.01	%
5-10 years		7,305		7,776	4.58	%
Over 10 years		2,955		3,176	4.79	%
Total	$	22,571	$	23,511	3.18	%

The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the six months ending June 30, 2012 and 2011, respectively, are as follows:

	Proceeds		Gross Gains		Gross Losses
	(In Thousands)
2012
Available for sale securities	$	30,424	$	273	$	-
2011
Available for sale securities	$	6,987	$	263	$	-

A summary of interest income for the six months ending June 30, 2012 and 2011 on available for sale investment securities is as follows:

		2012		2011
		(In Thousands)
US Treasury and government sponsored entities	$	553	$	816
U.S. Agency mortgage-backed securities		1		1
Other		630		482
Total taxable interest income	$	1,184	$	1,299
Municipal securities	$	283	$	235
Total tax-exempt interest income		283		235
Total	$	1,467	$	1,534

For the periods ending June 30, 2012,  December 31, 2011 and June 30, 2011, we held Federal Home Loan Bank of Seattle (“FHLB”) stock with a book value approximately equal to its market value in the amount of $2.0 million for each period. The Company evaluated its investment in FHLB stock for other-than-temporary impairment as of June 30, 2012, consistent with its accounting policy.  Based on the Company’s evaluation of the underlying investment, including the long-term nature of the investment, the liquidity position of the FHLB of Seattle, the actions being taken by the FHLB of Seattle to address its regulatory capital situation, and the Company’s intent and ability to hold the investment for a period of time sufficient to recover the par value, the Company did not recognize an other-than-temporary impairment loss. Even though the Company did not recognize an other-than-temporary impairment loss during the six-month period ending June 30, 2012, continued deterioration in the FHLB of Seattle’s financial position may result in future impairment losses.