Investment Securities

6 Months Ended

Jun. 30, 2011

Investment Securities [Abstract]

Investment Securities

2.  Investment Securities

There were no securities held-to-maturity at June 30, 2011. Securities held-to-maturity (in thousands) consisted of the following at December 31, 2010:

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market  Value
GNMA	$	25	$	-	$	-	$	25
FNMA		106		1		-		107
FHLMC		8		-		-		8
	$	139	$	1	$	-		140

Securities available-for-sale (in thousands) consists of the following:

	June 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses		Estimated Market Value
Municipals	$	230	$	1		-		231
Agency Bonds (FNMA/
/FHLMC/FFCB/FHLB)		39,998		246		12		40,232
CMO		1,965		13		-		1,978
FNMA pools		14,345		107		6		14,446
FHLMC pools		7,831		80		53		7,858
	$	64,369	$	447	$	71	$	64,745

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Asset Management Funds	$	6,795	$	121	$	-	$	6,916
FHLMC Voting Common
Stock		11		-		7		4
Municipals		230		4		-		234
Agency Bonds (FNMA/
FHLB)		35,118		216		110		35,224
CMO		2,027		-		20		2,007
FNMA ARM pools		9,683		77		49		9,711
FHLMC ARM pools		1,870		48		2		1,916
GNMA ARM pools		6,299		125		-		6,424
	$	62,033	$	591	$	188	$	62,436

The amortized cost and estimated market value of investment securities (in thousands) at June 30, 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
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	5,238	$	5,261	$	-	$	-
After 1 year thru 5 years		35,938		36,151		-		-
After 5 years thru 10 years		21,228		21,355		-		-
After 10 years		1,965		1,978		-		-
	$	64,369	$	64,745		-		-

At June 30, 2011, investment securities with a financial statement carrying amount (in thousands) of $41,657 were pledged to secure public and private deposits.  Investment securities were sold during the six months ending June 30, 2011 at a net gain of $177,000. No gain or loss was recognized on investment securities in 2010.  Sales, maturities and calls are detailed on the statement of cash flows.

Information pertaining to securities with gross unrealized losses (in thousands) at June 30, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
											`
June 30, 2011:
Federal agencies	$	-	$	-	$	2,009	$	12	$	2,009	$	12
Mortgage backed
securities		-		-		5,790		59		5,790		59
	$	-	$	-	$	7,799	$	71	$	7,799	$	71
December 31, 2010:
Federal agencies	$	12,720	$	110	$	-	$	-	$	12,720	$	110
FHLMC stock		3		7		-		-		3		7
Mortgage backed
securities		5,283		66		423		5		5,706		71
	$	18,006	$	183	$	423	$	5	$	18,429	$	188

Management evaluates securities for other-than-temporary impairment on a monthly basis.  Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The majority of these securities are guaranteed directly by the U.S. Government or other U.S. government agencies.  These unrealized losses relate principally to current interest rates for similar types of securities.  In analyzing an issuer's financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition.  As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary.

The Company also had a significant investment in a mutual fund, the Shay Asset Fund (“the Fund”) that invested primarily in short-term adjustable-rate mortgage-backed securities.  During the third quarter of 2009, management determined that the Fund's decline in market value was an other-than-temporary impairment (OTTI) and recorded a write down (in thousands) of $2,822.  Due to the credit loss existing in the Fund and based upon the Fund not gaining significant market increases over the prior eighteen months and various other factors the credit was determined to be OTTI.  The account cost balance (in thousands) of $10,851 was written down to $8,029 in 2009 and that value became the new cost value of the Fund. Regulatory agencies were advised of the impairment. The Fund in 2009 and 2010 restricted cash withdrawals (in thousands) to $250 per quarter. The Bank withdrew (in thousands) $250 in 2009 and $1,000 in 2010.  The Bank liquidated this Fund in January 2011 at a small gain.