NOTE B - INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2011

NOTE B – INVESTMENT SECURITIES

At September 30, 2011 and December 31, 2010, the amortized cost of securities and their approximate fair value were as follows (in thousands):

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2011
Available-for-Sale:
Obligations of U.S. government agencies	$	15,052	$	221	$	—		$	15,273
Obligations of state and political subdivisions		14,000		713		(71	)		14,642
Government agency mortgage-backed securities		227,923		7,683		(33	)		235,573
Corporate debt securities		6,000		—		(1,730	)		4,270
Equity securities		3,000		122		—			3,122
	$	265,975	$	8,739	$	(1,834	)	$	272,880
Held-to-Maturity:
Government agency mortgage-backed securities	$	6	$	—	$	—		$	6

December 31, 2010
Available-for-Sale:
Obligations of U.S. government agencies	$	21,096	$	135	$	(10	)	$	21,221
Obligations of state and political subdivisions		14,342		435		(226	)		14,551
Government agency mortgage-backed securities		221,807		2,729		(1,967	)		222,569
Corporate debt securities		6,000		—		(1,697	)		4,303
Equity securities		3,000		—		—			3,000
	$	266,245	$	3,299	$	(3,900	)	$	265,644
Held-to-Maturity:
Government agency mortgage-backed securities	$	6	$	—	$	—		$	6

For the three months ended September 30, 2011 there were $859,000 in gross realized gains on sales or calls of available for sale securities. For the three months ended September 30, 2010 there were no gross realized gains on sales or calls of available for sale securities. For the three months ended September 30, 2011 and 2010 there were no gross realized losses on sales, impairment or calls of securities categorized as available for sale securities. There were no sales or transfers of held to maturity securities for the three months ended September 30, 2011 and 2010. For the three months ended September 30, 2011 and 2010 there were $36,243,000 and $21,932,000, respectively, in gross proceeds from sales, maturities or calls of available for sale securities. For the three months ended September 30, 2011 and 2010 there were no gross proceeds from maturities or calls of held to maturity securities.

For the nine months ended September 30, 2011 there were $859,000 in gross realized gains on sales or calls of available for sale securities. For the nine months ended September 30, 2010 there were no gross realized gains on sales or calls of available for sale securities. For the nine months ended September 30, 2011 there were $10,000 in gross realized losses on sales, impairment or calls of securities categorized as available for sale securities. For the nine months ended September 30, 2010 there were no gross realized losses on sales of securities categorized as available for sale securities. There were no sales or transfers of held to maturity securities for the nine months ended September 30, 2011 and 2010. For the nine months ended September 30, 2011 and 2010 there were $60,488,000 and $39,843,000, respectively, in gross proceeds from sales, maturities or calls of available for sale securities. For the nine months ended September 30, 2011 there were no gross proceeds from maturities or calls of held to maturity securities. For the nine months ended September 30, 2010 there were $2,000 in gross proceeds from maturities or calls of held to maturity securities.

At September 30, 2011 and December 31, 2010, securities having fair value amounts of approximately $262,145,000 and $255,199,000, respectively, were pledged to secure public deposits, short-term borrowings and for other purposes required by law or contract. Although the Company had no short-term borrowings at September 30, 2011 and December 31, 2010, the Company pledges most of its securities at the Federal Home Loan Bank (“FHLB”) to provide borrowing capacity. See “Liquidity” on page 38.

Investment securities are evaluated for other-than-temporary impairment on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value below amortized cost is other-than-temporary. Management utilizes criteria such as the magnitude and duration of the decline and the intent and ability of the Company to retain its investment in the issues for a period of time sufficient to allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

A summary of investments securities in an unrealized loss for less than twelve months and twelve months or longer is as follows (in thousands).

September 30, 2011	Less than Twelve Months				Twelve Months or Longer					Total
Available-for-Sale:
Obligations of state and political subdivisions	$	—	$	—	$	1,007	$	(71	)	$	1,007	$	(71	)
Government agency mortgage-backed securities		—		—		17,301		(33	)		17,301		(33	)
Corporate debt securities		—		—		4,270		(1,730	)		4,270		(1,730	)
	$	—	$	—	$	22,578	$	(1,834	)	$	22,578	$	(1,834	)
Held-to-Maturity:
Government agency mortgage-backed securities	$	6	$	—	$	—	$	—		$	6	$	—

As of September 30, 2011, there were two corporate debt securities in a loss position for twelve months or more. There is a current active market for these securities and management believes that the unrealized losses on the Company’s investment in these corporate debt securities is due to the yield of the securities and is not attributable to changes in credit quality. The two corporate debt securities are each a $3,000,000 single-issuer trust preferred security issued by two separate large publicly-traded financial institutions. The securities are tied to the front-end of the yield curve, three-month LIBOR (a short-term interest rate) and have a spread over that. The Company has the ability and intent to hold these securities and expects a full recovery of value. The Company does not consider these investments to be other-than-temporarily impaired at September 30, 2011.

Management periodically evaluates each investment security for other-than-temporary impairment, relying primarily on industry analyst reports, observation of market conditions and interest rate fluctuations. Management has the ability and intent to hold securities with established maturity dates until recovery of fair value, which may be at maturity, and believes it will be able to collect all amounts due according to the contractual terms for all of the underlying investment securities; therefore, management does not consider these investments to be other-than-temporarily impaired.