INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2011

INVESTMENT SECURITIES

INVESTMENT SECURITIES

4.  INVESTMENT SECURITIES

At the time of purchase of a security, the Company designates the security as either available for sale or held to maturity, depending upon investment objectives, liquidity needs and intent. Securities held to maturity are stated at cost, adjusted for premium amortized or discount accreted, if any. The Company has the positive intent and ability to hold such securities to maturity.  Securities available for sale are stated at estimated fair value.  Unrealized gains and losses are excluded from income and reported net of tax as accumulated other comprehensive income (loss) as a separate component of stockholders’ equity until realized.  Interest earned on securities is included in interest income. Realized gains and losses on the sale of securities are reported in the consolidated statements of operations and determined using the adjusted cost of the specific security sold.

The amortized cost, gross unrealized gains and losses and estimated fair value of securities held to maturity and securities available for sale at June 30, 2011 and December 31, 2010 follow (in thousands).

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
June 30, 2011
Securities held to maturity:
Corporate securities	$	22,000	$	—	$	(105	)	$	21,895
Securities available for sale:
Obligations of states and political
subdivisions	$	1,341	$	10	$	—		$	1,351
Government Agency securities	43,467		84		(240		)	43,311
Mortgage-backed securities and
collateralized mortgage obligations - residential:
FHLMC	86,482		4,567		(44		)	91,005
FNMA	116,466		2,529		(69		)	118,926
GNMA	73,630		734		(276		)	74,088
Mortgage-backed securities and
collateralized mortgage obligations - commercial:
GNMA	5,092		—		(171		)	4,921
Total securities available for sale	326,478		7,924		(800		)	333,602
Total securities	$	348,478	$	7,924	$	(905	)	$	355,497
December 31, 2010
Securities held to maturity:
Corporate securities	$	22,000	$	—	$	(110	)	$	21,890
Securities available for sale:
Obligations of states and political
subdivisions	$	1,883	$	23	$	—		$	1,906
Government Agency securities	40,894		176		(514		)	40,556
Mortgage-backed securities and
collateralized mortgage obligations - residential:
FHLMC	106,040		4,803		(95		)	110,748
FNMA	111,841		2,190		(414		)	113,617
GNMA	89,874		648		(1,050		)	89,472
Mortgage-backed securities and
collateralized mortgage obligations - commercial:
GNMA	5,101		—		(242		)	4,859
Total securities available for sale	355,633		7,840		(2,315		)	361,158
Total securities	$	377,633	$	7,840	$	(2,425	)	$	383,048

The amortized cost and estimated fair value of securities held to maturity and securities available for sale at June 30, 2011 are shown below by expected maturity (in thousands). Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
	Cost		Fair Value
Securities held to maturity:
Due after one year through five years	$	8,000	$	7,960
Due after five years through ten years	14,000		13,935
Total securities held to maturity	22,000		21,895
Securities available for sale:
Due after one year through five years	23,673		23,727
Due after five years through ten years	16,141		16,027
Due after ten years	4,994		4,908
Subtotal	44,808		44,662
Mortgage-backed securities and
collateralized mortgage obligations - residential	276,578		284,019
Mortgage-backed securities and
collateralized mortgage obligations - commercial	5,092		4,921
Total securities available for sale	326,478		333,602
Total securities	$	348,478	$	355,497

The proceeds from sales of securities available for sale and the associated recognized gross gains, gross losses and taxes follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Proceeds	$	17,547	$	47,966	$	65,186	$	56,751
Gross gains	33		2,527		640		2,783
Gross losses	2		2		527		2
Tax provision, net	12		1,002		45		1,104

All of the Company’s securities with gross unrealized losses at both June 30, 2011 and December 31, 2010 had been in a continuous loss position for less than twelve months.

Unrealized losses have not been recognized in operations because the issuers’ bonds are of high credit quality, management does not intend to sell and it is not more likely than not that management would be required to sell the securities prior to recovery, and the decline in fair value is largely due to fluctuations in interest rates.

In the case of adjustable rate securities, the coupon rate resets periodically and is typically comprised of a base market index rate plus a spread.  The market value on these securities is primarily influenced by the length of time remaining before the coupon rate resets to market levels.  As an adjustable rate security approaches that reset date, it is likely that an unrealized loss position would dissipate.

The market value for fixed rate securities changes inversely with changes in interest rates.  When interest rates are falling, the market value of fixed rate securities will appreciate, whereas in a rising interest rate environment, the market value of fixed rate securities will depreciate.  The market value of fixed rate securities is also affected with the passage of time.  As a fixed rate security approaches its maturity date, the market value of the security typically approaches its par value.