Securities

6 Months Ended

Jun. 30, 2011

NOTE 2 — SECURITIES

Securities are summarized as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available for Sale
June 30, 2011
U.S. government agencies	$	68,950	$	210	$	(282	)	$	68,878
States and political subdivisions		28,893		843		(392	)		29,344
CMO Agency		88,678		2,442		(166	)		90,954
CMO Non-Agency		3,354		32		(75	)		3,311
Mortgage-backed securities		22,362		1,032		(6	)		23,388
Trust preferred securities		1,844		—		(163	)		1,681


	$	214,081	$	4,559	$	(1,084	)	$	217,556


December 31, 2010
U.S. government agencies	$	84,106	$	115	$	(922	)	$	83,299
States and political subdivisions		31,192		705		(396	)		31,501
CMO Agency		62,589		1,858		(265	)		64,182
CMO Non-Agency		3,454		43		(104	)		3,393
Mortgage-backed securities		17,168		815		(19	)		17,964
Trust preferred securities		1,850		—		(187	)		1,663


	$	200,359	$	3,536	$	(1,893	)	$	202,002


Held to maturity
December 31, 2010
States and political subdivisions	$	215	$	1	$	—		$	216
Other securities		250		1		—			251


	$	465	$	2	$	—		$	467

Contractual maturities of securities at June 30, 2011 are shown below. Securities not due at a single maturity date, collateralized mortgage obligations and mortgage-backed securities are shown separately.


	Available for Sale
	Fair
	Value
Due in one year or less	$	1,018
Due after one year through five years		4,676
Due after five years through ten years		52,499
Due after ten years		41,710
Collateralized mortgage obligations		94,265
Mortgage-backed securities		23,388


Total maturities	$	217,556

There were no realized gross gains or (losses) from sales of investment securities for the three and six month periods ended June 30, 2011 and 2010, respectively.

Securities with a carrying value of $190,329 and $135,692 at June 30, 2011 and December 31, 2010, respectively, were pledged for public deposits and securities sold under agreements to repurchase and to the Federal Reserve Bank. The balance of pledged securities in excess of the pledging requirements was $27,833 and $7,983 at June 30, 2011 and December 31, 2010, respectively.

Securities with unrealized losses at June 30, 2011 and December 31, 2010 are as follows:


	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
June 30, 2011
U. S. government agencies	$	23,690	$	(282	)	$	—	$	—		$	23,690	$	(282	)
States and political subdivisions		1,425		(162	)		1,754		(230	)		3,179		(392	)
CMO Agency		10,372		(166	)		—		—			10,372		(166	)
CMO Non-Agency		—		—			2,728		(75	)		2,728		(75	)
Mortgage-backed securities		2,040		(3	)		5		(3	)		2,045		(6	)
Trust preferred securities		—		—			1,681		(163	)		1,681		(163	)

Total temporarily impaired	$	37,527	$	(613	)	$	6,168	$	(471	)	$	43,695	$	(1,084	)


December 31, 2010
U. S. government agencies	$	65,178	$	(922	)	$	—	$	—		$	65,178	$	(922	)
States and political subdivisions		2,488		(114	)		1,659		(282	)		4,147		(396	)
CMO Agency		14,666		(265	)		—		—			14,666		(265	)
CMO Non-Agency		—		—			2,699		(104	)		2,699		(104	)
Mortgage-backed securities		2,821		(17	)		8		(2	)		2,829		(19	)
Trust preferred securities		—		—			1,663		(187	)		1,663		(187	)

Total temporarily impaired	$	85,153	$	(1,318	)	$	6,029	$	(575	)	$	91,182	$	(1,893	)

The Company reviews its investment portfolio on a quarterly basis judging each investment for other-than-temporary impairment (“OTTI”). Management does not have the intent to sell any of the temporarily impaired investments and believes it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The OTTI analysis focuses on the duration and amount a security is below book value and assesses a calculation for both a credit loss and a non-credit loss for each measured security considering the security’s type, performance, underlying collateral, and any current or potential debt rating changes. The OTTI calculation for credit loss is reflected in the income statement while the non-credit loss is reflected in other comprehensive income (loss).

The Company holds a single issue trust preferred security issued by a privately held bank holding company. The bank holding company deferred its interest payments beginning in the second quarter of 2009, and we have placed the security on non-accrual. The Federal Reserve Bank of St. Louis entered into an agreement with the bank holding company on October 22, 2009 which was made public on October 30, 2009. Among other provisions of the regulatory agreement, the bank holding company must strengthen its management of operations, strengthen its credit risk management practices, and submit a capital plan. As of June 30, 2011 no other communications between the bank holding company and the Federal Reserve Bank of St. Louis have been made public. Our estimated fair value implies an unrealized loss of $37, related primarily to illiquidity. The Company did not recognize other-than-temporary impairment on the security for the three and six months ended June 30, 2011. Cumulative other-than-temporary impairment recognized for this security is $854.

The Company holds a private label class A21 collateralized mortgage obligation that was analyzed for the quarter ended June 30, 2011 with multiple stress scenarios using conservative assumptions for underlying collateral defaults, loss severity, and prepayments. The security’s estimated fair value implies an unrealized loss of $74, an improvement of $30 compared to December 31, 2010. The Company did not recognize a write-down through non-interest income representing other-than-temporary impairment on the security for the three and six months ended June 30, 2011. Cumulative other-than-temporary impairment recognized for this security is $197.

The following table presents more detail on selective Company security holdings as of June 30, 2011. These details are listed separately due to the inherent level of risk for OTTI on these securities.

Current

Credit

Book

Fair

Unrealized

Description

Cusip#

Rating

Value

Loss

Collateralized mortgage obligations

Wells Fargo — 2007 - 4 A21

94985RAW2

Caa2

2,802

2,728

(74

)

Trust preferred securities

West Tennessee Bancshares, Inc.

956192AA6

N/A

675

638

(37

)

The following table presents a roll-forward of the cumulative amount of credit losses on the Company’s investment securities that have been recognized through earnings as of June 30, 2011 and 2010. There were no credit losses on the Company’s investment securities recognized in earnings for the three and six months ended June 30, 2011.


	Six months		Six months
	ended		ended
	6/30/2011		6/30/2010
Beginning balance of credit losses at January 1, 2011 and 2010	$	1,069	$	976
Other-than-temporary impairment credit losses		—		93


Ending balance of cumulative credit losses recognized in earnings	$	1,069	$	1,069

- Definition

This item represents the entire disclosure related to Investments in Certain Debt and Equity Securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

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