INVESTMENTS

9 Months Ended

Sep. 30, 2011

INVESTMENTS

INVESTMENTS

2. INVESTMENTS

Investment securities available for sale are summarized as follows (in thousands):

At September 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State, county, and municipal securities	$	43,355	$	2,435	$	6	$	45,784
Mortgage-backed securities	66,941		1,468		435		67,974
Corporate securities	9,669		—		389		9,280
Totals	$	119,965	$	3,903	$	830	$	123,038

At December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State, county, and municipal securities	$	46,807	$	439	$	1,342	$	45,904
Mortgage-backed securities	72,343		1,257		631		72,969
Corporate securities	8,528		30		76		8,482
Totals	$	127,678	$	1,726	$	2,049	$	127,355

Investment securities held to maturity are summarized as follows (in thousands):

At September 30, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State, county, and municipal securities	$	3,293	$	86	$	—	$	3,379
Mortgage-backed securities	8		—		—		8
Totals	$	3,301	$	86	$	—	$	3,387

At December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State, county, and municipal securities	$	3,294	$	86	$	5	$	3,375
Mortgage-backed securities	17		1		—		18
Totals	$	3,311	$	87	$	5	$	3,393

The amortized costs and fair values of investment securities at September 30, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with and without call or prepayment penalties (in thousands).

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	750	$	751	$	8	$	8
Due after one year through five years	4,447		4,361		1,131		1,148
Due after five years through ten years	28,907		29,357		2,162		2,231
Due after ten years	85,861		88,569		—		—
	$	119,965	$	123,038	$	3,301	$	3,387

Securities with carrying values of $80,645,000 and $70,239,000 at September 30, 2011 and December 31, 2010, respectively, were pledged to secure public deposits, FHLB advances and a $19 million line of credit at the Federal Reserve Bank discount window and for other purposes as required by law.

Gross realized gains on securities were $360,000 and $546,000 for the nine months ended September 30, 2011 and 2010, respectively. For the three month period ended September 30, 2011 and 2010, gross realized gains on securities were $141,000 and $211,000, respectively.  Gross realized losses on securities were $124,000 for the nine months period ended September 30, 2011. There were no gross realized losses on securities for the three months period ended September 30, 2011. Also, there were no gross realized losses on securities for the three and nine month periods ended September 30, 2010.

The Company’s investment portfolio consists principally of obligations of the United States, its agencies, or its corporations, general obligation and revenue municipals and corporate securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio.  The company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions.  Management believes credit risk associated with correspondent accounts is not significant.

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2011 and December 31, 2010. Except as explicitly identified below, all unrealized losses on investment securities are considered by management to be temporarily impaired given the credit ratings on these investment securities and the short duration of the unrealized loss (in thousands).

At September 30, 2011

Securities Available for Sale

	Securities in a loss position for					Securities in a loss position for
	less than twelve months					twelve months or more					Total
			Unrealized					Unrealized					Unrealized
	Fair value		losses			Fair value		losses			Fair value		losses
Mortgage-backed securities	$	10,612	$	(172	)	$	2,686	$	(263	)	$	13,298	$	(435	)
Municipal securities	—		—			690		(6		)	690		(6		)
Corporate	7,343		(326		)	1,937		(63		)	9,280		(389		)
Total	$	17,955	$	(498	)	$	5,313	$	(332	)	$	23,268	$	(830	)

Securities Held to Maturity

There were no securities classified as held to maturity in an unrealized loss position at September 30, 2011.

At December 31, 2010

Securities Available for Sale

	Securities in a loss position for					Securities in a loss position for
	less than twelve months					twelve months or more					Total
			Unrealized					Unrealized					Unrealized
	Fair value		losses			Fair value		losses			Fair value		losses
Mortgage-backed securities	$	23,830	$	(437	)	$	3,287	$	(193	)	$	27,117	$	(630	)
Municipal securities	29,021		(1,310		)	424		(32		)	29,445		(1,342		)
Corporate	6,184		(77		)	—		—			6,184		(77		)
Total	$	59,035	$	(1,824	)	$	3,711	$	(225	)	$	62,746	$	(2,049	)

Securities Held to Maturity

	Securities in a loss position for					Securities in a loss position for
	less than twelve months					twelve months or more				Total
			Unrealized					Unrealized				Unrealized
	Fair value		losses			Fair value		losses		Fair value		losses
Municipal securities	$	275	$	(5	)	$	—	$	—	$	275	$	(5	)
Total	$	275	$	(5	)	$	—	$	—	$	275	$	(5	)

The Company’s available for sale portfolio had six investment securities at September 30, 2011 and seven investment securities at December 31, 2010 that were in an unrealized loss position for longer than twelve months.  At September 30, 2011, one of the investment securities in an unrealized loss position for more than 12 months was a private label collateralized mortgage obligation (CMO) security.  At December 31, 2010 there were four private label collateralized mortgage obligation (CMO) securities in an unrealized loss position for more than 12 months.  The Company reviews these securities for other-than-temporary impairment on a quarterly basis by monitoring their credit support and coverage, constant payment of the contractual principal and interest, loan to value and delinquencies ratios.

We use prices from third party pricing services and, to a lesser extent, indicative (non-binding) quotes from third party brokers, to measure fair value of our investment securities. Fair values of the investment securities portfolio could decline in the future if the underlying performance of the collateral for collateralized mortgage obligations or other securities deteriorates and the levels do not provide sufficient protection for contractual principal and interest. As a result, there is risk that an other-than-temporary impairment may occur in the future particularly in light of the current economic environment.

As of the date of its evaluation, the Company did not intend to sell and has the ability to hold these securities and it is more likely than not that the Company will not be required to sell those securities before recovery of its amortized cost or the security matures. The Company believes, based on industry analyst reports and credit ratings, that it will continue to receive scheduled interest payments as well as the entire principal balance, and the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary.