Investment Securities

6 Months Ended

Jun. 30, 2011

Investment Securities

Investment Securities

Note 6:  Investment Securities

A summary of the amortized cost and market value of securities available for sale and securities held to maturity at June 30, 2011 and December 31, 2010 is as follows:

	June 30, 2011
	Investment Securities Available for Sale
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Mortgage-backed securities/CMOs	$	140,791	$	4,641	$	-		$	145,432
Municipal securities		10,725		105		(824	)		10,006
Corporate bonds		3,000		-		-			3,000
Pooled Trust Preferred Securities		6,415		-		(2,750	)		3,665
Other securities		131		2		(14	)		119
Total	$	161,062	$	4,748	$	(3,588	)	$	162,222

	June 30, 2011
	Investment Securities Held to Maturity
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government agencies	$	2	$	-	$	-	$	2
Other securities		137		7		-		144
Total	$	139	$	7	$	-	$	146

	December 31, 2010
	Investment Securities Available for Sale
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Mortgage-backed securities/CMOs	$	125,011	$	2,784	$	(133	)	$	127,662
Municipal securities		10,589		36		(1,415	)		9,210
Corporate bonds		3,000		-		-			3,000
Pooled Trust Preferred Securities		6,417		-		(2,967	)		3,450
Other securities		131		2		(16	)		117
Total	$	145,148	$	2,822	$	(4,531	)	$	143,439

	December 31, 2010
	Investment Securities Held to Maturity
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government agencies	$	2	$	-	$	-	$	2
Other securities		145		10		-		155
Total	$	147	$	10	$	-	$	157

The maturity distribution of the amortized cost and estimated market value of investment securities by contractual maturity at June 30, 2011 is as follows:

	June 30, 2011
	Available for Sale				Held to Maturity
(Dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in 1 year or less	$	-	$	-	$	-	$	-
After 1 year to 5 years		10		10		117		124
After 5 years to 10 years		417		448		2		2
After 10 years		160,635		161,764		-		-
No stated maturity		-		-		20		20
Total	$	161,062	$	162,222	$	139	$	146

Expected maturities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without prepayment penalties.

As of June 30, 2011 and December 31, 2010, the mortgage backed securities and collateralized mortgage obligations included in the investment securities portfolio consist solely of securities issued by U.S. government sponsored agencies.  There were no private label mortgage securities held in the investment securities portfolio as of those dates. The Company does not hold any mortgage-backed securities that are rated "Alt-A" or "Subprime" as of June 30, 2011 and December 31, 2010.  In addition, the Company does not hold any private issued CMO's as of June 30, 2011 and December 31, 2010.

In instances when a determination is made that an OTTI exists with respect to a debt security but the investor does not intend to sell the debt security and it is more likely than not that the investor will not be required to sell the debt security prior to its anticipated recovery, FASB Accounting Standards Codification ("ASC") 320-10, Investments – Debt and Equity Securities, changes the presentation and amount of the OTTI recognized in the income statement.  The OTTI is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total OTTI related to all other factors.  The amount of the total OTTI related to other factors is recognized in other comprehensive income.  The adoption of updated guidance under ASC 320-10 had an impact on the amount reported in the consolidated financial statements as impairment charges (credit losses) on bank pooled trust preferred securities for the three and six months ended June 30, 2011 in the amount of $2,000 for both periods.  The Company realized gross losses due to impairment charges on pooled trust preferred securities of $223,000 and $372,000 for the three and six months ended June 30, 2010, respectively.

The following table shows the fair value and gross unrealized losses associated with the investment portfolio, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	At June 30, 2011
	Less than 12 months				12 months or longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Municipal securities	$	3,238	$	106	$	3,996	$	718	$	7,234	$	824
Trust Preferred Securities		-		-		3,665		2,750		3,665		2,750
Other securities		-		-		76		14		76		14
Total	$	3,238	$	106	$	7,737	$	3,482	$	10,975	$	3,588

	At December 31, 2010
	Less than 12 months				12 months or longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities/CMOs	$	17,599	$	133	$	31	$	-	$	17,630	$	133
Municipal securities		5,288		398		3,599		1,017		8,887		1,415
Trust Preferred Securities		-		-		3,450		2,967		3,450		2,967
Other securities		-		-		74		16		74		16
Total	$	22,887	$	531	$	7,154	$	4,000	$	30,041	$	4,531

The impairment of the investment portfolio totaled $3.6 million with a total fair value of $11.0 million at June 30, 2011.  The unrealized loss for the Bank's pooled trust preferred securities was due to the secondary market for such securities becoming inactive and is considered temporary at June 30, 2011.

The unrealized loss on the remaining securities is due to changes in market value resulting from changes in market interest rates and is also considered temporary.  At June 30, 2011, the investment portfolio included twenty-five municipal securities with a total market value of $10.0 million.  The securities are reviewed quarterly for impairment. Research on each issuer is completed to ensure the financial stability of the municipal entity. The largest geographic concentration was in California where thirteen municipal securities had a market value of $5.0 million.  There were no defaults by any Moody's rated state or local government during the three months ended June 30, 2011.  As of June 30, 2011, management found no evidence of OTTI on any of the municipal securities held in the investment securities portfolio.