Securities

6 Months Ended

Jun. 30, 2011

Securities

Securities

(2)       Securities

The amortized cost, unrealized gains and losses, and fair value of securities available for sale follow:

June 30, 2011	Amortized		Unrealized
Securities available for sale	Cost		Gains		Losses		Fair Value
(in thousands)
U.S. Treasury and other U.S. government obligations	$	23,000	$	—	$	—	$	23,000
Government sponsored enterprise obligations	100,808		2,948		—		103,756
Mortgage-backed securities	58,936		2,801		35		61,702
Obligations of states and political subdivisions	66,624		1,953		25		68,552
Trust preferred securities of other financial institutions	1,250		20		—		1,270
Total securities available for sale	$	250,618	$	7,722	$	60	$	258,280

December 31, 2010	Amortized		Unrealized
Securities available for sale	Cost		Gains		Losses		Fair Value
(in thousands)
Government sponsored enterprise obligations	$	111,802	$	2,737	$	—	$	114,539
Mortgage-backed securities	58,616		2,348		216		60,748
Obligations of states and political subdivisions	68,429		777		417		68,789
Trust preferred securities of other financial institutions	1,250		6		—		1,256
Total securities available for sale	$	240,097	$	5,868	$	633	$	245,332

The investment portfolio includes a significant level of obligations of states and political subdivisions.  The issuers of the bonds are generally school districts or essential-service public works projects.  The bonds are concentrated in Kentucky, Indiana and Ohio.  Each of these securities has a rating of A or better by a recognized bond rating agency.

At December 31, 2010, Bancorp had mortgage-backed securities classified as held to maturity.  These securities, with an amortized cost of $20,000, had a fair value of $22,000.  There are no securities held to maturity as of June 30, 2011.

In addition to the available for sale portfolio, investment securities held by Bancorp include certain securities which are not readily marketable and are carried at cost. This category includes holdings of Federal Home Loan Bank of Cincinnati (FHLB) stock which are required as part of the condition for borrowing availability from the FHLB and are classified as restricted securities.  See Note 5 for information relating to FHLB borrowings.  Other securities consist of a Community Reinvestment Act (CRA) investment which matures in 2014, and is fully collateralized with a government agency security of similar duration.

A summary of securities as of June 30, 2011 based on contractual maturity is presented below. Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations.

	Securities
	Available for Sale
(In thousands)	Cost		Fair Value
Due within one year	$	67,308	$	67,354
Due within one year through five years	87,624		90,217
Due within five years through ten years	38,034		40,153
Due after ten years	57,652		60,556
	$	250,618	$	258,280

Securities with unrealized losses not recognized in income 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
(In thousands)	Value		Losses		Value		Losses		Value		Losses
June 30, 2011
Mortgage-backed securities	$	4,881	$	35	$	—	$	—	$	4,881	$	35
Obligations of states and political subdivisions	2,186		25		—		—		2,186		25
Total temporarily impaired securities	$	7,067	$	60	$	—	$	—	$	7,067	$	60
December 31, 2010
Mortgage-backed securities	$	9,620	$	216	$	—	$	—	$	9,620	$	216
Obligations of states and political subdivisions	31,444		417		—		—		31,444		417
Total temporarily impaired securities	$	41,064	$	633	$	—	$	—	$	41,064	$	633

Unrealized losses on Bancorp’s investment securities portfolio have not been recognized in income because the securities are of high credit quality, and the decline in fair values is largely due to changes in the prevailing interest rate environment since the purchase date.  The fair value is expected to recover as the securities reach their maturity date and/or the interest rate environment returns to conditions similar to when the securities were purchased.  These investments consist of 5 and 49 separate investment positions as of June 30, 2011 and December 31, 2010, respectively, that are not considered other-than-temporarily impaired.  Based on this information, Bancorp has not recorded other-than-temporary losses on any securities held at June 30, 2011.

Management evaluates the impairment of securities on a quarterly basis, considering various factors including issuer financial condition, agency rating, payment prospects, impairment duration and general industry condition.  As of June 30, 2011, Bancorp had no securities which had been impaired for 12 months or longer. As of June 30, 2011, Bancorp had one trust preferred security with a credit rating below investment grade — Caa1 by Moody’s Investor Service.  This security had an amortized cost of $1,000,000, a carrying value of $1,014,000, and an unrealized gain of $14,000.  Because management does not intend to sell the investments, and it is not likely that Bancorp will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, management is of the opinion that none of the securities are other-than-temporarily impaired at June 30, 2011.