Annual report pursuant to Section 13 and 15(d)

Securities

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Securities
 12 Months Ended
Dec. 31, 2012
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 2 – Securities

 

The fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

 

          (Dollars in thousands)        
          Gross     Gross     Estimated  
    Cost     Unrealized     Unrealized     Fair  
    Basis     Gains     Losses     Value  
December 31, 2012                                
U.S. government sponsored entities   $ 23,009     $ 94     $ (7 )   $ 23,096  
Collateralized mortgage obligations and residential mortgage-backed securities     96,782       3,147       (15 )     99,914  
Municipal securities     58,946       4,155       (28 )     63,073  
Collateralized debt obligations     5,208       -       (3,816 )     1,392  
Total securities available-for-sale   $ 183,945     $ 7,396     $ (3,866 )   $ 187,475  
                                 
December 31, 2011                                
U.S. government sponsored entities   $ 15,610     $ 41     $ (3 )   $ 15,648  
Collateralized mortgage obligations and residential mortgage-backed securities     107,569       3,630       (2 )     111,197  
Municipal securities     54,738       4,018       -       58,756  
Collateralized debt obligations     5,214       -       (3,853 )     1,361  
Total securities available-for-sale   $ 183,131     $ 7,689     $ (3,858 )   $ 186,962  

 

During August 2011, management transferred its entire held-to-maturity securities portfolio to available-for-sale. The book value of the securities transferred totaled approximately $16.4 million, with an unrealized gain of approximately $1.0 million that was recorded as a component of other comprehensive income at the date of transfer. All held-to-maturity securities were transferred to available-for-sale to avoid the potential implication that any remaining held-to-maturity securities would be tainted by a partial transfer. In addition, the transfer provides management the ability to sell lower balance odd lot securities, divest of certain securities to reduce credit or interest rate risk within the portfolio, and be positioned to take advantage of other portfolio restructuring opportunities.

 

The fair value of available-for-sale debt securities and carrying amount, if different, at year end 2012 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

 

    (Dollars in thousands)  
    Available-for-sale  
    Estimated     Tax-  
    Fair     Equivalent  
December 31, 2012   Value     Yield (%)  
Due in one year or less   $ 972       5.98  
Due from one to five years     14,942       3.08  
Due from five to ten years     38,313       4.16  
Due over ten years     33,334       4.81  
Collateralized mortgage obligations and residential mortgage-backed securities     99,914       2.86  
Total   $ 187,475       3.51  

 

Sales of available-for-sale securities were as follows:

 

    (Dollars in thousands)  
    December 31,     December 31,  
    2012     2011  
             
Proceeds   $ 25,900       22,713  
Gross gains     1,120       981  
Gross losses     -       (15 )

 

The tax provisions related to these net realized gains were approximately $440,000 for 2012 and $380,000 for 2011.

 

Accumulated other comprehensive income/(loss) balances, net of tax, related to available-for-sale securities, were as follows:

 

    (Dollars in thousands)  
    Unrealized  
    gain/(loss)  
Beginning balance, December 31, 2011   $ 2,476  
Current period change     (192 )
Ending balance, December 31, 2012   $ 2,284  

 

Securities with carrying values of approximately $32,935,000 and $70,412,000 were pledged as of December 31, 2012 and 2011, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law. The reduction in pledged securities is a result of the lifting of a state requirement to pledge securities for public funds on deposit.

 

Securities with unrealized losses at December 31, 2012 and 2011 not recognized in income are as follows:

 

    (Dollars in thousands)  
    Less than 12 months     12 months or longer     Total  
    Estimated           Estimated           Estimated        
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
    Value     Losses     Value     Losses     Value     Losses  
December 31, 2012                                                
U.S. government sponsored entities   $ 3,492     $ (7 )   $ -     $ -     $ 3,492     $ (7 )
Collateralized mortgage obligations and residential mortgage-backed securities     2,294       (15 )     -       -       2,294       (15 )
Municipal securities     3,330       (28 )     -       -       3,330       (28 )
Collateralized debt obligations     -       -       1,392       (3,816 )     1,392       (3,816 )
Total temporarily impaired   $ 9,116     $ (50 )   $ 1,392     $ (3,816 )   $ 10,508     $ (3,866 )
Number of securities             14               4               18  

 

    (Dollars in thousands)  
    Less than 12 months     12 months or longer     Total  
    Estimated           Estimated           Estimated        
    Fair     Unrealized     Fair     Unrealized     Fair     Unrealized  
    Value     Losses     Value     Losses     Value     Losses  
December 31, 2011                                    
U.S. government sponsored entities   $ 1,287     $ (3 )   $ -     $ -     $ 1,287     $ (3 )
Collateralized mortgage obligations and residential mortgage-backed securities     2,030       (2 )     -       -       2,030       (2 )
Municipal securities     -       -       -       -       -       -  
Collateralized debt obligations     -       -       1,361       (3,853 )     1,361       (3,853 )
Total temporarily impaired   $ 3,317     $ (5 )   $ 1,361     $ (3,853 )   $ 4,678     $ (3,858 )
Number of securities             2               4               6  

 

Unrealized losses on securities have not been recognized into income because the securities are of high credit quality or have undisrupted cash flows. Management has the intent and ability to hold the securities for the foreseeable future, and the decline in fair value is largely due to changes in interest rates and volatility in the securities markets. The fair values are expected to recover as the securities approach maturity