Annual report pursuant to Section 13 and 15(d)

Securities

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Securities
 12 Months Ended
Dec. 31, 2011
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, 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  

 

December 31, 2010                                
U.S. government sponsored entities   $ 4,172     $ -     $ (3 )   $ 4,169  
Collateralized mortgage obligations and residential mortgage-backed securities     94,930       2,372       (160 )     97,142  
Municipal securities     38,549       1,027       (211 )     39,365  
Collateralized debt obligations     5,215       -       (3,836 )     1,379  
Total securities available-for-sale   $ 142,866     $ 3,399     $ (4,210 )   $ 142,055  

 

The carrying amount, gross unrecognized gains and losses, and fair value of securities held-to-maturity were as follows:

 

    (Dollars in thousands)  
          Gross     Gross     Estimated  
    Cost     Unrecognized     Unrecognized     Fair  
    Basis     Gains     Losses     Value  
December 31, 2010                                
Municipal securities   $ 17,573     $ 613     $ -     $ 18,186  
Residential mortgage-backed securities     824       29       (1 )     852  
Total securities held-to-maturity   $ 18,397     $ 642     $ (1 )   $ 19,038  

 

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 2011 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        
    Fair     Tax-Equivalent  
December 31, 2011   Value     Yield (%)  
Due in one year or less   $ 1,020       6.25  
Due from one to five years     14,599       3.42  
Due from five years to ten years     28,533       5.01  
Due over ten years     31,613       5.84  
Collateralized mortgage obligations and residential mortgage-backed securities     111,197       3.29  
Total   $ 186,962       4.01  

 

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

 

    (Dollars in thousands)  
    December 31,     December 31,  
    2011     2010  
             
Proceeds   $ 22,713       18,951  
Gross gains     981       913  
Gross losses     (15 )     -  

 

The tax provisions related to these net realized gains were approximately $380,000 for 2011 and $359,000 for 2010.

 

Securities with carrying values of approximately $70,412,000 and $24,484,000 were pledged as of December 31, 2011 and 2010, respectively, as collateral for repurchase agreements, public funds, and for other purposes as permitted or required by law. The increase in pledged securities was the result of new pledging requirements for Indiana public funds deposits.

 

Securities with unrealized losses at December 31, 2011 and 2010 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, 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  

 

    (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, 2010                                                
U.S. government sponsored entities   $ 2,513     $ (3 )   $ -     $ -     $ 2,513     $ (3 )
Collateralized mortgage obligations and residential mortgage-backed securities     13,767       (161 )     -       -       13,767       (161 )
Municipal securities     7,496       (194 )     398       (17 )     7,894       (211 )
Collateralized debt obligations     -       -       1,379       (3,836 )     1,379       (3,836 )
Total temporarily impaired   $ 23,776     $ (358 )   $ 1,777     $ (3,853 )   $ 25,553     $ (4,211 )
Number of securities             27               5               32  

 

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.