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Securities
9 Months Ended
Sep. 30, 2012
Investments, Debt and Equity Securities [Abstract]  
Securities

Note 8Securities:

 

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

  

     Gross  Gross    
  Amortized  Unrealized  Unrealized  Fair 
Available-for-Sale Cost  Gains  Losses  Value 
September 30, 2012                
U.S. government, federal agencies and government sponsored enterprises $112,473  $1,313  $(23) $113,763 
U.S. government residential mortgage-backed  181,429   6,292   -   187,721 
Corporate  1,060   -   -   1,060 
  $294,962  $7,605  $(23) $302,544 

 

     Gross  Gross    
  Amortized  Unrealized  Unrealized  Fair 
  Cost  Gains  Losses  Value 
December 31, 2011                
U.S. government, federal agencies and government sponsored enterprises $168,104  $1,368  $(12) $169,460 
U.S. government residential mortgage-backed  148,329   3,727   (64)  151,992 
Corporate  1,060   -   -   1,060 
  $317,493  $5,095  $(76) $322,512 

 

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

 

     Gross  Gross    
  Amortized  Unrecognized  Unrecognized  Fair 
Held-to-Maturity Cost  Gains  Losses  Value 
2012                
Municipal and other obligations $58,314  $2,169  $(108) $60,375 
                 
2011                
Municipal and other obligations $48,975  $1,693  $(25) $50,643 

 

The amortized cost and fair value of debt securities and carrying amount, if different, at September 30, 2012 by contractual maturity were as follows (in thousands), with securities not due at a single maturity date, primarily mortgage-backed securities, shown separately.

 

  Available-for-Sale  Held-to-Maturity 
  Amortized  Fair  Amortized  Fair 
  Cost  Value  Cost  Value 
Due in one year or less $610  $616  $3,353  $3,368 
Due after one year through five years  51,409   52,076   29,592   30,780 
Due after five years through ten years  60,454   61,071   19,444   20,302 
Due after ten years  1,060   1,060   5,925   5,925 
U.S. Governmentagency mortgage-backed  181,429   187,721   -   - 
                 
  $294,962  $302,544  $58,314  $60,375 

 

Proceeds on the sale of $6,944,000 of available-for-sale securities resulted in gains of $203,000 for the first nine months of 2012. No securities were sold with losses in the first nine months of 2012. Proceeds on the sale of $13,367,000 of available-for-sale securities resulted in gains of $231,000 for the first nine months of 2011, with no losses.

 

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available-for-sale or held-to-maturity are evaluated for OTTI under ASC 320, Accounting for Certain Investments in Debt and Equity Securities.

 

In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

 

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Otherwise, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

 

As of September 30, 2012, the Bank’s security portfolio consisted of 227 securities, 11 of which were in an unrealized loss position of $131,000. There was no OTTI of securities at September 30, 2012. Unrealized losses have not been recognized into income because the issuers’ bonds are of high credit quality (U.S. government agencies and government sponsored enterprises and “A” rated or better Kentucky municipalities), management does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

 

Mortgage-backed Securities

 

At September 30, 2012, 100% of the mortgage-backed securities held by the Bank were issued by U.S. government sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because a decline in market value would be attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Bank does not consider these securities to be other than temporarily impaired at September 30, 2012.

 

At September 30, 2012 and December 31, 2011, securities with a carrying value of $327,242,000 and $342,288,000 were pledged to secure public deposits and repurchase agreements.

 

Securities with unrealized losses at September 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):

 

  Less than 12 Months  12 Months or More  Total 
  Fair  Unrealized  Fair  Unrealized  Fair  Unrealized 
Description of Securities Value  Loss  Value  Loss  Value  Loss 
September 30, 2012                        
U.S. government, federal agencies and government sponsored enterprises $4,992  $(23) $-  $-  $4,992  $(23)
Municipal & other obligations  5,518   (108)  -   -   5,518   (108)
Total temporarily impaired $10,510  $(131) $-  $-  $10,510  $(131)
                         
December 31, 2011                        
U.S. government, federal agencies and government sponsored enterprises $18,734  $(12) $-  $-  $18,734  $(12)
U.S government residential mortgage-backed  36,707   (64)  -   -   36,707   (64)
Municipal & other obligations  3,225   (24)  388   (1)  3,613   (25)
Total temporarily impaired $58,666  $(100) $388  $(1) $59,054  $(101)