v2.4.0.6
Securities
3 Months Ended
Mar. 31, 2012
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  
March 31, 2012                                
U.S. government, federal agencies and government sponsored enterprises   $ 162,326     $ 1,159     $ (312 )   $ 163,173  
U.S. government residential mortgage-backed     154,720       4,181       (138 )     158,763  
Corporate     1,060       -       -       1,060  
                                 
    $ 318,106     $ 5,340     $ (450 )   $ 322,996  

 

          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   $ 51,090     $ 1,676     $ (38 )   $ 52,728  
                                 
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 March 31, 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     Carrying     Fair  
    Cost     Value     Value     Value  
                         
Due in one year or less   $ 1,955     $ 1,976     $ 3,056     $ 3,070  
Due after one year through five years     86,460       87,084       24,337       25,127  
Due after five years through ten years     73,911       74,114       17,772       18,606  
Due after ten years     1,060       1,060       5,925       5,925  
U.S. Government agency mortgage-backed     154,720       158,762       -       -  
                                 
    $ 318,106     $ 322,996     $ 51,090     $ 52,728  

 

Available-for sale securities with a fair value of $7,176,000 were sold in March and a gain of $207,000 was recorded. This sale will settle and the proceeds will be received in April of 2012. No securities were sold with losses. Proceeds on the sale of $13,367,000 of available-for-sale securities resulted in gains of $231,000 for the first three 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 March 31, 2012, the Bank’s security portfolio consisted of 224 securities, 29 of which were in an unrealized loss position of $488. There was no other-than-temporary-impairment of securities at March 31, 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 March 31, 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 Company 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 Company does not consider these securities to be other than temporarily impaired at March 31, 2012.

 

At March 31, 2012 and December 31, 2011, securities with a carrying value of $344,980 and $342,288 were pledged to secure public deposits and repurchase agreements.

 

Securities with unrealized losses at March 31, 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  
March 31, 2012                                                
U.S. government, federal agencies and government sponsored enterprises   $ 44,686     $ (312 )   $ -     $ -     $ 44,686     $ (312 )
U.S. government mortgage-backed     24,783       (138 )     -       -       24,783       (138 )
Municipal & other obligations     3,667       (38 )     -       -       3,667       (38 )
                                                 
Total temporarily impaired   $ 73,136     $ (488 )   $ -     $ -     $ 73,136     $ (488 )
                                                 
December 31, 2011                                                
U.S. government, federal agencies and government sponsored enterprises   $ 18,734     $ (12 )   $ -     $ -     $ 18,734     $ (12 )
U.S government 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 )