INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2011

Investments, Debt and Equity Securities [Abstract]

NOTE 3 - INVESTMENT SECURITIES

The amortized cost and fair value of investment securities are based on contractual maturity dates. Actual maturities may differ from the contractual maturities because borrowers may have the right to prepay obligations with or without penalty. The amortized cost, approximate fair value, and expected maturities of investment securities are summarized as follows (amounts in thousands):

			December 31, 2011
	Amortized		Unrealized Holding				Fair
AVAILABLE FOR SALE	Cost		Gains		Losses		Value

Government sponsored enterprises
Within one year	$	52,367	$	153	$	-	$	52,520
One to five years		185,112		842		93		185,861
Six to ten years		29,877		160		30		30,007
		267,356		1,155		123		268,388

Mortgage backed securities
One to five years		84		8		-		92
Six to ten years		3,149		128		-		3,277
Over ten years		18,787		232		30		18,989
		22,020		368		30		22,358
State, county and municipal
Within one year		265		-		-		265
One to five years		1,784		64		-		1,848
Six to ten years		19,472		1,410		3		20,879
Over ten years		5,538		283		-		5,821
		27,059		1,757		3		28,813
Other investments
CRA Qualified Investment Fund		1,079		43		-		1,122
Other		36		-		-		36
		1,115		43		-		1,158

Total available for sale	$	317,550	$	3,323	$	156	$	320,717

HELD TO MATURITY

State, county and municipal
Within one year		804		11		-		815
One to five years		812		38		-		850
Six to ten years		6,519		473		-		6,992
Over ten years		2,874		213		-		3,087
		11,009		735		-		11,744

Total held to maturity	$	11,009	$	735	$	-	$	11,744

			December 31, 2010
	Amortized		Unrealized Holding				Fair
AVAILABLE FOR SALE	Cost		Gains		Losses		Value

Government sponsored enterprises
One to five years	$	186,938	$	349	$	652	$	186,635
Six to ten years		58,047		137		322		57,862
		244,985		486		974		244,497
Mortgage backed securities
Six to ten years		2,112		90		-		2,202
Over ten years		8,090		102		86		8,106
		10,202		192		86		10,308
State, county and municipal
Within one year		950		4		-		954
One to five years		1,395		40		-		1,435
Six to ten years		12,531		332		82		12,781
Over ten years		4,442		5		142		4,305
		19,318		381		224		19,475
Other investments
CRA Qualified Investment Fund		1,065		-		-		1,065
Other		36		-		-		36
		1,101		-		-		1,101

Total available for sale	$	275,606	$	1,059	$	1,284	$	275,381

HELD TO MATURITY

Government sponsored enterprises
One to five years	$	10,000	$	25	$	4	$	10,021
		10,000		25		4		10,021
State, county and municipal
One to five years		1,103		46		-		1,149
Six to ten years		5,847		149		14		5,982
Over ten years		3,728		-		96		3,632
		10,678		195		110		10,763

Total held to maturity	$	20,678	$	220	$	114	$	20,784

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011 and 2010 (tabular amounts in thousands):

	Less than				Twelve months
2011	twelve months				or more				Total
			Unrealized				Unrealized				Unrealized
AVAILABLE FOR SALE	Fair value		losses		Fair value		losses		Fair value		losses

Government sponsored enterprises	$	42,732	$	123	$	-	$	-	$	42,732	$	123
State, county, and municipal		260		3		-		-		260		3
Mortgage backed securities		6,507		30		-		-		6,507		30
Total	$	49,499	$	156	$	-	$	-	$	49,499	$	156

	Less than				Twelve months
2010	twelve months				or more				Total
			Unrealized				Unrealized				Unrealized
AVAILABLE FOR SALE	Fair value		losses		Fair value		losses		Fair value		losses

Government sponsored enterprises	$	132,747	$	973	$	-	$	-	$	132,747	$	974
State, county, and municipal		5,882		207		323		17		6,205		224
Mortgage backed securities		5,005		87		-		-		5,005		86
Total	$	143,634	$	1,267	$	323	$	17	$	143,957	$	1,284

HELD TO MATURITY

Government sponsored enterprises	$	1,996	$	4	$	-	$	-	$	1,996	$	4
State, county, and municipal		4,534		110		-		-		4,534		110
Total	$	6,530	$	114	$	-	$	-	$	6,530	$	114

Securities classified as available for sale are recorded at fair market value. There were no securities classified as available for sale in an unrealized loss position for twelve months or more at December 31, 2011. The Company owned one municipal bond with a fair value of $323,000, which had been in an unrealized loss position for twelve months or more at December 31, 2010. At December 31, 2011, the Company retained ownership of this bond. At December 31, 2011, the bond had a fair value of $376,000 with an unrealized gain of $41,000. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before recovery of their amortized cost. The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary.

Securities classified as held to maturity are recorded at cost. There were no securities classified as held-to-maturity in an unrealized loss position at December 31, 2011. There were no securities classified as held-to-maturity in an unrealized loss position for twelve months or more at December 31, 2010.

Investment securities with an aggregate par value of $175,457,000 ($179,252,000 fair value) at December 31, 2011 and $204,917,000 ($207,349,000 fair value) at December 31, 2010 were pledged to secure public deposits and for other purposes.

There were no sales of securities available for sale in 2011. During 2010, $20,758,000 par value of available for sale securities were sold for a gain of $993,000. During 2009, $53,560,000 par value of available for sale securities were sold for a gain of $1,576,000.

During 2010, the Company sold $2,255,000 par value ($2,370,000 fair value) of held to maturity securities, consisting of four securities, for a net gain of $73,000. Two of these held to maturity securities, $770,000 par value ($785,000 fair value), were sold under exception “a.” of ASC 320-10-25-6 as a result of both securities losing their rating due to a downgrade of the insurer. Two of these held to maturity securities, $1,485,000 par value ($1,585,000 fair value), were sold under exception “d.” of ASC 320-10-25-6 because the primary regulator of the Company’s subsidiary bank has increased scrutiny of capital and its components and, consequently, due to continued uncertainty in the municipal bond markets, the amount of investment in individual municipal securities issuers. In response to these regulatory concerns related to capital and its components, the Company sold all of its municipal securities of individual issuers in excess of $600,000 including all municipal securities in this size category classified held to maturity as well as those classified available for sale. We believe that the sale of these held to maturity securities should not be considered inconsistent with the original classification and the remaining portfolio is not tainted.

Management reviews securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (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, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Other Investments, at Cost

The Bank, as a member institution, is required to own certain stock investments in the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank. The stock is generally pledged against any borrowings from these institutions (see Note 9 to the Consolidated Financial Statements – LINES OF CREDIT). No ready market exists for the stock and it has no quoted market value. However, redemption of these stocks has historically been at par value.

The Company’s investments in stock are summarized below (amounts in thousands):

	December 31,
	2011		2010

Federal Reserve Bank	$	116	$	116
FHLB		1,749		2,613
	$	1,865	$	2,729

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

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+ Details

CNB CORP /SC/ 10-K