INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2011

NOTE 2 — INVESTMENT SECURITIES

The following tables summarize the aggregate amortized cost and estimated fair value of investment securities as of December 31:

	2011
	Amortized		Gross Unrealized				Estimated
(dollars in thousands)	Cost		Gains		Losses		Fair Value
Available-For-Sale Securities
U.S. government agencies	$	128,231	$	1,428	$	20	$	129,639
Residential mortgage-backed securities and collateralized mortgage obligations	120,578		3,875		34		124,419
State and political subdivisions	10,869		466		5		11,330
Total available-for-sale	259,678		5,769		59		265,388
Held-To-Maturity Securities
State and political subdivisions	34,662		1,576		—		36,238
Total held-to-maturity	34,662		1,576		—		36,238
Total investment securities	$	294,340	$	7,345	$	59	$	301,626

	2010
	Amortized		Gross Unrealized				Estimated
(dollars in thousands)	Cost		Gains		Losses		Fair Value
Available-For-Sale Securities
U.S. government agencies	$	85,474	$	612	$	311	$	85,775
Residential mortgage-backed securities and collateralized mortgage obligations	84,510		2,718		797		86,431
State and political subdivisions	8,504		323		62		8,765
Total available-for-sale	178,488		3,653		1,170		180,971
Held-To-Maturity Securities
State and political subdivisions	38,367		730		235		38,862
Total held-to-maturity	38,367		730		235		38,862
Total investment securities	$	216,855	$	4,383	$	1,405	$	219,833

The following tables show the gross unrealized losses and fair value of investments with unrealized losses that are not deemed to be other-than-temporarily impaired as of December 31:

	2011
	Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-For-Sale Securities
U.S. government agencies	$	8,005	$	20	$	—	$	—	$	8,005	$	20
Residential mortgage-backed securities and collateralized mortgage obligations	7,815		34		—		—		7,815		34
State and political subdivisions	374		5		—		—		374		5
Total available-for-sale	16,194		59		—		—		16,194		59
Held-To-Maturity Securities
State and political subdivisions	—		—		—		—		—		—
Total held-to-maturity	—		—		—		—		—		—
Total investment securities	$	16,194	$	59	$	—	$	—	$	16,194	$	59

	2010
	Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-For-Sale Securities
U.S. government agencies	$	35,373	$	311	$	—	$	—	$	35,373	$	311
Residential mortgage-backed securities and collateralized mortgage obligations	24,599		797		—		—		24,599		797
State and political subdivisions	1,128		62		—		—		1,128		62
Total available-for-sale	61,100		1,170		—		—		61,100		1,170
Held-To-Maturity Securities
State and political subdivisions	12,076		235		—		—		12,076		235
Total held-to-maturity	12,076		235		—		—		12,076		235
Total investment securities	$	73,176	$	1,405	$	—	$	—	$	73,176	$	1,405

At December 31, 2011, Bancorp held no security in the available-for-sale portfolio and no security in the held-to-maturity portfolio that had an unrealized loss for more than one year. Bancorp does not intend to sell securities that are identified as temporarily impaired nor does available evidence suggest it is more likely than not that management will be required to sell any impaired securities. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. Management believes the nature of the securities in the investment portfolio present a high probability of collecting all contractual amounts due. Based on the evaluation, management has determined that no investment security in Bancorp’s investment portfolio is other-than-temporarily impaired.

Available for sale investment securities with a carrying value of $116.9 million and $96.0 million, as of December 31, 2011 and 2010, respectively, were pledged as collateral for public fund deposits, securities sold under agreements to repurchase, Treasury Tax and Loan payments, and Federal Reserve Bank discount window borrowings. Gross realized gains through the sale of available-for-sale securities were $1,000, $0, and $0 for 2011, 2010, and 2009, respectively. Bancorp had no realized losses through the sale of available-for-sale securities for 2011, 2010, and 2009. Sales of securities were $2.9 million, $0, and $0 for 2011, 2010, and 2009, respectively.

The amortized cost and estimated fair value of investment securities at December 31, 2011, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	2011
	Available-For-Sale				Held-To-Maturity
	Amortized		Estimated		Amortized		Estimated
(dollars in thousands)	Cost		Fair Value		Cost		Fair Value

U.S. government agencies
1 year	$	26,018	$	26,181	$	—	$	—
2-5 years	83,796		84,984		—		—
6-10 years	9,149		9,154		—		—
Over 10 years	9,268		9,320		—		—

Residential mortgage-backed securities and collateralized mortgage obligations
1 year	—		—		—		—
2-5 years	—		—		—		—
6-10 years	38,251		40,458		—		—
Over 10 years	82,327		83,961		—		—

State and political subdivisions
1 year	1,233		1,262		6,101		6,130
2-5 years	5,179		5,438		9,977		10,344
6-10 years	2,302		2,426		13,607		14,239
Over 10 years	2,155		2,204		4,977		5,525
Total investment securities	$	259,678	$	265,388	$	34,662	$	36,238

- 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

Skagit State Bancorp, Inc. 10-K