Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2010
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
 
Commission File Number: 000-51584
 
 
BERKSHIRE HILLS BANCORP, INC.
 
(Exact name of registrant as specified in its charter)

Delaware
 
04-3510455
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
24 North Street, Pittsfield, Massachusetts
 
01201
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (413) 443-5601
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes x     No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes ¨  No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one)
 
Large Accelerated Filer ¨        Accelerated Filer x       Non-Accelerated Filer ¨     Smaller Reporting Company ¨   
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
 
Yes ¨  No x
 
The Registrant had 14,044,403 shares of common stock, par value $0.01 per share, outstanding as of November 3, 2010.

 

 

BERKSHIRE HILLS BANCORP, INC.
FORM 10-Q

INDEX
   
Page
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Consolidated Financial Statements (unaudited)
 
     
 
Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
3
     
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2010 and 2009
4
     
 
Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2010 and 2009
5
     
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009
6
     
 
Notes to Consolidated Financial Statements
7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
     
 
Selected Financial Data
33
     
 
Average Balances and Average Yields/Rates
34
     
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
42
     
Item 4. 
Controls and Procedures
42
     
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
43
Item 1A.
Risk Factors
43
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
44
Item 3.
Defaults Upon Senior Securities
44
Item 4.
Removed and Reserved
45
Item 5.
Other Information
45
Item 6.
Exhibits
45
     
Signatures
46

 
2

 

PART I
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS

   
September 30,
   
December 31,
 
(In thousands, except share data)
 
2010
   
2009
 
Assets
           
Cash and due from banks
  $ 26,817     $ 25,770  
Short-term investments
    11,565       6,838  
Total cash and cash equivalents
    38,382       32,608  
                 
Trading security
    17,398       15,880  
Securities available for sale, at fair value
    315,213       324,345  
Securities held to maturity (fair values of $58,790 and $58,567)
    57,476       57,621  
Federal Home Loan Bank stock and other restricted securities
    23,120       23,120  
Total securities
    413,207       420,966  
                 
Loans held for sale
    3,445       4,146  
                 
Residential mortgages
    638,829       609,007  
Commercial mortgages
    895,519       851,828  
Commercial business loans
    226,625       186,044  
Consumer loans
    293,136       314,779  
Total loans
    2,054,109       1,961,658  
Less:  Allowance for loan losses
    (31,836 )     (31,816 )
Net loans
    2,022,273       1,929,842  
                 
Premises and equipment, net
    37,858       37,390  
Other real estate owned
    2,900       30  
Goodwill
    161,725       161,725  
Other intangible assets
    12,071       14,375  
Cash surrender value of bank-owned life insurance policies
    38,170       36,904  
Other assets
    68,408       62,438  
Total assets
  $ 2,798,439     $ 2,700,424  
                 
Liabilities
               
Demand deposits
  $ 278,165     $ 276,587  
NOW deposits
    213,734       197,176  
Money market deposits
    609,255       532,840  
Savings deposits
    220,564       208,597  
Time deposits
    747,029       771,562  
Total deposits
    2,068,747       1,986,762  
                 
Short-term debt
    96,125       83,860  
Long-term Federal Home Loan Bank advances
    197,687       207,344  
Junior subordinated debentures
    15,464       15,464  
Total borrowings
    309,276       306,668  
                 
Other liabilities
    37,501       22,413  
Total liabilities
    2,415,524       2,315,843  
                 
Stockholders’ equity
               
Common stock ($0.01 par value; 26,000,000 shares authorized; 15,848,825 shares issued and 14,035,838 shares outstanding in 2010; 15,848,825 shares issued and 13,916,094 shares outstanding in 2009)
    158       158  
Additional paid-in capital
    337,670       338,822  
Unearned compensation
    (2,114 )     (1,318 )
Retained earnings
    102,270       99,033  
Accumulated other comprehensive loss
    (9,204 )     (2,968 )
Treasury stock, at cost (1,812,987 shares in 2010 and 1,932,731 shares in 2009)
    (45,865 )     (49,146 )
Total stockholders' equity
    382,915       384,581  
Total liabilities and stockholders' equity
  $ 2,798,439     $ 2,700,424  

The accompanying notes are an integral part of these consolidated financial statements.

 
3

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
(In thousands, except per share data)
 
2010
   
2009
   
2010
   
2009
 
Interest and dividend income
                       
Loans
  $ 24,917     $ 25,034     $ 73,354     $ 76,836  
Securities and other
    3,546       3,426       10,554       10,269  
Total interest and dividend income
    28,463       28,460       83,908       87,105  
Interest expense
                               
Deposits
    6,512       8,045       20,195       25,195  
Borrowings and junior subordinated debentures
    2,267       3,250       6,861       10,310  
Total interest expense
    8,779       11,295       27,056       35,505  
Net interest income
    19,684       17,165       56,852       51,600  
Non-interest income
                               
Deposit, loan and interest rate swap fees
    3,279       3,286       10,270       8,220  
Insurance commissions and fees
    2,316       2,337       8,986       10,180  
Wealth management fees
    1,090       1,369       3,406       3,671  
Total fee income
    6,685       6,992       22,662       22,071  
Other
    230       272       714       1,092  
Loss on sale of securities, net
    -       (5 )     -       (4 )
Non-recurring income
    -       1       -       1,178  
Total non-interest income
    6,915       7,260       23,376       24,337  
Total net revenue
    26,599       24,425       80,228       75,937  
Provision for loan losses
    2,000       4,300       6,526       9,000  
Non-interest expense
                               
Compensation and benefits
    10,870       9,757       32,827       28,011  
Occupancy and equipment
    2,988       2,674       8,986       8,661  
Technology and communications
    1,458       1,371       4,214       4,026  
Marketing and professional services
    1,253       1,446       3,666       3,648  
Supplies, postage and delivery
    520       702       1,635       2,087  
FDIC premiums and assessments
    893       669       2,540       3,748  
Other real estate owned
    100       15       127       177  
Amortization of intangible assets
    768       833       2,304       2,499  
Non-recurring expenses
    -       -       21       601  
Other
    1,244       1,477       3,994       3,917  
Total non-interest expense
    20,094       18,944       60,314       57,375  
                                 
Income before income taxes
    4,505       1,181       13,388       9,562  
Income tax expense (benefit)
    1,081       (741 )     3,220       1,426  
Net income
  $ 3,424     $ 1,922     $ 10,168     $ 8,136  
                                 
Less: Cumulative preferred stock dividend and accretion
    -       -       -       1,030  
Less: Deemed dividend resulting from preferred stock repayment
    -       -       -       2,954  
Net income available to common stockholders
  $ 3,424     $ 1,922     $ 10,168     $ 4,152  
                                 
Basic earnings per common share
  $ 0.25     $ 0.14     $ 0.73     $ 0.32  
                                 
Diluted earnings per common share
  $ 0.25     $ 0.14     $ 0.73     $ 0.32  
                                 
Weighted average common shares outstanding:
                               
Basic
    13,865       13,806       13,852       12,977  
Diluted
    13,893       13,857       13,883       13,145  

The accompanying notes are an integral part of these consolidated financial statements.

 
4

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                       
Accumulated
             
                     
Additional
   
Unearned
         
other comp-
             
   
Common stock
   
Preferred
   
paid-in
   
compen-
   
Retained
   
rehensive
   
Treasury
       
(In thousands)
 
Shares
   
Amount
   
stock
   
capital
   
sation
   
earnings
   
loss
   
stock
   
Total
 
             
Balance at December 31, 2008
    12,253     $ 142     $ 36,822     $ 307,620     $ (1,905 )   $ 127,773     $ (11,574 )   $ (50,453 )   $ 408,425  
 
                                                                       
Comprehensive income:
                                                                       
Net income
    -       -       -       -       -       8,136       -       -       8,136  
Other net comprehensive income
    -       -       -       -       -       -       8,195       -       8,196  
Total comprehensive income
                                                                    16,332  
Redemption of preferred stock, including deemed dividend of $2,954
    -       -       (37,046 )     -       -       (2,954 )     -       -       (40,000 )
Preferred stock discount accretion and dividends
    -       -       224       -       -       (1,030 )     -       -       (806 )
Repurchase of warrant issued with preferred stock
    -       -       -       (1,040 )     -       -       -       -       (1,040 )
Issuance of common stock, net of issuance costs of $2,266
    1,610       16       -       32,349       -       -       -       -       32,365  
Cash dividends declared ($0.48 per share)
    -       -       -       -       -       (6,161 )     -       -       (6,161 )
Forfeited shares
    (9 )     -       -       (30 )     227       -       -       (197 )     -  
Exercise of stock options
    20       -       -       -       -       (189 )     -       505       316  
Restricted stock grants
    57       -       -       (131 )     (1,309 )     -       -       1,440       -  
Stock-based compensation
    -       -       -       42       1,041       -       -       -       1,083  
Other, net
    (3 )     -       -       (7 )     -       (63 )     -       (138 )     (209 )
                                                                         
Balance at September 30, 2009
    13,928     $ 158     $ -     $ 338,803     $ (1,946 )   $ 125,512     $ (3,379 )   $ (48,843 )   $ 410,305  
                                                                         
Balance at December 31, 2009
    13,916     $ 158     $ -     $ 338,822     $ (1,318 )   $ 99,033     $ (2,968 )   $ (49,146 )   $ 384,581  
                                                                         
Comprehensive income:
                                                                       
Net income
    -       -       -       -       -       10,168       -       -       10,168  
Other net comprehensive loss
    -       -       -       -       -       -       (6,236 )     -       (6,236 )
Total comprehensive income
                                                                    3,932  
Cash dividends declared ($0.48 per share)
    -       -       -       -       -       (6,741 )     -       -       (6,741 )
Forfeited shares
    (13 )     -       -       4       254       -       -       (258 )     -  
Exercise of stock options
    24       -       -       -       -       (206 )     -       609       403  
Restricted stock grants
    132       -       -       (1,160 )     (2,201 )     -       -       3,361       -  
Stock-based compensation
    -       -       -       4       1,151       -       -       -       1,155  
Other, net
    (23 )     -       -       -       -       16       -       (431 )     (415 )
 
                                                                       
Balance at September 30, 2010
    14,036     $ 158     $ -     $ 337,670     $ (2,114 )   $ 102,270     $ (9,204 )   $ (45,865 )   $ 382,915  

The accompanying notes are an integral part of these consolidated financial statements.

 
5

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Nine Months Ended September 30,
 
(In thousands)
 
2010
   
2009
 
Cash flows from operating activities:
           
Net income
  $ 10,168     $ 8,136  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provision for loan losses
    6,526       9,000  
Net amortization of securities
    1,942       1,187  
Change in unamortized net loan costs and premiums
    872       664  
Premises depreciation and amortization expense
    2,832       2,846  
Stock-based compensation expense
    1,155       1,083  
Amortization of other intangibles
    2,304       2,499  
Income from cash surrender value of bank-owned life insurance policies
    (884 )     (901 )
Loss on sales of securities, net
    -       4  
Net decrease in loans held for sale
    701       268  
Net change in other
    (1,117 )     (3,882 )
Net cash provided by operating activities
    24,499       20,904  
                 
Cash flows from investing activities:
               
Trading security:
               
Proceeds from maturities, calls and prepayments
    327       -  
Securities available for sale:
               
Sales
    3,159       11,479  
Proceeds from maturities, calls and prepayments
    88,626       42,072  
Purchases
    (82,653 )     (120,221 )
Securities held to maturity:
               
Proceeds from maturities, calls and prepayments
    15,967       12,237  
Purchases
    (15,823 )     (17,900 )
                 
Loan (originations) and principal repayments, net
    (102,854 )     12,563  
Proceeds from surrender of bank-owned life insurance
    2,217       -  
Purchase of bank-owned life insurance
    (2,599 )     -  
Capital expenditures
    (3,347 )     (1,787 )
Net cash used by investing activities
    (96,980 )     (61,557 )
                 
Cash flows from financing activities:
               
Net increase in deposits
    81,985       137,238  
Proceeds from Federal Home Loan Bank advances and other borrowings
    212,505       85,000  
Repayments of Federal Home Loan Bank advances and other borrowings
    (209,897 )     (184,602 )
Net proceeds from common stock issuance
    -       32,365  
Net proceeds from reissuance of treasury stock
    403       316  
Common stock cash dividends paid
    (6,741 )     (6,161 )
Net impact of preferred stock and warrant including repurchase and dividends
    -       (41,846 )
Net cash provided by financing activities
    78,255       22,310  
                 
Net change in cash and cash equivalents
    5,774       (18,343 )
Cash and cash equivalents at beginning of period
    32,608       44,798  
Cash and cash equivalents at end of period
  $ 38,382     $ 26,455  
                 
Supplemental cash flow information:
               
Interest paid on deposits
    20,626       25,211  
Interest paid on borrowed funds
    6,888       10,579  
Income taxes(refunded) paid, net
    (117 )     1,952  

The accompanying notes are an integral part of these consolidated financial statements.

 
6

 

1.      GENERAL 

 
Basis of presentation and consolidation
 
The consolidated financial statements (the “financial statements”) of Berkshire Hills Bancorp, Inc. (the “Company” or “Berkshire”) have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements, including year-end consolidated balance sheet data presented, do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation are reflected in the interim financial statements and consist of normal recurring entries. These financial statements include the accounts of the Company and its wholly-owned subsidiaries, Berkshire Insurance Group, Inc. (“BIG”) and Berkshire Bank (the “Bank”), together with the Bank’s consolidated subsidiaries. One of the Bank’s consolidated subsidiaries is Berkshire Bank Municipal Bank, a New York chartered limited-purpose commercial bank. All significant inter-company transactions have been eliminated in consolidation. The results of operations for the nine months ended September 30, 2010 are not necessarily indicative of the results which may be expected for the year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Business
 
Through its wholly-owned subsidiaries, the Company provides a variety of financial services to individuals, businesses, not-for-profit organizations, and municipalities in and around western Massachusetts, southern Vermont and northeastern New York. The Company also provides asset based middle market commercial lending throughout New England and its New York markets. Its primary deposit products are checking, NOW, money market, savings, and time deposit accounts. Its primary lending products are residential mortgages, commercial mortgages, commercial business loans and consumer loans. The Company offers electronic banking, cash management, and other transaction and reporting services; it also offers interest rate swap contracts to commercial customers. The Company offers private banking services and wealth management services including trust, financial planning, and investment services. The Company is an agent for complete lines of property and casualty, life, disability, and health insurance to individuals and businesses.
 
Business segments
 
An operating segment is a component of a business for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and evaluate performance. The Company has two reportable operating segments, Banking and Insurance, which are delineated by the consolidated subsidiaries of Berkshire Hills Bancorp, Inc. Banking includes the activities of Berkshire Bank and its subsidiaries, which provide commercial and consumer banking services. Insurance includes the activities of Berkshire Insurance Group, Inc., which provides commercial and consumer insurance services. The only other consolidated financial activity of the Company consists of the transactions of Berkshire Hills Bancorp, Inc.
 
Use of estimates
 
In preparing the financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses; the valuation of deferred tax assets; the estimates related to the initial measurement of goodwill and other intangible assets and subsequent impairment analyses; the determination of other-than-temporary impairment of securities; and the determination of the fair value of assets and liabilities.

 
7

 

Earnings Per Common Share
 
Earnings per common share have been computed based on the following (average diluted shares outstanding are calculated using the treasury stock method):
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
(In thousands, except per share data)
 
2010
   
2009
   
2010
   
2009
 
                                 
Net income
  $ 3,424     $ 1,922     $ 10,168     $ 8,136  
Less: Cumulative preferred stock dividends and accretion
    -       -       -       1,030  
Less: Deemed dividend resulting from preferred stock repayment
    -       -       -       2,954  
Net income available to common stockholders
  $ 3,424     $ 1,922     $ 10,168     $ 4,152  
                                 
Average number of common shares outstanding
    14,037       13,926       14,020       13,100  
Less: average number of unvested stock award shares
    (172 )     (120 )     (168 )     (123 )
Average number of basic shares outstanding
    13,865       13,806       13,852       12,977  
                                 
Plus: average number of dilutive unvested stock award shares
    22       13       20       134  
Plus: average number of dilutive stock options
    6       38       11       34  
Average number of diluted shares outstanding
    13,893       13,857       13,883       13,145  
                                 
Basic earnings per common share
  $ 0.25     $ 0.14     $ 0.73     $ 0.32  
Diluted earnings per common share
  $ 0.25     $ 0.14     $ 0.73     $ 0.32  

For the quarter ended September 30, 2010, 145 thousand shares of restricted stock and 117 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the quarter ended September 30, 2009, 107 thousand shares of restricted stock and 121 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.
 
Recent accounting pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”. New authoritative accounting guidance under ASC Topic 810 amends prior guidance to provide more relevant and reliable information to users of financial statements by enterprises involved with variable interest entities. This accounting guidance became effective for the Company on January 1, 2010 and did not have a significant impact on the Company’s financial statements.

FASB ASC Topic 860, “Transfers and Servicing”. New authoritative accounting guidance under ASC Topic 860 amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. The new authoritative accounting guidance eliminates the concept of a “qualifying special-purpose entity” and changes the requirements for derecognizing financial assets. The new authoritative accounting guidance also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. This accounting guidance became effective for the Company on January 1, 2010 and did not have a significant impact on the Company’s financial statements.
 
FASB Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements”. New authoritative accounting guidance under ASU No. 2010-06 provides guidance that requires more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. This guidance became effective for the Company on January 1, 2010 and did not have a material impact on the Company’s financial statements.

 
8

 

FASB ASU No. 2010-20, “Receivables (Topic 310), Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses”. In July 2010, the FASB issued ASU 2010-20 which requires an entity to provide disclosures that facilitate financial statement users’ evaluation of (1) the nature of credit risk inherent in the entity’s loan portfolio (2) how that risk is analyzed and assessed in arriving at the allowance for loan and lease losses and (3) the changes and reasons for those changes in the allowance for loan and lease losses. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The adoption of this guidance will require significant additional disclosures in the December 31, 2010 financial statements and subsequent financial statements.

2.      TRADING ACCOUNT SECURITY

 
The Company holds a tax advantaged economic development bond that is being accounted for at fair value. The security had an amortized cost of $14.7 million and $15.0 million and a fair value of $17.4 million and $15.9 million at September 30, 2010 and December 31, 2009, respectively. As discussed further in Note 10-Derivative Financial Instruments and Hedging Activities, the Company has entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there are no other securities in the trading portfolio at September 30, 2010.

 
9

 

3.      SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

 
The following is a summary of securities available for sale and held to maturity:
 
(In thousands)
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair Value
 
September 30, 2010
                       
Securities available for sale
                       
Debt securities:
                       
Municipal bonds and obligations
  $ 80,654     $ 4,175     $ (22 )   $ 84,807  
Government guaranteed residential mortgage-backed securities
    21,551       398       -       21,949  
Government-sponsored residential mortgage-backed securities
    142,502       3,581       (76 )     146,007  
Corporate bonds
    26,430       191       (54 )     26,567  
Trust preferred securities
    22,253       361       (1,726 )     20,888  
Other bonds and obligations
    421       2       -       423  
Total debt securities
    293,811       8,708       (1,878 )     300,641  
Equity securities:
                               
Marketable equity securities
    15,374       53       (855 )     14,572  
Total securities available for sale
    309,185       8,761       (2,733 )     315,213  
                                 
Securities held to maturity
                               
Municipal bonds and obligations
    6,592       -       -       6,592  
Government-sponsored residential mortgage-backed securities
    84       4       -       88  
Tax advantaged economic development bonds
    50,627       1,425       (115 )     51,937  
Other bonds and obligations
    173       -       -       173  
Total securities held to maturity
    57,476       1,429       (115 )     58,790  
                                 
Total
  $ 366,661     $ 10,190     $ (2,848 )   $ 374,003  
                                 
December 31, 2009
                               
Securities available for sale
                               
Debt securities:
                               
Municipal bonds and obligations
  $ 73,277     $ 1,836     $ (329 )   $ 74,784  
Government guaranteed residential mortgage-backed securities
    12,923       224       (116 )     13,031  
Government-sponsored residential mortgage-backed securities
    179,674       4,714       (143 )     184,245  
Corporate bonds
    36,941       641       (245 )     37,337  
Trust preferred securities
    9,285       -       (2,370 )     6,915  
Other bonds and obligations
    5,481       9       (20 )     5,470  
Total debt securities
    317,581       7,424       (3,223 )     321,782  
Equity securities:
                               
Marketable equity securities
    2,679       55       (171 )     2,563  
Total securities available for sale
    320,260       7,479       (3,394 )     324,345  
                                 
Securities held to maturity
                               
Municipal bonds and obligations
    14,737       -       -       14,737  
Government-sponsored residential mortgage-backed securities
    139       3       -       142  
Tax advantaged economic development bonds
    42,572       951       (8 )     43,515  
Other bonds and obligations
    173       -       -       173  
Total securities held to maturity
    57,621       954       (8 )     58,567  
                                 
Total
  $ 377,881     $ 8,433     $ (3,402 )   $ 382,912  

 
10

 

The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities, segregated by contractual maturity at September 30, 2010 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable. Equity securities have no maturity and are also shown in total.

   
Available for sale
   
Held to maturity
 
   
Amortized
   
Fair
   
Amortized
   
Fair
 
(In thousands)
 
Cost
   
Value
   
Cost
   
Value
 
                         
Within 1 year
  $ 24,029     $ 24,254     $ 3,699     $ 3,699  
Over 1 year to 5 years
    3,374       3,329       1,701       1,701  
Over 5 years to 10 years
    24,600       25,339       30,742       31,509  
Over 10 years
    77,755       79,763       21,250       21,793  
Total bonds and obligations
    129,758       132,685       57,392       58,702  
                                 
Marketable equity securities
    15,374       14,572       -       -  
Residential mortgage-backed securities
    164,053       167,956       84       88  
                                 
Total
  $ 309,185     $ 315,213     $ 57,476     $ 58,790  

 
11

 

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:

   
Less Than Twelve Months
   
Over Twelve Months
   
Total
 
   
Gross
         
Gross
         
Gross
       
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
 
(In thousands)
 
Losses
   
Value
   
Losses
   
Value
   
Losses
   
Value
 
September 30, 2010
                 
                                     
Securities available for sale
                                   
Debt securities:
                                   
Municipal bonds and obligations
  $ 4     $ 2,217     $ 18     $ 1,237     $ 22     $ 3,454  
Government-sponsored residential mortgage-backed securities
    76       24,990       -       -       76       24,990  
Corporate bonds
    4       5,000       50       2,945       54       7,945  
Trust preferred securities
    -       -       1,726       5,485       1,726       5,485  
Other bonds and obligations
    -       -       -       319       -       319  
Total debt securities
    84       32,207       1,794       9,986       1,878       42,193  
                                                 
Marketable equity securities
    840       12,175       15