INVESTMENT AND MORTGAGE-BACKED SECURITIES

6 Months Ended

Jun. 30, 2011

INVESTMENT AND MORTGAGE-BACKED SECURITIES [Abstract]

INVESTMENT AND MORTGAGE-BACKED SECURITIES

10.   INVESTMENT AND MORTGAGE-BACKED SECURITIES

The following is a summary of major categories of securities owned by the Company at June 30, 2011:

					Unrealized Gains or Losses Recognized in Accumulated Other Comprehensive Loss
	Purchase Amortized / Historical Cost		Recorded Amortized/ Historical Cost (1)		Non-Credit OTTI			Unrealized Gains		Unrealized Losses			Book Value		Other Unrealized Losses			Fair Value
					(Dollars in Thousands)
Held-to-Maturity:
Pooled bank trust preferred securities ("TRUPS")	$	18,941	$	10,057	$	(950	)		-	$	(1,858	)(2)	$	7,249	$	(765	)	$	6,484
Available-for-sale:
Mutual fund investments		4,979		3,554		-			1,148		-			4,702		-			4,702
Agency notes		160,365		160,365		-			131		(86	)		160,410		-			160,410
Pass-through MBS issued by GSEs		84,373		84,373		-			5,292		-			89,665		-			89,665
Collateralized mortgage obligations    ("CMOs")  issued by GSEs		23,587		23,587		-			638		-			24,225		-			24,225
Private issuer pass through MBS		1,911		1,911		-			-		(118	)		1,793		-			1,793
Private issuer CMOs		1,726		1,726		-			28		-			1,754		-			1,754
Total	$	295,882	$	285,573	$	(950	)	$	7,237	$	(2,062	)	$	289,788	$	(765	)	$	289,033

(1) Amount represents the purchase amortized / historical cost less any credit-related OTTI charges recognized through earnings.

(2) Amount represents the unamortized portion of the unrealized loss that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from available-for-sale to held-to-maturity).

The following is a summary of major categories of securities owned by the Company at December 31, 2010:

					Unrealized Gains or Losses Recognized in Accumulated Other Comprehensive Loss
	Purchase Amortized / Historical Cost		Recorded Amortized/ Historical Cost (1)		Non-Credit OTTI			Unrealized Gains		Unrealized Losses			Book Value		Other Unrealized Losses			Fair Value
					(Dollars in Thousands)
Held-to-Maturity:
TRUPS	$	19,008	$	10,760	$	(2,203	)		-	$	(1,916	)(2)	$	6,641	$	(2,233	)	$	4,408
Available-for-sale:
Mutual fund investments		4,962		3,537		-			957		(4	)		4,490		-			4,490
Agency notes		81,388		81,388		-			5		(241	)		81,152		-			81,152
Pass-through MBS issued by GSEs		100,847		100,847		-			5,236		-			106,083		-			106,083
CMOs issued by GSEs		32,953		32,953		-			1,012		-			33,965		-			33,965
Private issuer pass through MBS		2,363		2,363		-			-		(65	)		2,298		-			2,298
Private issuer CMOs		2,122		2,122		-			50		-			2,172		-			2,172
Total		243,643		233,970	$	(2,203	)		7,260		(2,226	)		236,801		(2,233	)	$	234,568

(1) Amount represents the purchase amortized / historical cost less any credit-related OTTI charges recognized through earnings.

(2) Amount represents the remaining unamortized portion of the unrealized loss that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from available-for-sale to held-to-maturity).

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At June 30, 2011, the agency note investments in the above table had contractual maturities as follows:

	Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Due after one year through five years	$	159,975	$	160,018
Due after five years through ten years		390		392
	$	160,365	$	160,410

The held-to-maturity TRUPS had a weighted average term to maturity of 23.5 years at June 30, 2011.  At June 30, 2011, MBS available-for-sale (which include pass-through MBS issued by GSEs, CMOs issued by GSEs, private issuer pass through MBS and private issuer CMOs) possessed a weighted average contractual maturity of 16.9 years and a weighted average estimated duration of 2.1 years.  There were no sales of MBS available-for-sale during the six months ended June 30, 2011 and 2010.

There were no sales of investment securities available-for-sale during the six months ended June 30, 2011.  Proceeds from the sales of investment securities available-for-sale (i.e., mutual funds and agency notes) were $2.5 million during the six months ended June 30, 2010.  Gains of $608,000 was recognized on these sales.  On March 31, 2010, the Company transferred six mutual fund investments totaling $1.4 million from available-for-sale to trading.  Unrealized holding gains totaling $242,000 were recognized on these investments on the date of transfer,.

At June 30, 2011, in management’s judgment, the credit quality of the collateral pool underlying six of the Company's eight TRUPS had deteriorated to the point that full recovery of the Company’s initial investment was considered uncertain, thus resulting in recognition of OTTI charges.  At June 30, 2011, these six securities had credit ratings ranging from  "D" to "Caa3." The Company applied ASC 320-10-65 to determine the credit related component of OTTI for the six TRUPS by discounting the expected future cash flows applicable to the securities at the effective interest rate implicit in the security at the date of acquisition by the Company.

The following table provides a reconciliation of the pre-tax OTTI charges recognized on the Company's TRUPS.

	At or for the Three Months Ended June 30, 2011			At or for the Three Months Ended June 30, 2010
	Credit Related OTTI Recognized in Earnings	Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss	Total OTTI	Credit Related OTTI Recognized in Earnings	Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss	Total OTTI
	(Dollars in Thousands)
Cumulative balance at the beginning of the period	$8,310	$1,591	$9,901	$5,937	$4,196	$10,133
OTTI recognized on securities with previous OTTI	574	-	574	508	13	521
Reductions and transfers to credit-related OTTI	-	(640)	(640)	-	(365)	(365)
Amortization of previously recognized OTTI	-	(1)	(1)	-	(29)	(29)
Cumulative balance at end of the period	$8,884	$950	$9,834	$6,445	$3,815	$10,260

	At or for the Six Months Ended June 30, 2011			At or for the Six Months Ended June 30, 2010
	Credit Related OTTI Recognized in Earnings	Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss	Total OTTI	Credit Related OTTI Recognized in Earnings	Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss	Total OTTI
	(Dollars in Thousands)
Cumulative balance at the beginning of the period	$8,247	$2,203	$10,450	$5,772	$4,425	$10,197
OTTI recognized on securities with previous OTTI	637	-	637	673	63	736
Reductions and transfers to credit-related OTTI	-	(1,245)	(1,245)	-	(619)	(619)
Amortization of previously recognized OTTI	-	(8)	(8)	-	(54)	(54)
Cumulative balance at end of the period	$8,884	$950	$9,834	$6,445	$3,815	$10,260

The remaining aggregate amortized cost of TRUPS that could be subject to future OTTI charges through earnings was $10.7 million at June 30, 2011.  Of this total, unrealized losses of $3.5 million have already been recognized as a component of accumulated other comprehensive loss.

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The following table provides a reconciliation of the pre-tax OTTI charges recognized on the Company's equity mutual funds (contained within investment securities available-for-sale):

	At or For the Three Months Ended June 30,		At or For the Six Months Ended June 30,
	2011	2010	2011	2010
PRE-TAX OTTI	(Dollars in Thousands)
Cumulative balance at the beginning of the period	$1,425	$2,042	$1,425	$3,063
OTTI recognized during the period	-	-	-	_
Reduction of OTTI for securities sold during the period	-	(617)	-	(1,302)
Reduction of OTTI for securities transferred to trading during the period	-	-	-	(336)
Cumulative balance at end of the period	$1,425	$1,425	$1,425	$1,425

During the three months and six months ended June 30, 2010, the Company sold portions of mutual fund investments for which it had previously recognized OTTI charges, recovering $617,000 and $1.3 million, respectively, of the apportioned OTTI previously recognized on these fund shares.

In addition, during the six months ended June 30, 2010, the Company transferred mutual fund balances from available-for-sale into trading as part of a re-positioning of a portion of its BMP investments.  The transfer of these mutual funds from available-for-sale into trading during 2010 resulted in the recovery of approximately $336,000 of previously recognized OTTI charges.  Any recovery in value of mutual funds has been recognized as a component of other comprehensive income for mutual funds that have had both OTTI charges and have not been either subsequently sold or transferred into trading.

The following table summarizes the gross unrealized losses and fair value of investment securities and MBS as of June 30, 2011, aggregated by investment category and the length of time the securities were in a continuous unrealized loss position:

	Total				12 or More Consecutive Months of Unrealized Losses				Less than 12 Consecutive Months of Unrealized Losses
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
					(Dollars in thousands)
Held-to-Maturity Securities:
TRUPS (1)	$	6,484	$	3,573	$	6,484	$	3,573	$	-	$	-
Available-for-Sale Securities:
Agency notes		64,914		86		-		-		64,914		86
Private issuer pass through MBS		1,793		118		1,793		118		-		-
Total	$	73,191	$	3,777	$	8,277	$	3,691	$	64,914	$	86

(1) At June 30, 2011, the recorded balance of these securities was $7.2 million.  This balance reflected both the remaining unrealized loss of $1.9 million that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from available-for-sale to held-to-maturity) for two TRUPS that have not been deemed OTTI, and an unrealized loss of $950,000 that has been recognized in accumulated other comprehensive loss that represents the non-credit component of impairment for five TRUPS that have been deemed OTTI.  In accordance with both ASC 320-10-35-17 and ASC 320-10-65, these unrealized losses are currently being amortized over the remaining estimated life of these securities.

TRUPS That Have Maintained an Unrealized Holding Loss for 12 or More Consecutive Months

At June 30, 2011, two of the TRUPS, with an amortized cost of $7.2 million were not deemed to have OTTI.  These securities remained in an unrealized loss for 12 or more consecutive months, and their cumulative unrealized loss was $2.9 million at June 30, 2011, reflecting both illiquidity in the marketplace and concerns over future bank failures.  At June 30, 2011, both of these securities had ratings ranging from "CC" to "Ba1."  Despite both the significant decline in market value and the duration of their impairment, management believes that the unrealized losses on these securities at June 30, 2011 were temporary, and that the full value of the investments will be realized once the market dislocations have been removed, or as the securities continue to make their contractual payments of principal and interest.  In making this determination, management considered the following:

·Based upon an internal review of the collateral backing the TRUPS portfolio, which accounted for current and prospective deferrals, each of the securities could reasonably be expected to continue making all contractual payments

·The Company has the intent and ability to hold these securities until they fully recover their impairment, evidenced by the election to reclassify them as held-to-maturity in 2008

·There were no cash or working capital requirements nor contractual or regulatory obligations that would compel the Company to sell any of these securities prior to their forecasted recovery or maturity

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·Each security has a pool of underlying issuers comprised primarily of banks

·None of the securities have exposure to real estate investment trust issued debt (which has experienced high default

rates)

·Each security featured either a mandatory auction or a de-leveraging mechanism that could result in principal repayments to the Bank prior to the stated maturity of the security

·Each security is characterized by some level of over-collateralization

The remaining six trust preferred securities, with an aggregate amortized cost of $3.4 million at June 30, 2011, have previously been determined to meet the OTTI criteria.

Private Issuer Pass Through MBS That Have Maintained an Unrealized Holding Loss for 12 or More Consecutive Months

At June 30, 2011, the Company owned one private label pass-through MBS that possessed unrealized losses for 12 or more consecutive months, with an amortized cost of $1.9 million and an unrealized loss of $118,000. The Company's investment is in the most senior tranche (or repayment pool) of this security.  Despite a challenging real estate marketplace, the private label pass-through MBS made contractual principal and interest payments that reduced its principal balance by approximately 29% during the twelve months ended June 30, 2011.  At June 30, 2011, the Company performed an analysis of likely potential defaults of the real estate loans underlying this security in the current economic environment, and determined that this security could reasonably be expected to continue making all contractual payments.  The Company has no intent to sell this security and it is not likely that the Company will be required to sell this security before the recovery of its remaining amortized cost.

The following summarizes the gross unrealized losses and fair value of investment securities and MBS as of December 31, 2010, aggregated by investment category and the length of time that the securities were in a continuous unrealized loss position:

	Total				12 or More Consecutive Months of Unrealized Losses				Less than 12 Consecutive Months of Unrealized Losses
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
					(Dollars in thousands)
Held-to-Maturity Securities:
TRUPS	$	4,408	$	6,352	$	4,408	$	6,352	$	-	$	-
Available-for-Sale Securities:
Agency notes		75,756		241		-		-		75,756		241
Fixed Income mutual fund		506		4		-		-		506		4
Private issuer pass through MBS		2,298		65		2,298		65
Total	$	82,968	$	6,662	$	6,706	$	6,417	$	76,262	$	245