Note 3 Securities

Available-for-Sale Securities

The following tables summarize available-for-sale securities held by the Company at December 31, 2011 and 2010:

	Available-for-Sale Securities
December 31, 2011	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
U.S. Treasury securities	$	2,020	$	50	$	0	$	2,070
Obligations of U.S. Government sponsored entities		408,958		13,663		31		422,590
Obligations of U.S. states and political subdivisions		56,939		2,722		8		59,653
Mortgage-backed securities – residential, issued by
U.S. Government agencies		123,426		6,347		0		129,773
U.S. Government sponsored entities		501,136		16,300		58		517,378
Non-U.S. Government agencies or sponsored entities		6,334		0		458		5,876
U.S. corporate debt securities		5,017		166		0		5,183
Total debt securities		1,103,830		39,248		555		1,142,523
Equity securities		1,023		0		0		1,023
Total available-for-sale securities	$	1,104,853	$	39,248	$	555	$	1,143,546

1 Net of other-than-temporary impairment losses recognized in earnings

	Available-for-Sale Securities
December 31, 2010	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(in thousands)
U.S. Treasury securities	$	2,043	$	86	$	0	$	2,129
Obligations of U.S. Government sponsored entities		402,057		7,372		1,989		407,440
Obligations of U.S. states and political subdivisions		60,707		2,339		9		63,037
Mortgage-backed securities – residential, issued by
U.S. Government agencies		143,319		3,233		539		146,013
U.S. Government sponsored entities		393,331		13,568		1,421		405,478
Non-U.S. Government agencies or sponsored entities		9,636		3		356		9,283
U.S. corporate debt securities		5,024		179		0		5,203
Total debt securities		1,016,117		26,780		4,314		1,038,583
Equity securities		1,025		0		0		1,025
Total available-for-sale securities	$	1,017,142	$	26,780	$	4,314	$	1,039,608

1 Net of other-than-temporary impairment losses recognized in earnings

Held-to-Maturity Securities

The following tables summarize held-to-maturity securities held by the Company at December 21, 2011 and 2010:

December 31, 2011	Held-to-Maturity Securities
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of U.S. states and political subdivisions	$	26,673	$	582	$	0	$	27,255
Total held-to-maturity debt securities	$	26,673	$	582	$	0	$	27,255

Held-to-Maturity Securities

December 31, 2010	Held-to-Maturity Securities
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of U.S. states and political subdivisions	$	54,973	$	1,155	$	64	$	56,064
Total held-to-maturity debt securities	$	54,973	$	1,155	$	64	$	56,064

The following table sets forth information with regard to sales transactions of securities available-for-sale:

	Year ended December 31,
(in thousands)	2011			2010			2009
Proceeds from sales	$	59,666		$	13,976		$	35,510
Gross realized gains		510			181			411
Gross realized losses		(114	)		(3	)		(63	)
Net gains on sales of available-for-sale securities	$	396		$	178		$	348

Realized losses on held-to-maturity securities were $2,000 in 2010. The Company sold $382,000 of municipal securities that experienced significant deterioration in the issuer’s credit worthiness during 2010 and were downgraded below investment grade by a rating agency. The sale of these securities was directly a result of the deterioration in the issuer’s credit worthiness and does not impact the Company’s intent to hold its remaining held-to-maturity debt securities to maturity. There were no sales of held-to-maturity securities in 2011 and 2009.

The following table summarizes available-for-sale securities that had unrealized losses at December 31, 2011:

December 31, 2011

Available-for-Sale Securities	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored entities		30,831		31		0		0		30,831		31
Obligations of U.S. states and political subdivisions		1,083		8		0		0		1,083		8

Mortgage-backed securities – residential, issued by
U.S. Government sponsored entities		28,307		58		0		0		28,307		58
Non-U.S. Government agencies or sponsored entities		1,944		172		3,932		286		5,876		458
Total available-for-sale securities	$	62,165	$	269	$	3,932	$	286	$	66,097	$	555

There were no unrealized losses on held-to-maturity securities at December 31, 2011.

The following table summarizes available-for-sale securities that had unrealized losses at December 31, 2010:

December 31, 2010

Available-for-Sale Securities	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. Government sponsored entities	$	93,167	$	1,989	$	0	$	0	$	93,167	$	1,989
Obligations of U.S. states and political subdivisions		1,771		9		0		0		1,771		9

Mortgage-backed securities – residential, issued by
U.S. Government agencies		44,288		539		0		0		44,288		539
U.S. Government sponsored entities		119,102		1,421		0		0		119,102		1,421
Non-U.S. Government agencies or sponsored entities		0		0		8,343		356		8,343		356
Total available-for-sale securities	$	258,328	$	3,958	$	8,343	$	356	$	266,671	$	4,314

The following table summarizes held-to-maturity securities that had unrealized losses at December 31, 2010:

Held-to-Maturity Securities	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. states and political subdivisions	$	14,947	$	63	$	14	$	1	$	14,961	$	64

Total held-to-maturity securities	$	14,947	$	63	$	14	$	1	$	14,961	$	64

The gross unrealized losses reported for mortgage-backed securities-residential relate to investment securities issued by U.S. government sponsored entities such as Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, U.S. government agencies such as Government National Mortgage Association, and non-agencies. Total gross unrealized losses were primarily attributable to changes in interest rates and levels of market liquidity, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.

The Company does not intend to sell the investment securities that are in an unrealized loss position until recovery of unrealized losses (which may be until maturity), and it is not more-likely-than not that the Company will be required to sell the investment securities, before recovery of their amortized cost basis, which may be at maturity. Accordingly, as of December 31, 2011, and December 31, 2010, management believes the unrealized losses detailed in the tables above are not other-than-temporary.

Ongoing Assessment of Other-Than-Temporary Impairment

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment. A debt security is considered impaired if the fair value is less than its amortized cost basis (including any previous OTTI charges) at the reporting date. If impaired, the Company then assesses whether the unrealized loss is other-than-temporary. An unrealized loss on a debt security is generally deemed to be other-than-temporary and a credit loss is deemed to exist if the present value, discounted at the security’s effective rate, of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss component of an other-than-temporary impairment write-down for debt securities is recorded in earnings while the remaining portion of the impairment loss is recognized, net of tax, in other comprehensive income provided that the Company does not intend to sell the underlying debt security and it is more-likely-than not that the Company would not have to sell the debt security prior to recovery of the unrealized loss, which may be to maturity. If the Company intended to sell any securities with an unrealized loss or it is more-likely-than not that the Company would be required to sell the investment securities, before recovery of their amortized cost basis, then the entire unrealized loss would be recorded in earnings.

The Company considers the following factors in determining whether a credit loss exists.

1.	The length of time and the extent to which the fair value has been less than the amortized cost basis;

2.	The level of credit enhancement provided by the structure which includes, but is not limited to, credit subordination positions, excess spreads, overcollateralization, protective triggers;

3.	Changes in the near term prospects of the issuer or underlying collateral of a security, such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;

4.	The level of excess cash flow generated from the underlying collateral supporting the principal and interest payments of the debt securities; and

5.	Any adverse change to the credit conditions of the issuer or the security such as credit downgrades by the rating agencies.

As of December 31, 2011, the Company held five non-U.S. Government agencies or sponsored entities mortgage backed securities with a fair value of $5.9 million. In 2009, the Company determined that three of these non-U.S. Government mortgage backed securities were other-than-temporarily impaired based on an analysis of the above factors for these three securities. As a result, the Company recorded other-than-temporary impairment charges of $1.8 million in 2009 on these investments. The credit loss component of $146,000 was recorded as other-than-temporary impairment losses in the consolidated statement of income, while the remaining non-credit portion of the impairment loss was recognized in other comprehensive income (loss) in the consolidated statement of condition and changes in shareholders’ equity. In 2011 and 2010, the Company reviewed these five securities and determined that additional credit related other-than-temporary charges of $65,000 and $34,000, respectively, related to three of the non-U.S. Government mortgage backed securities was necessary. As of December 31, 2011, the amount by which the carrying value of these three securities exceeded their fair value was $447,000. A continuation or worsening of current economic conditions may result in additional credit loss component of other-than-temporary impairment losses related to these investments.

The following table summarizes the roll-forward of credit losses on debt securities held by the Company for which a portion of an other-than-temporary impairment is recognized in other comprehensive income:

	As of December 31,

(in thousands)	2011		2010		2009
Credit losses at beginning of the period	$	180	$	146	$	0
temporary impairment was not previously recognized		0		0		146
Credit losses related to securities for which an other-than-temporary impairment was previously recognized		65		34		0
Ending balance of credit losses on debt securities held for which a portion of an other-than-temporary impairment was recognized in other comprehensive income	$	245	$	180	$	146

The amortized cost and estimated fair value of debt securities by contractual maturity are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are shown separately since they are not due at a single maturity date.

	Amortized		Fair
December 31, 2011 (in thousands)	Cost1		Value
Available-for-sale securities:
Due in one year or less	$	8,611	$	8,722
Due after one year through five years		252,388		265,814
Due after five years through ten years		202,782		205,584
Due after ten years		9,153		9,376
Total		472,934		489,496
Mortgage-backed securities		630,896		653,027
Total available-for-sale debt securities	$	1,103,830	$	1,142,523

1 Net of other-than-temporary impairment losses recognized in earnings.

December 31, 2010 (in thousands)	Amortized Cost1		Fair Value
Available-for-sale securities:
Due in one year or less	$	7,770	$	7,867
Due after one year through five years		309,193		312,952
Due after five years through ten years		143,682		147,546
Due after ten years		9,186		9,444
Total		469,831		477,809
Mortgage-backed securities		546,286		560,774
Total available-for-sale debt securities	$	1,016,117	$	1,038,583

1 Net of other-than-temporary impairment losses recognized in earnings.

December 31, 2011 (in thousands)	Amortized Cost		Fair Value
Held-to-maturity securities:
Due in one year or less	$	11,905	$	11,932
Due after one year through five years		10,808		11,234
Due after five years through ten years		3,004		3,133
Due after ten years		956		956
Total held-to-maturity debt securities	$	26,673	$	27,255

December 31, 2010 (in thousands)	Amortized Cost		Fair Value
Held-to-maturity securities:
Due in one year or less	$	34,645	$	34,692
Due after one year through five years		15,378		16,157
Due after five years through ten years		3,765		4,024
Due after ten years		1,185		1,191
Total held-to-maturity debt securities	$	54,973	$	56,064

Trading Securities

The following summarizes trading securities, at estimated fair value, as of:

(in thousands)	December 31, 2011		December 31, 2010

Obligations of U.S. Government sponsored entities	$	12,693	$	13,139
Mortgage-backed securities – residential, issued by
U.S. Government sponsored entities		6,905		9,698
Total trading securities	$	19,598	$	22,837

The net gains on trading account securities, which reflect mark-to-market adjustments, totaled $62,000 in 2011, $219,000 in 2010 and $204,000 in 2009.

The Company pledges securities as collateral for public deposits and other borrowings, and sells securities under agreements to repurchase (see Note 10 Securities Sold Under Agreements to Repurchase and Federal Funds Purchased). Securities carried of $698.9 million and $682.2 million at December 31, 2011 and 2010, respectively, were either pledged or sold under agreements to repurchase.

Except for U.S. government securities, there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of shareholders’ equity at December 31, 2011.

The Company has an equity investment in a small business investment company (“SBIC”) established for the purpose of providing financing to small businesses in market areas served by the Company. As of December 31, 2011 and 2010, this investment totaled $3.4 million and was included in other assets on the Company’s Consolidated Statements of Condition. The investment is accounted for under the equity method of accounting. As of December 31, 2011, the Company reviewed this investment and determined that there was no impairment.

The Company also holds non-marketable Federal Home Loan Bank New York (“FHLBNY”) stock and non-marketable Federal Reserve Bank (“FRB”) stock, both of which are required to be held for regulatory purposes and for borrowing availability. The required investment in FHLB stock is tied to the Company’s borrowing levels with the FHLB. Holdings of FHLBNY stock and FRB stock totaled $17.0 million and $2.1 million at December 31, 2011, respectively, and $19.9 million and $2.1 million at December 31, 2010, respectively. These securities are carried at par, which is also cost. The FHLBNY continues to pay dividends and repurchase its stock. As such, the Company has not recognized any impairment on its holdings of FHLBNY stock.