4. Investment Securities

(a) Securities available for sale

The amortized cost and fair value of securities available for sale are as follows:

(dollars in thousands)	June 30, 2011
Available for sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	676,966		982		1,886		676,062
State and political subdivisions		56,697		1,029		56		57,670
Mortgage backed securities and collateralized mortgage obligations - residential		64,906		1,476		49		66,333
Corporate bonds		102,345		1,378		529		103,194
Other		650		-		-		650
Total debt securities		901,564		4,865		2,520		903,909
Equity securities		6,872		-		-		6,872
Total securities available for sale	$	908,436		4,865		2,520		910,781

(dollars in thousands)	December 31, 2010
Available for sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

U.S. government sponsored enterprises	$	625,399		312		10,825		614,886
State and political subdivisions		79,038		1,184		458		79,764
Mortgage backed securities and collateralized mortgage obligations - residential		73,384		618		435		73,567
Corporate bonds		115,274		854		624		115,504
Other		650		-		-		650
Total debt securities		893,745		2,968		12,342		884,371
Equity securities		7,183		47		-		7,230
Total securities available for sale	$	900,928		3,015		12,342		891,601

Federal Home Loan Bank stock and Federal Reserve Bank stock included in equity securities at June 30, 2011 and December 31, 2010, totaled $6.9 million.

The following table distributes the debt securities included in the available for sale portfolio as of June 30, 2011, based on the securities' final maturity (mortgage-backed securities and collateralized mortgage obligations are stated using an estimated average life):

	June 30, 2011
(dollars in thousands) Available for sale	Amortized Cost		Fair Value
Due in one year or less	$	9,973		10,054
Due in one year through five years		437,956		440,105
Due after five years through ten years		425,304		424,787
Due after ten years		28,331		28,963
	$	901,564		903,909

Actual maturities may differ from the above because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

Gross unrealized losses on investment securities available for sale and the related fair values aggregated by the length of time that individual securities have been in an unrealized loss position, were as follows:

(dollars in thousands)
Available for sale	June 30, 2011
	Less than				12 months
	12 months				or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
U.S. government sponsored enterprises	$	358,272		1,886		-		-		358,272		1,886
State and political subdivisions		1,523		56		-		-		1,523		56
Mortgage backed securities and collateralized mortgage obligations - residential		-		-		787		49		787		49
Corporate bonds		47,707		529		-		-		47,707		529
Total available for sale	$	407,502		2,471		787		49		408,289		2,520

(dollars in thousands)	December 31, 2010
Available for sale	Less than				12 months
	12 months				or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
U.S. government sponsored enterprises	$	526,071		10,825		-		-		526,071		10,825
State and political subdivisions		19,939		458		-		-		19,939		458
Mortgage backed securities and collateralized mortgage obligations - residential		58,952		392		803		43		59,755		435
Corporate bonds		50,934		624		-		-		50,934		624
Total available for sale	$	655,896		12,299		803		43		656,699		12,342

Proceeds from sales and calls of securities available for sale were $381.6 million and $539.4 million for the three months ended June 30, 2011 and 2010, respectively.

Gross gains of approximately $888 thousand and $1.5 million were realized on these sales and calls for the three months ended June 30, 2011 and 2010, respectively. Gross losses realized on sales of securities available for sale for the three months ended June 30, 2011 were approximately $37 thousand. No securities were sold at a loss for the three months ended June 30, 2010. Income tax expense recognized on net gains on sales and calls of securities available for sale were approximately $355 thousand and $615 thousand for the three months ended June 30, 2011 and 2010, respectively.

Proceeds from sales and calls of securities available for sale were $403.6 million and $649.7 million for the six months ended June 30, 2011 and 2010, respectively.

Gross gains of approximately $1.2 million and $1.5 million were realized on these sales and calls for the six months ended June 30, 2011 and 2010, respectively. Gross losses realized on sales of securities available for sale for the six months ended June 30, 2011 were approximately $37 thousand. No securities were sold at a loss during the six months ended June 30, 2010. Income tax expense recognized on net gains on sales and calls of securities available for sale were approximately $455 thousand and $616 thousand for the six months ended June 30, 2011 and 2010, respectively.

(b) Held to maturity securities

The amortized cost and fair value of the held to maturity securities are as follows:

(dollars in thousands)	June 30, 2011
Held to maturity			Gross		Gross
	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Fair Value

Mortgage backed securities - residential	$	105,509		6,688		-		112,197
Corporate bonds		49,019		2,225		-		51,244
Total held to maturity securities	$	154,528		8,913		-		163,441

(dollars in thousands)	December 31, 2010
Held to maturity			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value

Mortgage backed securities - residential	$	122,654		6,092		-		128,746
Corporate bonds		69,058		2,402		-		71,460
Total held to maturity securities	$	191,712		8,494		-		200,206

The following table distributes the debt securities included in the held to maturity portfolio as of June 30, 2011, based on the securities' final maturity (mortgage-backed securities are stated using estimated average life):

	June 30, 2011
(dollars in thousands)	Amortized		Fair
Held to maturity	Cost		Value
Due in one year or less	$	24,010		24,356
Due in one year through five years		120,611		128,315
Due in five years through ten years		9,907		10,770
	$	154,528		163,441

Actual maturities may differ from the above because of securities prepayments and the right of certain issuers to call or prepay their obligations without penalty.

There were no held to maturity securities in an unrealized loss position as of June 30, 2011 and December 31, 2010. There were no sales or transfers of held to maturity securities during 2011 and 2010.

Other-Than-Temporary-Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio by type and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320 “Investments – Debt and Equity Securities.”

In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (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, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether management intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If management intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the OTTI on debt securities shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

As of June 30, 2011, the Company's security portfolio consisted of 306 securities, 52 of which were in an unrealized loss position, and are discussed below.

Mortgage-backed Securities and Collateralized Mortgage Obligations - Residential

At June 30, 2011, all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies, primarily GNMA (Ginnie Mae), FNMA (Fannie Mae) and FHLMC (Freddie Mac), institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2011.

Other Securities

At June 30, 2011, the Company has unrealized losses on U.S. government-sponsored enterprises, state and political subdivisions and corporate bonds. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2011.

As a result of the above analysis, for the quarter ended June 30, 2011, the Company did not recognize any other-than-temporary impairment losses for credit or any other reason.