4.	Investment Securities

(a) Securities available for sale

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



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

U.S. government sponsored enterprises	$	632,997		1,631		816		633,812
State and political subdivisions		50,187		1,102		-		51,289
Mortgage backed securities and collateralized mortgage obligations - residential		198,814		2,105		403		200,516
Corporate bonds		102,997		67		5,600		97,464
Other		650		-		-		650
Total debt securities		985,645		4,905		6,819		983,731
Equity securities		6,871		-		-		6,871

Total securities available for sale	$	992,516		4,905		6,819		990,602


(dollars in thousands)	December 31, 2010
Available for sale			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		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 September 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 September 30, 2011, based on the securities' final maturity (mortgage-backed securities and collateralized mortgage obligations are stated using an estimated average life):

	September 30, 2011
(dollars in thousands)	Amortized		Fair
Available for sale	Cost		Value
Due in one year or less	$	9,353		9,454
Due in one year through five years		565,697		564,079
Due after five years through ten years		386,746		385,565
Due after ten years		23,849		24,633
	$	985,645		983,731

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	September 30, 2011
	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss

U.S. government sponsored enterprises	$	225,094		816		-		-		225,094		816
Mortgage backed securities and collateralized mortgage obligations - residential		93,669		355		784		48		94,453		403
Corporate bonds		82,677		5,214		9,614		386		82,677		5,600
Total available for sale	$	401,440		6,385		10,398		434		402,224		6,819

(dollars in thousands)	December 31, 2010
Available for sale	Less than				12 months
	12 months				or more				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		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 $512.5 million and $187.8 million for the three months ended September 30, 2011 and 2010, respectively.

Gross gains of approximately $166 thousand and $934 thousand were realized on these sales and calls for the three months ended September 30, 2011 and 2010, respectively. Gross losses realized on sales of securities available for sale for the three months ended September 30, 2011 were approximately $8 thousand. No securities were sold at a loss during the three months ended September 30, 2010. Income tax expense recognized on net gains on sales and calls of securities available for sale were approximately $55 thousand and $327 thousand for the three months ended September 30, 2011 and 2010, respectively.

Proceeds from sales and calls of securities available for sale were $916.1 million and $837.6 million for the nine months ended September 30, 2011 and 2010, respectively.

Gross gains of approximately $1.3 million and $2.9 million were realized on these sales and calls for the nine months ended September 30, 2011 and 2010, respectively. Gross losses realized on sales of securities available for sale for the nine months ended September 30, 2011 and 2010 were approximately $45 thousand and $417 thousand, respectively. Income tax expense recognized on net gains on sales and calls of securities available for sale were approximately $454 thousand and $866 thousand for the nine months ended September 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)	September 30, 2011
Held to maturity			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value

U.S. government sponsored enterprises	$	25,000		72		-		25,072
Mortgage backed securities - residential		109,603		6,900		-		116,503
Corporate bonds		59,555		1,083		341		60,297
Total held to maturity securities	$	194,158		8,055		341		201,872

(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 September 30, 2011, based on the securities' final maturity (mortgage-backed securities are stated using estimated average life):

	September 30, 2011
(dollars in thousands)	Amortized		Fair
Held to maturity	Cost		Value
Due in one year or less	$	24,005		24,280
Due in one year through five years		135,242		142,902
Due in five years through ten years		34,911		34,690
	$	194,158		201,872

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.

The corporate bonds included in the held to maturity securities portfolio that are in an unrealized loss position as of September 30, 2011 have been in an unrealized loss position for less than twelve months. There were no held to maturity securities in an unrealized loss position as of December 31, 2010.

There were no sales or transfers of held to maturity securities during 2011 and 2010.

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 September 30, 2011, the Company's security portfolio consisted of 292 securities, 52 of which were in an unrealized loss position, and are discussed below.

Mortgage-backed Securities and Collateralized Mortgage Obligations - Residential

At September 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 September 30, 2011.

Other Securities

At September 30, 2011, the Company has unrealized losses (unrecognized losses for held to maturity securities) on U.S. government-sponsored enterprises and state and political subdivisions. 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 September 30, 2011.

In the case of unrealized losses on corporate bonds at September 30, 2011, the Company's exposure is primarily in bonds of firms in the financial sector. Changing market perceptions of that sector and of some specific firms has had a negative impact on bond pricing. All of the corporate bonds owned continue to be rated investment grade, all are current as to the payment of interest and the Company expects to collect the full amount of the principal balance at maturity. The Company actively monitors the firms and the bonds. The Company has concluded that the decline in fair value is not attributable to 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 September 30, 2011.

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