6.	SECURITIES

The amortized cost and estimated fair value of investment and mortgage-backed securities as of December 31, 2011 and 2010, are reflected in the tables below (in thousands):

	December 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized Losses				Estimated
AVAILABLE FOR SALE:	Cost		Gains		OTTI		Other		Fair Value
Investment Securities:
State and Political Subdivisions	$	251,281	$	31,221	$	–	$	45	$	282,457
Other Stocks and Bonds		2,925		–		2,426		–		499
Mortgage-backed Securities:
U.S. Government Agencies		99,974		7,158		–		80		107,052
Government-Sponsored Enterprises		589,687		20,127		–		740		609,074
Total	$	943,867	$	58,506	$	2,426	$	865	$	999,082

	December 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized Losses				Estimated
HELD TO MATURITY:	Cost		Gains		OTTI		Other		Fair Value
Investment Securities:
State and Political Subdivisions	$	1,010	$	196	$	–	$	–	$	1,206
Other Stocks and Bonds		486		15		–		–		501
Mortgage-backed Securities:
U.S. Government Agencies		22,999		1,159		–		43		24,115
Government-Sponsored Enterprises		342,632		14,848		–		11		357,469
Total	$	367,127	$	16,218	$	–	$	54	$	383,291

	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized Losses				Estimated
AVAILABLE FOR SALE:	Cost		Gains		OTTI		Other		Fair Value
Investment Securities:
U.S. Treasury	$	4,700	$	–	$	–	$	–	$	4,700
State and Political Subdivisions		296,357		4,445		–		6,540		294,262
Other Stocks and Bonds		3,117		1		2,736		–		382
Mortgage-backed Securities:
U.S. Government Agencies		145,136		5,296		–		159		150,273
Government-Sponsored Enterprises		721,908		16,035		–		1,642		736,301
Total	$	1,171,218	$	25,777	$	2,736	$	8,341	$	1,185,918

	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized Losses				Estimated
HELD TO MATURITY:	Cost		Gains		OTTI		Other		Fair Value
Investment Securities:
State and Political Subdivisions	$	1,012	$	44	$	–	$	–	$	1,056
Other Stocks and Bonds		483		14		–		–		497
Mortgage-backed Securities:
U.S. Government Agencies		20,821		566		–		55		21,332
Government-Sponsored Enterprises		384,546		8,576		–		589		392,533
Total	$	406,862	$	9,200	$	–	$	644	$	415,418

Year-end securities carried at fair value through income were as follows (in thousands):

	At December 31,
	2011		2010		2009
Mortgage-backed Securities:
U.S. Government Agencies	$	30,413	$	5,392	$	–
Government-Sponsored Enterprises		617,346		66,784		–
Total	$	647,759	$	72,176	$	–

Net gains and losses on securities carried at fair value through income were as follows (in thousands):

	Year Ended December 31,
	2011		2010			2009

Net gain on sales transactions	$	937	$	–		$	–
Net mark-to-market gains (losses)		6,693		(598	)		–
Net gain on securities carried at fair value through income	$	7,630	$	(598	)	$	–

The following table represents the unrealized loss on securities for the years ended December 31, 2011 and 2010 (in thousands):

	Less Than 12 Months				More Than 12 Months				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
As of December 31, 2011:

Available for Sale
State and Political Subdivisions	$	1,668	$	42	$	307	$	3	$	1,975	$	45
Other Stocks and Bonds		–		–		499		2,426		499		2,426
Mortgage-Backed Securities		148,171		754		5,322		66		153,493		820
Total	$	149,839	$	796	$	6,128	$	2,495	$	155,967	$	3,291

Held to Maturity
Mortgage-Backed Securities	$	8,918	$	54	$	–	$	–	$	8,918	$	54
Total	$	8,918	$	54	$	–	$	–	$	8,918	$	54

As of December 31, 2010:

Available for Sale
State and Political Subdivisions	$	136,671	$	6,501	$	270	$	39	$	136,941	$	6,540
Other Stocks and Bonds		–		–		189		2,736		189		2,736
Mortgage-Backed Securities		267,014		1,712		12,184		89		279,198		1,801
Total	$	403,685	$	8,213	$	12,643	$	2,864	$	416,328	$	11,077

Held to Maturity
Mortgage-Backed Securities	$	52,676	$	644	$	–	$	–	$	52,676	$	644
Total	$	52,676	$	644	$	–	$	–	$	52,676	$	644

When it is determined that a decline in fair value of HTM and AFS securities is other-than-temporary, the carrying value of the security is reduced to its estimated fair value, with a corresponding charge to earnings for the credit portion and the noncredit portion to other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, the length of time and the extent to which the fair value has been less than cost and the financial condition and near-term prospects of the issuer. Additionally, we do not currently intend to sell the securities and it is not more likely than not that we will be required to sell the security before the anticipated recovery of its amortized cost basis.

The turmoil in the capital markets had a significant impact on our estimate of fair value for certain of our securities. We believe the fair values are reflective of illiquidity and credit impairment. At December 31, 2011, we have in AFS Other Stocks and Bonds, $2.9 million amortized cost basis in pooled trust preferred securities (“TRUPs”). Those securities are structured products with cash flows dependent upon securities issued by U.S. financial institutions, including banks and insurance companies. Our estimate of fair value at December 31, 2011 for the TRUPs is approximately $499,000 and reflects the market illiquidity. With the exception of the TRUPs, to the best of management's knowledge and based on our consideration of the qualitative factors associated with each security, there were no securities in our investment and mortgage-backed securities portfolio at December 31, 2011 with an other-than-temporary impairment.

Given the facts and circumstances associated with the TRUPs we performed detailed cash flow modeling for each TRUP using an industry-accepted cash flow model. Prior to loading the required assumptions into the model we reviewed the financial condition of each of the underlying issuing banks within the TRUP collateral pool that had not deferred or defaulted as of December 31, 2011. Management's best estimate of a deferral assumption was assigned to each issuing bank based on the category in which it fell. Our analysis of the underlying cash flows contemplated various default, deferral and recovery scenarios to arrive at our best estimate of cash flows. Based on that detailed analysis, we have concluded that the other-than-temporary impairment, which captures the credit component, was estimated at $3.1 million at both December 31, 2011 and 2010. The noncredit charge to other comprehensive income was estimated at $2.4 million at December 31, 2011 and $2.7 million at December 31, 2010. Therefore, the carrying amount of the TRUPs was written down with $75,000 and $3.0 million recognized in earnings for the years ended December 31, 2010 and 2009, respectively. There was no additional write-down of the TRUPs recognized in earnings for the year ended December 31, 2011. The cash flow model assumptions represent management's best estimate and consider a variety of qualitative factors, which include, among others, the credit rating downgrades, the severity and duration of the mark-to-market loss, and the structural nuances of each TRUP. Management believes that the detailed review of the collateral and cash flow modeling support the conclusion that the TRUPs had an other-than-temporary impairment at December 31, 2011. We will continue to update our assumptions and the resulting analysis each reporting period to reflect changing market conditions. Additionally, we do not currently intend to sell the TRUPs and it is not more likely than not that we will be required to sell the TRUPs before the anticipated recovery of their amortized cost basis.

The table below provides more detail on the TRUPs at December 31, 2011 (dollars in thousands).

TRUP	Par		Credit Loss		Amortized Cost		Fair Value		Tranche	Credit Rating

1	$	2,000	$	1,075	$	925	$	117	C1	Ca
2		2,000		550		1,450		234	B1	C
3		2,000		1,450		550		148	B2	C
	$	6,000	$	3,075	$	2,925	$	499

The following table presents the impairment activity related to credit loss, which is recognized in earnings, and the impairment activity related to all other factors, which are recognized in other comprehensive income (in thousands).

	Year Ended December 31, 2011
	Impairment Related to Credit Loss		Impairment Related to All Other Factors		Total Impairment

Balance, beginning of the period	$	3,075	$	2,694	$	5,769
Charges on securities for which other-than-temporary impairment charges were not previously recognized		–		–		–
Additional charges on securities for which other-than-temporary impairment charges were previously recognized		–		–		–
Balance, end of the period	$	3,075	$	2,694	$	5,769

	Year Ended December 31, 2010
	Impairment Related to Credit Loss		Impairment Related to All Other Factors			Total Impairment

Balance, beginning of the period	$	3,000	$	2,730		$	5,730
Charges on securities for which other-than-temporary impairment charges were not previously recognized		–		–			–
Additional charges on securities for which other-than-temporary impairment charges were previously recognized		75		(36	)		39
Balance, end of the period	$	3,075	$	2,694		$	5,769

Interest income recognized on securities for the years presented:

	Years Ended December 31,
	2011		2010		2009
	(in thousands)

U.S. Treasury	$	2	$	8	$	40
U.S. Government Agencies		–		–		678
State and Political Subdivisions		12,548		10,926		7,797
Other Stocks and Bonds		34		46		147
Mortgage-backed Securities		51,467		50,130		65,463

Total interest income on securities	$	64,051	$	61,110	$	74,125

There were no securities transferred from AFS to HTM during 2011 and 2010. There were no sales from the HTM portfolio during the years ended December 31, 2011, 2010 or 2009. There were $367.1 million and $406.9 million of securities classified as HTM at December 31, 2011 and 2010, respectively. In conjunction with correcting errors in the first three quarters of 2011 that will be restated related to securities carried at fair value through income, on October 1, 2010 we corrected $13.9 million in HTM securities which should have been originally classified as securities carried at fair value through income.

Of the $11.8 million in net securities gains from the AFS portfolio for the year ended December 31, 2011, there were $11.9 million in realized gains and approximately $121,000 in realized losses. Of the $25.8 million in net securities gains from the AFS portfolio for the year ended December 31, 2010, there were $28.3 million in realized gains and $2.5 million in realized losses. Of the $33.4 million in net securities gains from the AFS portfolio for the year ended December 31, 2009, there were $33.5 million in realized gains and $0.1 million in realized losses.

The amortized cost and fair value of securities at December 31, 2011, are presented below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are presented in total by category due to the fact that mortgage-backed securities typically are issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with varying maturities. The characteristics of the underlying pool of mortgages, such as fixed-rate or adjustable-rate, as well as prepayment risk, are passed on to the certificate holder. The term of a mortgage-backed pass-through security thus approximates the term of the underlying mortgages and can vary significantly due to prepayments.

	December 31, 2011
	Amortized Cost		Fair Value
Available for sale securities:	(in thousands)

Investment Securities
Due in one year or less	$	1,705	$	1,714
Due after one year through five years		7,173		7,408
Due after five years through ten years		27,561		29,870
Due after ten years		217,767		243,964
		254,206		282,956
Mortgage-backed securities		689,661		716,126
Total	$	943,867	$	999,082

	December 31, 2011
	Amortized Cost		Fair Value
Held to maturity securities:	(in thousands)

Investment Securities
Due in one year or less	$	–	$	–
Due after one year through five years		–		–
Due after five years through ten years		486		501
Due after ten years		1,010		1,206
		1,496		1,707
Mortgage-backed securities		365,631		381,584
Total	$	367,127	$	383,291

Investment and mortgage-backed securities with book values of $1.04 billion and $977.4 million were pledged as of December 31, 2011 and 2010, respectively, to collateralize FHLB advances, repurchase agreements, public funds and trust deposits or for other purposes as required by law.

Securities with limited marketability, such as FHLB stock and other investments, are carried at cost, which approximates its fair value and assessed for other-than-temporary impairment. These securities have no maturity date.