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Securities
 9 Months Ended
Sep. 30, 2013
Investments, Debt and Equity Securities [Abstract]  
Securities
Securities
(In Thousands)
The amortized cost and fair value of securities held to maturity were as follows:
 


 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
September 30, 2013
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
149,056

 
$
13

 
$
(7,707
)
 
$
141,362

Obligations of states and political subdivisions
290,999

 
8,352

 
(2,699
)
 
296,652

 
$
440,055

 
$
8,365

 
$
(10,406
)
 
$
438,014

December 31, 2012
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
90,045

 
$
116

 
$
(232
)
 
$
89,929

Obligations of states and political subdivisions
227,721

 
16,860

 
(35
)
 
244,546

 
$
317,766

 
$
16,976

 
$
(267
)
 
$
334,475



In light of the ongoing fiscal uncertainty in state and local governments, the Company analyzes its exposure to potential losses in its security portfolio on at least a quarterly basis. Management reviews the underlying credit rating and analyzes the financial condition of the respective issuers. Based on this analysis, the Company sold certain securities representing obligations of state and political subdivisions that were classified as held to maturity during 2013. The securities sold showed significant credit deterioration in that an
analysis of the financial condition of the respective issuers showed the issuers were operating at net deficits with little to no financial cushion to offset future contingencies. These securities had a carrying value of $4,292, and the Company recognized a net gain of $169 on the sale during the nine months ended September 30, 2013. No securities classified as held to maturity were sold during the nine months ended September 30, 2012.

The amortized cost and fair value of securities available for sale were as follows:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
September 30, 2013
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
6,151

 
$
146

 
$
(211
)
 
$
6,086

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
221,276

 
3,264

 
(3,610
)
 
220,930

Government agency collateralized mortgage obligations
151,340

 
1,793

 
(3,777
)
 
149,356

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
41,440

 
1,486

 
(547
)
 
42,379

Government agency collateralized mortgage obligations
5,029

 
82

 
—

 
5,111

Trust preferred securities
27,629

 
—

 
(10,876
)
 
16,753

Other debt securities
20,174

 
280

 
(213
)
 
20,241

Other equity securities
2,775

 
1,102

 
—

 
3,877

 
$
475,814

 
$
8,153

 
$
(19,234
)
 
$
464,733

 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
December 31, 2012
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
$
2,169

 
$
273

 
$
—

 
$
2,442

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
139,699

 
5,209

 
(91
)
 
144,817

Government agency collateralized mortgage obligations
115,647

 
2,273

 
(399
)
 
117,521

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
41,981

 
3,077

 
—

 
45,058

Government agency collateralized mortgage obligations
5,091

 
316

 
—

 
5,407

Trust preferred securities
28,612

 
—

 
(13,544
)
 
15,068

Other debt securities
22,079

 
852

 
(1
)
 
22,930

Other equity securities
2,355

 
713

 
—

 
3,068

 
$
357,633

 
$
12,713

 
$
(14,035
)
 
$
356,311



Gross realized gains and gross realized losses on sales of securities available for sale for the three and nine months ended September 30, 2013 and 2012 were as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Gross gains on sales of securities available for sale
$
—

 
$
—

 
$
—

 
$
1,850

Gross losses on sales of securities available for sale
—

 
—

 
(115
)
 
(77
)
(Loss) Gain on sales of securities available for sale, net
$
—

 
$
—

 
$
(115
)
 
$
1,773


 
At September 30, 2013 and December 31, 2012, securities with a carrying value of $581,266 and $308,362, respectively, were pledged to secure government, public and trust deposits. Securities with a carrying value of $5,684 and $19,006 were pledged as collateral for short-term borrowings and derivative instruments at September 30, 2013 and December 31, 2012, respectively.
The amortized cost and fair value of securities at September 30, 2013 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
 
 
Held to Maturity
 
Available for Sale
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due within one year
$
34,535

 
$
34,604

 
$
—

 
$
—

Due after one year through five years
52,911

 
54,378

 
1,084

 
1,161

Due after five years through ten years
196,982

 
191,821

 
5,067

 
4,925

Due after ten years
155,627

 
157,211

 
27,629

 
16,753

Residential mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
—

 
—

 
221,276

 
220,930

Government agency collateralized mortgage obligations
—

 
—

 
151,340

 
149,356

Commercial mortgage backed securities:
 
 
 
 
 
 
 
Government agency mortgage backed securities
—

 
—

 
41,440

 
42,379

Government agency collateralized mortgage obligations
—

 
—

 
5,029

 
5,111

Other debt securities
—

 
—

 
20,174

 
20,241

Other equity securities
—

 
—

 
2,775

 
3,877

 
$
440,055

 
$
438,014

 
$
475,814

 
$
464,733


The following table presents the age of gross unrealized losses and fair value by investment category as of the dates presented:
 
 
Less than 12 Months
 
12 Months or More
 
Total
 
#
 
Fair
Value
 
Unrealized
Losses
 
#
 
Fair
Value
 
Unrealized
Losses
 
#
 
Fair
Value
 
Unrealized
Losses
Held to Maturity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
30
 
$
138,850

 
$
(7,707
)
 
0
 
$
—

 
$
—

 
30
 
$
138,850

 
$
(7,707
)
Obligations of states and political subdivisions
110
 
59,395

 
(2,699
)
 
0
 
—

 
—

 
110
 
59,395

 
(2,699
)
Total
140
 
$
198,245

 
$
(10,406
)
 
0
 
$
—

 
$
—

 
140
 
198,245

 
$
(10,406
)
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
8
 
$
35,224

 
$
(232
)
 
0
 
$
—

 
$
—

 
8
 
$
35,224

 
$
(232
)
Obligations of states and political subdivisions
4
 
2,861

 
(34
)
 
1
 
126

 
(1
)
 
5
 
2,987

 
(35
)
Total
12
 
$
38,085

 
$
(266
)
 
1
 
$
126

 
$
(1
)
 
13
 
$
38,211

 
$
(267
)
Available for Sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
1
 
$
3,789

 
$
(211
)
 
0
 
$
—

 
$
—

 
1
 
$
3,789

 
$
(211
)
Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
24
 
95,531

 
(3,610
)
 
0
 
—

 
—

 
24
 
95,531

 
(3,610
)
Government agency collateralized mortgage obligations
18
 
76,248

 
(3,476
)
 
2
 
7,335

 
(301
)
 
20
 
83,583

 
(3,777
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
4
 
16,672

 
(547
)
 
0
 
—

 
—

 
4
 
16,672

 
(547
)
Government agency collateralized mortgage obligations
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Trust preferred securities
0
 
—

 
—

 
4
 
16,753

 
(10,876
)
 
4
 
16,753

 
(10,876
)
Other debt securities
1
 
2,764

 
(206
)
 
1
 
1,971

 
(7
)
 
2
 
4,735

 
(213
)
Total
48
 
$
195,004

 
$
(8,050
)
 
7
 
$
26,059

 
$
(11,184
)
 
55
 
$
221,063

 
$
(19,234
)
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of other U.S. Government agencies and corporations
0
 
$
—

 
$
—

 
0
 
$
—

 
$
—

 
0
 
$
—

 
$
—

Residential mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
3
 
15,431

 
(91
)
 
0
 
—

 
—

 
3
 
15,431

 
(91
)
Government agency collateralized mortgage obligations
11
 
44,616

 
(389
)
 
1
 
1,605

 
(10
)
 
12
 
46,221

 
(399
)
Commercial mortgage backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government agency mortgage backed securities
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Government agency collateralized mortgage obligations
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Trust preferred securities
0
 
—

 
—

 
4
 
15,068

 
(13,544
)
 
4
 
15,068

 
(13,544
)
Other debt securities
0
 
—

 
—

 
1
 
2,188

 
(1
)
 
1
 
2,188

 
(1
)
Other equity securities
0
 
—

 
—

 
0
 
—

 
—

 
0
 
—

 
—

Total
14
 
$
60,047

 
$
(480
)
 
6
 
$
18,861

 
$
(13,555
)
 
20
 
$
78,908

 
$
(14,035
)

 


The Company evaluates its investment portfolio for other-than-temporary-impairment (“OTTI”) on a quarterly basis. Impairment is assessed at the individual security level. The Company considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. Impairment is considered to be other-than-temporary if the Company intends to sell the investment security or if the Company does not expect to recover the entire amortized cost basis of the security before the Company is required to sell the security or before the security’s maturity.
The Company holds investments in pooled trust preferred securities that had an amortized cost basis of $27,629 and $28,612 and a fair value of $16,753 and $15,068, at September 30, 2013 and December 31, 2012, respectively. The investments in pooled trust preferred securities consist of four securities representing interests in various tranches of trusts collateralized by debt issued by over 330 financial institutions. Management’s determination of the fair value of each of its holdings in pooled trust preferred securities is based on the current credit ratings, the known deferrals and defaults by the underlying issuing financial institutions and the degree to which future deferrals and defaults would be required to occur before the cash flow for the Company’s tranches is negatively impacted. In addition, management continually monitors key credit quality and capital ratios of the issuing institutions. This determination is further supported by quarterly valuations, which are performed by third parties, of each security obtained by the Company. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the investments’ amortized cost, which may be maturity. At September 30, 2013, management did not, and does not currently, believe such securities will be settled at a price less than the amortized cost of the investment, but the Company previously concluded that it was probable that there had been an adverse change in estimated cash flows for all four trust preferred securities and recognized credit related impairment losses on these securities in 2010 and 2011. No additional impairment was recognized during the three or nine months ended September 30, 2013.
However, based on the qualitative factors discussed above, each of the four pooled trust preferred securities was classified as a nonaccruing asset at September 30, 2013. Investment interest is recorded on the cash-basis method until qualifying for return to accrual status.
The following table provides information regarding the Company’s investments in pooled trust preferred securities at September 30, 2013:
 
Name
Single/
Pooled
 
Class/
Tranche
 
Amortized
Cost
 
Fair
Value
 
Unrealized
Loss
 
Lowest
Credit
Rating
 
Issuers
Currently in
Deferral or
Default
XIII
Pooled
 
B-2
 
$
1,155

 
$
1,140

 
$
(15
)
 
Caa3
 
28
%
XXIII
Pooled
 
B-2
 
8,831

 
5,547

 
(3,284
)
 
B1
 
21
%
XXIV
Pooled
 
B-2
 
12,076

 
6,782

 
(5,294
)
 
Ca
 
34
%
XXVI
Pooled
 
B-2
 
5,567

 
3,284

 
(2,283
)
 
Ca
 
31
%
 
 
 
 
 
$
27,629

 
$
16,753

 
$
(10,876
)
 
 
 
 


The following table provides a summary of the cumulative credit related losses recognized in earnings for which a portion of OTTI has been recognized in other comprehensive income:
 
 
2013
 
2012
Balance at January 1
$
(3,337
)
 
$
(3,337
)
Additions related to credit losses for which OTTI was not previously recognized
—

 
—

Increases in credit loss for which OTTI was previously recognized
—

 
—

Balance at September 30
$
(3,337
)
 
$
(3,337
)