SECURITIES

6 Months Ended

Jun. 30, 2012

SECURITIES

SECURITIES

NOTE 3 - SECURITIES

The amortized cost and fair value of securities available for sale and related unrealized gains/losses recognized in accumulated other comprehensive income was as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
As of June 30, 2012	Cost		Gains		Losses			Value
Available for Sale
U. S. government agency	$	2,122	$	36	$	—		$	2,158
State and municipal	300,468		25,767		(94		)	326,141
Mortgage-backed securities-residential (GSE’s)	264,228		8,912		(25		)	273,115
Collateralized mortgage obligations	281,204		4,994		(55		)	286,143
Equity securities	4,938		—		—			4,938
Other securities	3,573		—		(31		)	3,542
Total available for sale	$	856,533	$	39,709	$	(205	)	$	896,037

As of December 31, 2011
Available for Sale
State and municipal	$	320,269	$	24,723	$	(115	)	$	344,877
Mortgage-backed securities-residential (GSE’s)	264,619		7,074		(189		)	271,504
Collateralized mortgage obligations	246,985		3,807		(25		)	250,767
Equity securities	5,410		—		—			5,410
Other securities	3,589		—		(57		)	3,532
Total available for sale	$	840,872	$	35,604	$	(386	)	$	876,090

The amortized cost and fair value of the investment securities portfolio are shown by expected maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity or with no maturity are shown separately.

	Available for Sale
June 30, 2012	Amortized Cost		Fair Value
Within one year	$	3,238	$	3,277
One through five years	50,431		52,995
Six through ten years	83,972		90,722
After ten years	168,522		184,847
Mortgage-backed securities-residential (GSE’s)	264,228		273,115
Collateralized mortgage obligations	281,204		286,143
Equity securities	4,938		4,938
Total available for sale securities	$	856,533	$	896,037

Proceeds from sales of securities available for sale were $20,886 and $120,600 for the six months ended June 30, 2012 and 2011, respectively. Gross gains of $1,070 and $3,737 and gross losses of $35 and $83 were realized on these sales during 2012 and 2011, respectively.  In addition to the gross gains and losses from sales, there was a $500 impairment loss recognized on one investment during the first quarter of 2012.

Proceeds from sales of securities available for sale were $930 and $77,172 for the three months ended June 30, 2012 and 2011, respectively. Gross gains of $48 and $2,521 and gross losses of $0 and $0 were realized on these sales during 2012 and 2011, respectively.

Below is a summary of securities with unrealized losses as of June 30, 2012 and December 31, 2011 presented by length of time the securities have been in a continuous unrealized loss position.

	Less than 12 months					12 months or longer					Total
June 30, 2012 Description of securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	2,191	$	(72	)	$	265	$	(22	)	$	2,456	$	(94	)
Mortgage-backed securities-residential (GSE’s)	11,133		(25		)	—		—			11,133		(25		)
Collateralized mortgage obligations	11,932		(55		)	—		—			11,932		(55		)
Other securities	—		—			970		(31		)	970		(31		)
Total temporarily impaired	25,256		(152		)	1,235		(53		)	26,491		(205		)

	Less than 12 months					12 months or longer					Total
December 31, 2011 Description of securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	1,576	$	(72	)	$	237	$	(43	)	$	1,813	$	(115	)
Mortgage-backed securities-residential (GSE’s)	50,493		(189		)	—		—			50,493		(189		)
Collateralized mortgage obligations	25,527		(25		)	—		—			25,527		(25		)
Other securities	945		(57		)	—		—			945		(57		)
Total temporarily impaired	$	78,541	$	(343	)	$	237	$	(43	)	$	78,778	$	(386	)

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 into two general segments and applying the appropriate OTTI model. Investment securities are generally evaluated for OTTI under ASC 320. However, certain purchased beneficial interests, including non-agency mortgage-backed securities, asset-backed securities, and collateralized debt obligations, that had credit ratings at the time of purchase of below AA are evaluated using the model outlined in ASC 325-10.

In determining OTTI under ASC 320, 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 entity 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 under either model, the amount of the OTTI recognized in earnings depends on whether an entity 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, less any current-period credit loss. If an entity 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, less any current-period credit loss, 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 an entity 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 less any current-period loss, the OTTI 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, 2012, the Company’s security portfolio consisted of 944 securities, 14 of which were in an unrealized loss position.  Unrealized losses on state and municipal securities have not been recognized into income because management has the ability to hold for a period of time sufficient to allow for any anticipated recovery in fair value and it is unlikely that management will be required to sell the securities before their anticipated recovery. The decline in value is primarily attributable to temporary illiquidity and the financial crisis affecting these markets and not necessarily the expected cash flows of the individual securities. The Company monitors the financial condition of these issuers. The fair value of these debt securities is expected to recover as the securities approach their maturity date.

At June 30, 2012, almost all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value of approximately $25 is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed 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, 2012.

The Company’s collateralized mortgage obligation securities portfolio includes agency collateralized mortgage obligations with a market value of $286,143 which had unrealized losses of approximately $55 at June 30, 2012. The Company monitors to ensure it has adequate credit support and as of June 30, 2012, the Company believes there is no OTTI and 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. All securities are investment grade.

The unrealized losses on other securities are related to one single issue trust preferred security and have not been recognized into income because management has the ability to hold for a period of time sufficient to allow for any anticipated recovery in fair value and it is unlikely that management will be required to sell the security before its anticipated recovery. The Company performs a quarterly review of this security and based on this review, no evidence of adverse changes in expected cash flows is anticipated. The decline in value is primarily attributable to temporary illiquidity and the financial crisis affecting these markets and not the expected cash flows of the individual security. Currently, the issuer has made all contractual payments and given no indication that they will not be able to make them into the future. The fair value of these debt securities is expected to recover as the securities approach their maturity date. As of June 30, 2012, the fair value of the security was $970 with an unrealized loss of $31.

During the first quarter of 2012, the Company determined that one of its equity holdings was other than temporarily impaired and wrote down the security by $500 to its fair value of $250. This amount was included in net realized gains/(losses) on securities.