Securities

9 Months Ended

Sep. 30, 2011


3.	Securities

The following tables set forth the amortized cost, gross unrealized gains and losses and the estimated fair value of securities classified as available for sale and held to maturity at September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011


			Gross Unrealized				Estimated Fair
	Amortized Cost		Gains		Losses		Value

Classified as Available for Sale
U.S. Treasury and government agencies	$	3,000	$	3		—	$	3,003
Mortgage-backed securities		359,227		8,704	$	256		367,675
Obligations of states and political subdivisions		97,268		4,434		—		101,702
Other debt securities		12,165		1		8,992		3,174

Total debt securities		471,660		13,142		9,248		475,554
Mutual funds and other equity securities		10,071		660		147		10,584

Total	$	481,731	$	13,802	$	9,395	$	486,138


			Gross Unrecognized				Estimated Fair
	Amortized Cost		Gains		Losses		Value

Classified as Held To Maturity
Mortgage-backed securities	$	8,536	$	629		—	$	9,165
Obligations of states and political subdivisions		5,137		325		—		5,462

Total	$	13,673	$	954		—	$	14,627

December 31, 2010


			Gross Unrealized				Estimated Fair
	Amortized Cost		Gains		Losses		Value

Classified as Available for Sale
U.S. Treasury and government agencies	$	3,001	$	11		—	$	3,012
Mortgage-backed securities		303,479		6,648	$	587		309,540
Obligations of states and political subdivisions		111,912		4,170		1		116,081
Other debt securities		12,329		—		7,956		4,373

Total debt securities		430,721		10,829		8,544		433,006
Mutual funds and other equity securities		10,071		706		116		10,661

Total	$	440,792	$	11,535	$	8,660	$	443,667


			Gross Unrecognized				Estimated Fair
	Amortized Cost		Gains		Losses		Value

Classified as Held To Maturity
Mortgage-backed securities	$	11,131	$	700	$	1	$	11,830
Obligations of states and political subdivisions		5,136		306		—		5,442

Total	$	16,267	$	1,006	$	1	$	17,272

Included in other debt securities are investments in six pooled trust preferred securities with amortized costs and estimated fair values of $11,600 and $2,654, respectively, at September 30, 2011. These investments represent trust preferred obligations of banking industry companies. The value of these investments has been severely negatively affected by the recent downturn in the economy and increased investor concerns about recent and potential future losses in the financial services industry. These investments are rated below investment grade by Moody’s Investor Services at September 30, 2011 with ratings ranging from Caa1 to C. In light of these conditions, these investments were reviewed for other-than-temporary impairment.

In estimating OTTI losses, the Company considers: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuers, (3) whether the Company intends to sell or whether it is more likely than not that the Company would be required to sell the investments prior to recovery of cost and (4) evaluation of cash flows to determine if they have been adversely affected.

The Company uses a discounted cash flow (“DCF”) analysis to provide an estimate of an OTTI loss. Inputs to the discount model included known defaults and interest deferrals, projected additional default rates, projected additional deferrals of interest, over-collateralization tests, interest coverage tests and other factors. Expected default and deferral rates were weighted toward the near future to reflect the current adverse economic environment affecting the banking industry. The discount rate was based upon the yield expected from the related securities. Significant inputs to the cash flow models used in determining credit related other-than-temporary impairment losses on pooled trust preferred securities as of September 30, 2011 included the following:


Annual Prepayment		1.00%
Projected specific defaults/deferrals		33.1% - 73.6%
Projected severity of loss on specific defaults/deferrals		50.0% - 87.1%
Projected additional defaults:
Year 1		2.00%
Year 2		1.00%
Thereafter		0.25%
Projected severity of loss on additional defaults		85.00%
Present value discount rates		3m LIBOR + 1.60% - 2.25%

The following table summarizes the change in pretax OTTI credit related losses on securities available for sale for the nine month period ended September 30, 2011 and 2010 (in thousands):


	2011		2010

Balance at beginning of period:
Total OTTI credit related impairment charges beginning of period	$	9,110	$	6,557
Increase to the amount related to the credit loss for which other-than-temporary impairment was previously recognized		323		2,125
Credit related impairment not previously recognized		—		158

Balance at end of period:	$	9,433	$	8,840

During the nine month period ended September 30, 2011, pretax OTTI losses of $161, $72, $39, $50 and $1, respectively, were recognized on five pooled trust preferred securities which prior to the 2011 charges had book values of $2,208, $5,583, $949, $2,180 and $656, respectively. These OTTI losses resulted from adverse changes in the expected cash flows of these securities which indicated that the Company may not recover the entire cost basis of these investments. Continuation or worsening of current adverse economic conditions may result in further impairment charges in the future.

The following tables reflect the Company’s investment’s fair value and gross unrealized loss, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, as of September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011


	Duration of Unrealized Loss
	Less Than 12 Months				Greater than 12 Months				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss

Classified as Available for Sale
U.S. Treasuries and government agencies		—		—		—		—		—		—
Mortgage-backed securities — residential	$	38,648	$	256		—		—	$	38,648	$	256
Obligations of states and political subdivisions		—		—		—		—		—		—
Other debt securities		—		—	$	3,118	$	8,992		3,118		8,992

Total debt securities		38,648		256		3,118		8,992		41,766		9,248
Mutual funds and other equity securities		20		2		80		145		100		147

Total temporarily impaired securities	$	38,668	$	258	$	3,198	$	9,137	$	41,866	$	9,395

There were no securities classified as held to maturity in an unrealized loss position at September 30, 2011.

December 31, 2010


	Duration of Unrealized Loss
					Greater than 12
	Less Than 12 Months				Months				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss

Classified as Available for Sale
U.S. Treasuries and government agencies		—		—		—		—		—		—
Mortgage-backed securities — residential	$	72,105	$	587		—		—	$	72,105	$	587
Obligations of states and political subdivisions		461		1		—		—		461		1
Other debt securities		—		—	$	4,193	$	7,956		4,193		7,956

Total debt securities		72,566		588		4,193		7,956		76,759		8,544
Mutual funds and other equity securities		—		—		118		116		118		116

Total temporarily impaired securities	$	72,566	$	588	$	4,311	$	8,072	$	76,877	$	8,660

Classified as Held to Maturity
Mortgage-backed securities — residential	$	400	$	1		—		—	$	400	$	1

Total temporarily impaired securities	$	400	$	1		—		—	$	400	$	1

The total number of securities in the Company’s portfolio that were in an unrealized loss position was 77 and 90, respectively, at September 30, 2011 and December 31, 2010. The Company has determined that it does not intend to sell, or it is more likely than not that it will be required to sell, its securities that are in an unrealized loss position prior to the recovery of its amortized cost basis. With the exception of the investment in pooled trust preferred securities discussed above, the Company believes that its securities continue to have satisfactory ratings, are readily marketable and that current unrealized losses are primarily a result of changes in interest rates. Therefore, management does not consider these investments to be other-than-temporarily impaired at September 30, 2011. With regard to the investments in pooled trust preferred securities, the Company has decided to hold these securities as it believes that current market quotes for these securities are not necessarily indicative of their value. The Company has recognized impairment charges on five of the pooled trust preferred securities. Management believes that the remaining impairment in the value of these securities to be primarily related to illiquidity in the market and therefore not credit related at September 30, 2011.

At September 30, 2011 and December 31, 2010, securities having a stated value of approximately $385,000 and $310,000, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

The contractual maturity of all debt securities held at September 30, 2011 is shown below. Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.


	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(000’s)

Contractual Maturity
Within 1 year	$	11,110	$	11,122		—		—
After 1 year but within 5 years		40,462		42,363	$	5,137	$	5,462
After 5 year but within 10 years		48,751		51,276		—		—
After 10 years		12,110		3,118		—		—
Mortgage-backed securities — residential		359,227		367,675		8,536		9,165

Total	$	471,660	$	475,554	$	13,673	$	14,627