Securities

12 Months Ended

Dec. 31, 2011

Investments debt and equity securities abstract

Investments In Debt And Marketable Equity Securities And Certain Trading Assets Disclosure Text Block

NOTE 5: SECURITIES

At December 31, 2011 and 2010, respectively, all securities within the scope of FASB ASC 320, Investments – Debt and Equity Securities were classified as available-for-sale. The fair value and amortized cost for securities available-for-sale by contractual maturityat December 31, 2011 and 2010, respectively, are presented below.

		December 31, 2011
			1 year	1 to 5	5 to 10	After 10	Fair	Gross Unrealized		Amortized
(Dollars in thousands)			or less	years	years	years	Value	Gains	Losses	Cost
Available-for-sale:
Agency obligations (a)		$	—	—	5,013	46,072	51,085	182	1	$	50,904
Agency RMBS (a)			—	—	14,935	149,863	164,798	2,534	129		162,393
State and political subdivisions			—	414	17,761	63,538	81,713	4,339	48		77,422
Trust preferred securities:
	Pooled		—	—	—	100	100	—	130		230
	Individual issuer		—	—	—	1,886	1,886	186	243		1,943
	Total available-for-sale	$	—	414	37,709	261,459	299,582	7,241	551	$	292,892
(a) Includes securities issued by U.S. government agencies or government sponsored entities.

		December 31, 2010
			1 year	1 to 5	5 to 10	After 10	Fair	Gross Unrealized		Amortized
(Dollars in thousands)			or less	years	years	years	Value	Gains	Losses	Cost
Available-for-sale:
Agency obligations (a)		$	—	—	37,821	52,650	90,471	95	1,017	$	91,393
Agency RMBS (a)			—	—	9,976	133,168	143,144	1,566	1,441		143,019
State and political subdivisions			21	856	13,547	62,342	76,766	472	2,801		79,095
Trust preferred securities:
	Pooled		—	—	—	20	20	—	210		230
	Individual issuer		—	—	—	2,129	2,129	—	153		2,282
Corporate debt			—	2,690	—	—	2,690	—	—		2,690
	Total available-for-sale	$	21	3,546	61,344	250,309	315,220	2,133	5,622	$	318,709
(a) Includes securities issued by U.S. government agencies or government sponsored entities.

Securities with aggregate fair values of $161.5million and $171.1 million at December 31, 2011 and 2010, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, Federal Home Loan Bank (“FHLB”) advances, and for other purposes required or permitted by law.

Included in other assets on the Consolidated Balance Sheetsare cost-method investments. The carrying amounts of cost-method investments were $5.0 and $5.8 million at December 31, 2011 and2010, respectively. Cost-method investments primarily include non-marketable equity investments, such as FHLB of Atlanta stock and Federal Reserve Bank (“FRB”) stock.

Gross Unrealized Losses and Fair Value

The fair values and gross unrealized losses on securities at December 31, 2011 and2010, respectively, segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or more are presented below.

				Less than 12 Months		12 Months or Longer		Total
				Fair	Unrealized	Fair	Unrealized	Fair		Unrealized
(Dollars in thousands)				Value	Losses	Value	Losses	Value		Losses
December 31, 2011:
Agency obligations			$	5,000	1	—	—	5,000	$	1
Agency RMBS				17,020	129	—	—	17,020		129
State and political subdivisions				1,686	11	718	37	2,404		48
Trust preferred securities:
	Pooled			—	—	100	130	100		130
	Individual issuer			—	—	757	243	757		243
		Total	$	23,706	141	1,575	410	25,281	$	551

December 31, 2010:
Agency obligations			$	45,351	1,017	—	—	45,351	$	1,017
Agency RMBS				89,840	1,441	—	—	89,840		1,441
State and political subdivisions				49,176	2,323	3,207	478	52,383		2,801
Trust preferred securities:
	Pooled			—	—	20	210	20		210
	Individual issuer			—	—	847	153	847		153
		Total	$	184,367	4,781	4,074	841	188,441	$	5,622

The applicable date for determining when securities are in an unrealized loss position is December 31, 2011. As such, it is possible that a security in an unrealized loss position at December 31, 2011had a market value that exceeded its amortized cost on other days during the past 12-month period.

For the securities in the previous table, the Company does not have the intent to sell and has determined it is not more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis, which may be maturity. The Company has assessed each security for credit impairment. For debt securities, the Company evaluates, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the securities' amortized cost basis. For cost-method investments, the Company evaluates whether an event or change in circumstances has occurred during the reporting period that may have a significant adverse effect on the fair value of the investment.

In determining whether a loss is temporary, the Company considers all relevant information including:

• the length of time and the extent to which the fair value has been less than the amortized cost basis;
• adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors, including changes in technology or the discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security or changes in the quality of the credit enhancement);
• the historical and implied volatility of the fair value of the security;
• the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future;
• failure of the issuer of the security to make scheduled interest or principal payments;
• any changes to the rating of the security by a rating agency; and
• recoveries or additional declines in fair value subsequent to the balance sheet date.

To the extent the Company estimates future expected cash flows, the Company considered all available information in developing those expected cash flows. For asset-backed securities such as pooled trust preferred securities, such information generally includes:

• remaining payment terms of the security (including as applicable, terms that require underlying obligor payments to increase in the future);
• current delinquencies and nonperforming assets of underlying collateral;
• expected future default rates; and
• subordination levels or other credit enhancements.

Agency obligations

The unrealized losses associated with agency obligations are primarily driven by changes in interest rates and not due to the credit quality of the securities. These securities are issued by U.S. government agencies or government-sponsored entities and do not have any credit losses given the explicit or implicit government guarantee.

Agency residential mortgage-backed securities (“RMBS”)

The unrealized losses associated with Agency RMBS are primarily driven by changes in interest rates and not due to the credit quality of the securities. These securities are issued by U.S. government agencies or government-sponsored entities and do not have any credit losses given the explicit or implicit government guarantee.

Securities of U.S. states and political subdivisions

The unrealized losses associated with securities of U.S. states and political subdivisions are primarily driven by changes in interest rates and are not due to the credit quality of the securities. These securities will continue to be monitored as part of the Company's quarterly impairment analysis, but are expected to perform even if the rating agencies reduce the credit rating of the bond insurers. As a result, the Company expects to recover the entire amortized cost basis of these securities.

Pooled trust preferred securities

The unrealized losses associated with pooled trust preferred securities are primarily driven by higher projected collateral losses and wider credit spreads. Pooled trust preferred securities primarily consist of securities issued by community banks and thrifts. The Company assesses impairment for these securities using a cash flow model. The key assumptions include default probabilities of the underlying collateral and recoveries on collateral defaults. Based upon the Company's assessment of the expected credit losses for these securities, and given the performance of the underlying collateral compared to the Company's credit enhancement, the Company expects to recover the remaining amortized cost basis of these securities.

Individual issuer trust preferred securities

The unrealized losses associated with individual issuer trust preferred securities are primarily related to securities backed by individual issuer community banks. For individual issuers, management evaluates the financial performance of the issuer on a quarterly basis to determine if it is probable that the issuer can make all contractual principal and interest payments. Based upon its evaluation, the Company expects to recover the remaining amortized cost basis of these securities.

Cost-method investments

At December 31, 2011, cost-method investments with an aggregate cost of $5.0 million were not evaluated for impairment because the Company did not identify any events or changes in circumstances that may have a significant adverse effect on the fair value of these cost-method investments.

The carrying values of the Company's investment securities could decline in the future if the underlying performance of the collateral for pooled trust preferred securities, the financial condition of individual issuers of trust preferred securities, or the credit quality of other securities deteriorate and the Company determines it is probable that it will not recover the entire amortized cost basis for the security. As a result, there is a risk that significant other-than-temporary impairment charges may occur in the future.

The following tables show the applicable credit ratings, fair values, gross unrealized losses, and life-to-date impairment charges for pooled and individual issuer trust preferred securities at December 31, 2011 , and 2010, respectively, segregated by those securities that have been in an unrealized loss position for less than 12 months and 12 months or more.

Trust Preferred Securities as of		December 31, 2011
								Unrealized Losses				Life-to-date
			Credit Rating			Fair	Less than		12 months			Impairment
(Dollars in thousands)			Moody's	Fitch		Value	12 months		or Longer	Total		Charges
Pooled:
ALESCO Preferred Funding XVII Ltd (a)			C	CC	$	100		—	130	130	$	1,770
Individual issuer (b):
Carolina Financial Capital Trust I			n/a	n/a		193		—	—	—		257
Main Street Bank Statutory Trust I (c)			n/a	n/a		389		—	111	111		—
MNB Capital Trust I			n/a	n/a		55		—	—	—		445
PrimeSouth Capital Trust I			n/a	n/a		75		—	—	—		425
TCB Trust			n/a	n/a		368		—	132	132		—
United Community Capital Trust			n/a	n/a		806		—	—	—		379
	Total individual issuer					1,886		—	243	243		1,506
Total trust preferred securities					$	1,986		—	373	373	$	3,276
n/a - not applicable securities not rated.
(a) Class B Deferrable Third Priority Secured Floating Rate Notes. The underlying collateral is primarily composed of
	trust preferred securities issued by community banks and thrifts.
(b) 144A Floating Rate Capital Securities. Underlying issuer is a community bank holding company. Securities have no
	excess subordination or overcollateralization.
(c) Now an obligation of BB&T Corporation.

Trust Preferred Securities as of		December 31, 2010
								Unrealized Losses				Life-to-date
			Credit Rating			Fair	Less than		12 months			Impairment
(Dollars in thousands)			Moody's	Fitch		Value	12 months		or Longer	Total		Charges
Pooled:
ALESCO Preferred Funding XVII Ltd (a)			C	CC	$	20		—	210	210	$	1,770
Individual issuer (b):
Carolina Financial Capital Trust I			n/a	n/a		312		—	—	—		138
Main Street Bank Statutory Trust I (c)			n/a	n/a		438		—	62	62		—
MNB Capital Trust I			n/a	n/a		152		—	—	—		348
PrimeSouth Capital Trust I			n/a	n/a		197		—	—	—		303
TCB Trust			n/a	n/a		409		—	91	91		—
United Community Capital Trust			n/a	n/a		621		—	—	—		379
	Total individual issuer					2,129		—	153	153		1,168
Total trust preferred securities					$	2,149		—	363	363	$	2,938
n/a - not applicable securities not rated.
(a) Class B Deferrable Third Priority Secured Floating Rate Notes. The underlying collateral is primarily composed of
	trust preferred securities issued by community banks and thrifts.
(b) 144A Floating Rate Capital Securities. Underlying issuer is a community bank holding company. Securities have no
	excess subordination or overcollateralization.
(c) Now an obligation of BB&T Corporation.

For pooled trust preferred securities, the Company estimated expected future cash flows of the security by estimating the expected future cash flows of the underlying collateral and applying those collateral cash flows, together with any credit enhancements such as subordination interests owned by third parties, to the security. The expected future cash flows of the underlying collateral are determined using the remaining contractual cash flows adjusted for future expected credit losses (which consider default probabilities derived from issuer credit ratings for the underlying collateral). The probability-weighted expected future cash flows of the security are then discounted at the interest rate used to recognize income on the security to arrive at a present value amount.

Excess subordination is defined as the amount of performing collateral that is in excess of what is needed to pay-off a specified class of securities and all classes senior to the specified class. Performing collateral is defined as total collateral minus all collateral that is currently deferring or currently in default. This definition assumes that all collateral that is currently deferring will default with a zero recovery rate. The underlying issuers can cure the deferral, or some portion greater than zero could be recovered on default of an underlying issuer. Excess subordination, as defined previously, does not consider any excess interest spread that is built into the structure of the security, which provides another source of repayment for the bonds.

At December 31, 2011 and2010, respectively, there was no excess subordination for the Class B notes of ALESCO Preferred Funding XVII, Ltd.

Other-Than-Temporarily Impaired Securities

The following table presents a roll-forward of the credit loss component of the amortized cost of debt securities that the Company has written down for other-than-temporary impairment and the credit component of the loss is recognized in earnings (referred to as “credit-impaired” debt securities). Other-than-temporary impairmentsrecognized in earnings for the years ended December 31, 2011, 2010and 2009, respectively, for credit-impaired debt securities are presented as additions in two components based upon whether the current period is the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit-impaired (subsequent credit impairments). The credit loss component is reduced if the Company sells, intends to sell or believesit will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if the Company receives cash flows in excess of what it expected to receive over the remaining life of the credit-impaired debt security, the security matures oris fully written-down and deemed worthless. Changes in the credit loss component of credit-impaired debt securities were:

				Year ended December 31
(Dollars in thousands)				2011	2010	2009
Balance, beginning of period			$	2,938	4,570	—
	Additions:
		Initial credit impairments		—	1,160	2,663
		Subsequent credit impairments		338	58	1,907
	Reductions:
		Securities sold		—	(975)	—
		Due to change in intent or requirement to sell
		Securities fully written down and deemed worthless		—	(1,875)	—
		Increases in expected cash flows		—	—	—
Balance, end of period			$	3,276	2,938	4,570

Other-Than-TemporaryImpairment

The following table presents details of the other-than-temporary impairment related to securities, including equity securities carried at cost.

					Year ended December 31
(Dollars in thousands)					2011	2010	2009
Other-than-temporary impairment charges (included in earnings):
	Debt securities:
		Corporate debt securities		$	—	810	—
		Pooled trust preferred securities			—	50	2,695
		Individual issuer trust preferred securities			338	1,168	1,875
			Total debt securities	$	338	2,028	4,570
	Cost-method investments				—	—	1,980
Total other-than-temporary impairment charges					338	2,028	6,550
Other-than-temporary impairment on debt securities:
	Recorded as part of gross realized losses:
		Credit-related			338	1,218	4,570
		Securities with intent to sell			—	810	—
	Recorded directly to other comprehensive income for non-credit
		related impairment			130	210	257
Total other-than-temporary impairment on debt securities				$	468	2,238	4,827

Realized Gains and Losses
The following table presents the gross realized gains and losses on sales and other-than-temporary impairment charges
related to securities, including cost-method investments.
			Year ended December 31
(Dollars in thousands)			2011	2010	2009
Gross realized gains		$	1,698	3,496	2,881
Gross realized losses			(482)	(45)	(34)
Other-than-temporary impairment charges			(338)	(2,028)	(6,550)
	Realized gains (losses), net	$	878	1,423	(3,703)