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Securities

12 Months Ended

Dec. 31, 2011

Securities [Abstract]

NOTE 4 – SECURITIES

Due to the Bank Merger, the Company reported no investment securities on its Consolidated Balance Sheet as of December 31, 2011 (Successor). Investment securities as of December 31, 2010 (Predecessor) are summarized as follows:


		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Available for Sale
December 31, 2010
U.S. government agencies		$	84,106			$	115			$	(922	)		$	83,299
States and political subdivisions			31,192				705				(396	)			31,501
CMO Agency			62,589				1,858				(265	)			64,182
CMO Non-Agency			3,454				43				(104	)			3,393
Mortgage-backed securities			17,168				815				(19	)			17,964
Trust preferred securities			1,850				—				(187	)			1,663

		$	200,359			$	3,536			$	(1,893	)		$	202,002

Held to Maturity

December 31, 2010
States and political subdivisions		$	215			$	1			$	—			$	216
Other securities			250				1				—				251
Other securities
		$	465			$	2			$	—			$	467

Contractual maturities of securities at year-end 2010 are shown below. Securities not due at a single maturity date, collateralized mortgage obligations and mortgage-backed securities are shown separately.


		Available for Sale				Held to Maturity
		Fair				Carrying				Fair
		Value				Amount				Value
Due in one year or less		$	979			$	465			$	467
Due after one year through five years			4,226				—				—
Due after five years through ten years			61,208				—				—
Due after ten years			50,050				—				—
Collateralized mortgage obligations			67,575				—				—
Mortgage-backed securities			17,964				—				—

Total maturities		$	202,002			$	465			$	467

Gross gains of $6,324, $0 and $1,415 were recognized for the Predecessor periods of January 1, 2011 through September 7, 2011 and full year 2010 and 2009, respectively, from proceeds of $177,787, $0 and $36,266, respectively, on the sale of securities available for sale.

Securities with a fair value of $135,692 and $125,005 at year-end 2010 and 2009 were pledged for public deposits and securities sold under agreements to repurchase and to the Federal Reserve Bank. The balance of pledged securities in excess of the pledging requirements was $7,983 and $9,135 at year-end 2010 and 2009, respectively.

The Company held 200 and 168 securities in its portfolio as of December 31, 2010 and 2009, respectively, and of these securities 53 and 35 had an unrealized loss. Unrealized losses on securities are due to changes in interest rates and not due to credit quality issues.

Securities with unrealized losses at year-end 2010 not recognized in income were as follows:


		Less than 12 months								12 months or more								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Loss				Value				Loss				Value				Loss
2010
U. S. government agencies		$	65,178			$	(922	)		$	—			$	—			$	65,178			$	(922	)
States and political subdivisions			2,488				(114	)			1,659				(282	)			4,147				(396	)
Collateralized mortgage obligations			14,666				(266	)			2,699				(104	)			17,365				(370	)
Mortgage-backed securities			2,821				(17	)			8				(2	)			2,829				(19	)
Trust preferred securities			—				—				1,663				(186	)			1,663				(186	)

Total temporarily impaired		$	85,153			$	(1,319	)		$	6,029			$	(574	)		$	91,182			$	(1,893	)

The Predecessor Company reviewed its investment portfolio on a quarterly basis judging each investment for other-than-temporary impairment (“OTTI”). The OTTI analysis focused on the duration and amount a security is below book value and assessed a calculation for both a credit loss and a non credit loss for each measured security considering the security’s type, performance, underlying collateral, and any current or potential debt rating changes. The OTTI calculation for credit loss was reflected in the income statement while the non credit loss was reflected in other comprehensive income (loss).

The Predecessor Company held a single issue trust preferred security issued by a privately held bank holding company. Based upon available but limited information we estimated that the likelihood of collecting the security’s principal and interest payments is approximately 50%. In addition, the bank holding company deferred its interest payments beginning in the second quarter of 2009, and we had placed the security on non-accrual. The Federal Reserve Bank of St. Louis entered into an agreement with the bank holding company on October 22, 2009 which was made public on October 30, 2009. Among other provisions of the regulatory agreement, the bank holding company must strengthen its management of operations, strengthen its credit risk management practices, and submit a capital plan. As of December 31, 2010 no other communications between the bank holding company and the Federal Reserve Bank of St. Louis have been made public.

The Company valued the security by projecting estimated cash flows given the assumption of collecting approximately 50% of the security’s principal and interest and then discounting the amount back to the present value using a discount rate of 3.50% plus three month LIBOR. As of December 31, 2010, our best estimate for the three month LIBOR over the next twenty years (the remaining life of the security) was 3.17%. The difference in the present value and the carrying value of the security was the OTTI credit portion. Due to the illiquid trust preferred market for private issuers and the absence of a credible pricing source, we calculated a 15% illiquidity premium for the security to calculate the OTTI non credit portion. The security was booked at a fair value of $638 at December 31, 2010 and during the twelve months ended December 30, 2010 the Company recognized a write-down of $75 through non-interest income representing other-than-temporary impairment on the security.

The Predecessor Company held a private label class A21 collateralized mortgage obligation that was analyzed for the year ended December 31, 2010 with multiple stress scenarios using conservative assumptions for underlying collateral defaults, loss severity, and prepayments. The average principal at risk given the stress scenarios was calculated at 4.37%, and then analyzed using the present value of the future cash flows using the fixed rate of the security of 5.5% as the discount rate. The difference in the present value and the carrying value of the security was the OTTI credit portion. The security was booked at a fair value of $2,699 at December 31, 2010 and during the twelve months ended December 31, 2010 the Company recognized a write-down of $18 through non-interest income representing other-than-temporary impairment on the security.

The Predecessor Company held a private label class 2A1 collateralized mortgage obligation that was analyzed for the year ended December 31, 2009 but was not analyzed for the year ended December 31, 2010. This security’s book value for the year ended December 31, 2010 was $651 while the fair value for the same period was recorded at $695. Since the fair value of the security was in excess of the book value at December 31, 2010, it was removed from the OTTI analysis for December 31, 2010.

The following table presents more detail on selective Predecessor Company security holdings as of year-end 2010. These details are listed separately due to the inherent level of risk for OTTI on these securities.


						Current Credit				Book				Fair				Unrealized				Present Value Discounted
Description		Cusip#				Rating				Value				Value				Loss				Cash Flow

Collateralized mortgage obligations
Wells Fargo – 2007 - 4 A21			94985RAW2				Caa2			$	2,802			$	2,699			$	(103	)		$	2,887

Trust preferred securities
West Tennessee Bancshares, Inc.			956192AA6				N/A				675				638				(37	)			675

The following table presents a roll-forward of the cumulative amount of credit losses on the Company’s investment securities that have been recognized through earnings as of December 31, 2010 and 2009. Credit losses on the Company’s investment securities recognized in earnings were $93 for the year ended December 31, 2010 and $976 for the year ended December 31, 2009.


		December 31, 2010				December 31, 2009
Beginning balance of credit losses at January 1, 2010 and 2009		$	976			$	—
Other-than-temporary impairment credit losses			93				976

Ending balance of cumulative credit losses recognized in earnings		$	1,069			$	976

This item represents the entire disclosure related to Investments in Certain Debt and Equity Securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

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