Investment Securities

3 Months Ended

Jun. 30, 2012

Investment Securities:

Investment Securities

NOTE 6: INVESTMENT SECURITIES

	June 30, 2012
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$30,000	$18	$--	$30,018	1.25%
Collateralized mortgage obligations	4,858	154	239	4,773	5.29
Mortgage-backed securities	585,327	14,904	75	600,156	2.75
Small Business Administration
loan pools	53,027	723	11	53,739	1.83
States and political subdivisions	120,141	7,644	--	127,785	5.66
Corporate bonds	49	245	--	294	42.08
Equity securities	1,230	1,196	--	2,426	--
Total Available for Sale Securities	$794,632	$24,884	$325	$819,191	3.09%

	December 31, 2011
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
AVAILABLE-FOR-SALE SECURITIES:
U.S. government agencies	$20,000	$60	$--	$20,060	1.12%
Collateralized mortgage obligations	5,220	--	380	4,840	5.53%
Mortgage-backed securities	628,729	13,728	802	641,655	3.12%
Small Business Administration
loan pools	55,422	1,070	--	56,492	1.68%
States and political subdivisions	145,663	5,478	903	150,238	5.72%
Corporate bonds	50	245	--	295	39.65%
Equity securities	1,230	601	--	1,831	--
Total Available for Sale Securities	$856,314	$21,182	$2,085	$875,411	3.44%%

	June 30, 2012
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$920	$173	$--	$1,093	7.37%

	December 31, 2011
		Gross	Gross		Tax
	Amortized	Unrealized	Unrealized	Fair	Equivalent
	Cost	Gains	Losses	Value	Yield
HELD-TO-MATURITY SECURITIES:
States and political subdivisions	$1,865	$236	$--	$2,101	4.39%

The amortized cost and fair value of available-for-sale securities at June 30, 2012, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized	Fair
	Cost	Value
One year or less	$1,120	$1,120
After one through five years	975	993
After five through ten years	10,556	10,986
After ten years	190,566	198,737
Securities not due on a single maturity date	590,185	604,929
Equity securities	1,230	2,426
Total Available for Sale Securities by Contractual Maturity	$794,632	$819,191

The held-to-maturity securities at June 30, 2012, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized	Fair
	Cost	Value
After five through ten years	$920	$1,093

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2012 and December 31, 2011, respectively, was approximately $42.6 million and $172.6 million , which is approximately 5.2% and 19.7% of the Company’s available-for-sale and held-to-maturity investment portfolio, respectively.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary at June 30, 2012.

During the three and six months ended June 30, 2012, the Company determined that the impairment of a non-agency collateralized mortgage obligation with a book value of $962,000 had become other than temporary.  Consequently, the Company recorded a $262,000 pre-tax charge to income.  During the three and six months ended June 30, 2011, the Company determined that the impairment of a non-agency collateralized mortgage obligation with a book value of $1.8 million had become other than temporary.  Consequently, the Company recorded a $400,000 pre-tax charge to income.

The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011:

	June 30, 2012
	Less than 12 Months		12 Months or More		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
	Value	Losses	Value	Losses	Value	Losses
Description of Securities
Collateralized mortgage
obligations	$--	$--	$1,124	$(239)	$1,124	$(239)
Mortgage-backed securities	13,973	(29)	17,629	(46)	31,602	(75)
Small Business
Administration loan pools	9,876	(11)	--	--	9,876	(11)
Total securities by investment category	$23,849	$(40)	$18,753	$(285)	$42,062	$(325)

	December 31, 2011
	Less than 12 Months		12 Months or More		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
	Value	Losses	Value	Losses	Value	Losses
Description of Securities
Collateralized mortgage
obligations	$3,760	$(110)	$1,460	$(270)	$5,220	$(380)
Mortgage-backed securities	61,720	(365)	91,824	(437)	153,544	(802)
States and political
subdivisions	6,436	(44)	7,381	(859)	13,817	(903)
Total securities by investment category	$71,916	$(519)	$100,665	$(1,566)	$172,581	$(2,085)

Gross gains of $2.1 million and gross losses of $559,000 resulting from sales of available-for-sale securities were realized for the three and six months ended June 30, 2012.  No securities were sold during the three and six months ended June 30, 2011, and therefore, no gains or losses on sales were realized.  Gains and losses on sales of securities are determined on the specific-identification method.

Other-than-temporary Impairment.  Upon acquisition of a security, the Company decides whether it is within the scope of the accounting guidance for beneficial interests in securitized financial assets or will be evaluated for impairment under the accounting guidance for investments in debt and equity securities.

The accounting guidance for beneficial interests in securitized financial assets provides incremental impairment guidance for a subset of the debt securities within the scope of the guidance for investments in debt and equity securities.  For securities where the security is a beneficial interest in securitized financial assets, the Company uses the beneficial interests in securitized financial asset impairment model.  For securities where the security is not a beneficial interest in securitized financial assets, the Company uses the debt and equity securities impairment model.  The Company does not currently have securities within the scope of this guidance for beneficial interests in securitized financial assets.

The Company conducts periodic reviews to identify and evaluate each investment security to determine whether an other-than-temporary impairment has occurred.  The Company considers the length of time a security has been in an unrealized loss position, the relative amount of the unrealized loss compared to the carrying value of the security, the type of security and other factors.  If certain criteria are met, the Company performs additional review and evaluation using observable market values or various inputs in economic models to determine if an unrealized loss is other-than-temporary.  The Company uses quoted market prices for marketable equity securities and uses broker pricing quotes based on observable inputs for equity investments that are not traded on a stock exchange.  For non-agency collateralized mortgage obligations, to determine if the unrealized loss is other-than-temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss.  The Company also evaluates any current credit enhancement underlying these securities to determine the impact on cash flows.  If the Company determines that a given security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

Credit Losses Recognized on Investments.  Certain debt securities have experienced fair value deterioration due to credit losses. 

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.

	Accumulated
	Credit Losses
Credit losses on debt securities held
April 1, 2012	$3,598
Additions related to other-than-temporary losses not previously recognized	--
Additions related to increases in credit losses on debt securities for which
other-than-temporary impairment losses were previously recognized	262
Reductions due to sales	--
June 30, 2012	$3,860
Credit losses on debt securities held
April 1, 2011	$2,983
Additions related to other-than-temporary losses not previously recognized	--
Additions related to increases in credit losses on debt securities for which
other-than-temporary impairment losses were previously recognized	400
Reductions due to sales	--
June 30, 2011	$3,383
Credit losses on debt securities held
January 1, 2012	$3,598
Additions related to other-than-temporary losses not previously recognized	--
Additions related to increases in credit losses on debt securities for which
other-than-temporary impairment losses were previously recognized	262
Reductions due to sales	--
June 30, 2012	$3,860
Credit losses on debt securities held
January 1, 2011	$2,983
Additions related to other-than-temporary losses not previously recognized	--
Additions related to increases in credit losses on debt securities for which
other-than-temporary impairment losses were previously recognized	400
Reductions due to sales	--
June 30, 2011	$3,383