Securities

12 Months Ended

Dec. 31, 2012

Securities [Abstract]

Securities

2. Securities

The following table summarizes the Company’s securities:

(Dollar amounts in thousands)	Amortized cost		Unrealized gains		Unrealized losses		Fair value
December 31, 2012:
Trust preferred securities	$	45,894	$	367	$	(8,234)	$	38,027
Municipal securities		177,414		13,717		(244)		190,887
Equity securities		1,142		676		-		1,818
Corporate bonds		219,700		7,186		(1,091)		225,795
Mortgage-backed securities
U.S. sponsored entities		617,158		33,021		(246)		649,933
Private label		4,139		177		-		4,316
Subtotal mortgage-backed securities		621,297		33,198		(246)		654,249
Total securities	$	1,065,447	$	55,144	$	(9,815)	$	1,110,776
December 31, 2011:
Trust preferred securities	$	45,894	$	265	$	(8,615)	$	37,544
Municipal securities		174,288		10,427		(230)		184,485
Equity securities		1,754		351		(2)		2,103
Corporate bonds		165,923		1,784		(2,928)		164,779
Mortgage-backed securities
U.S. sponsored entities		694,674		37,636		(8)		732,302
Private label		8,964		241		(302)		8,903
Subtotal mortgage-backed securities		703,638		37,877		(310)		741,205
Total securities	$	1,091,497	$	50,704	$	(12,085)	$	1,130,116

The private-label mortgage backed securities totaled $4.3 million and $8.9 million as of December 31, 2012 and December 31, 2011, respectively, and are secured by residential real estate.

The proceeds from the sale of securities as of December 31, 2012 were $3.7 million. Gross realized gains on sales of securities available for sale were $746,000 in 2012. The Company recorded impairment charges of approximately $4,800 on a $2.5 million collateralized debt obligation (CDO) and approximately $26,000 on one of its equity investments in various banks that had experienced a decline in their fair value for the last several quarters. There was non-credit related OTTI on these securities recognized in AOCI during the period of approximately $375,000.

The proceeds from the sale of securities as of December 31, 2011 were $25.4 million. Gross realized gains on sales of securities available for sale were $937,000 in 2011. The Company recorded impairment charges of approximately $78,000 on a $2.5 million CDO, $52,000 on a private –label mortgage backed security and approximately $317,000 on five of its equity investments in various banks that had experienced a decline in their fair value for the last several quarters. There was non-credit related OTTI on these securities recognized in AOCI during the period of approximately $548,000.

During 2010, the Company did not have any security sales, however the Company recorded impairment charges of approximately $810,000 on a $2.5 million collateralized debt obligation (CDO), $212,000 on a private-label mortgage-backed security and approximately $217,000 on five of its equity investments in various banks that had experienced a decline in their fair value for the last several quarters. There was non-credit related OTTI on these securities recognized in AOCI during the period of approximately $600,000.

Included in the $38.0 million of trust preferred securities are standalone trust preferred securities with a fair value of $36.2 million. In addition, there was one pooled trust preferred security with a par value of $2.5 million and a fair value of $173,000 that was not investment-grade rated. The Company took an impairment charge of approximately $5,000 on this $2.5 million CDO that is comprised of sixteen financial institutions during 2012. This security is a CDO currently comprised of trust preferred securities of 10 financial institutions and has a Moody’s rating of Ca, which is below investment grade. The Company had an independent third party analyze this bond at December 31, 2011 and the Company believes the factors have improved for this bond since the third party review.

Because of the subprime crisis current markets for variable rate corporate trust preferred bonds are illiquid. In order to determine prices of these securities the Company utilizes a discounted cash flow method, mentioned above. This method is described more fully in footnote 12, Fair Value.

The following is a summary of the amounts recognized in earnings related to credit losses on securities which the Company has recorded other-than-temporary impairment charges through earnings and other comprehensive income:

(Dollars in thousands)
		Totals
January 1, 2010	$	-
Credit losses on securities for which other-than-temporary impairment was not previously recognized		1,022
Additional increases as a result of impairment charges recognized on investments for which an OTTI charge was not previously recognized		-
December 31, 2010		1,022
Credit losses on securities for which other-than-temporary impairment was not previously recognized		-
Additional increases as a result of impairment charges recognized on investments for which an OTTI charge was not previously recognized		130
December 31, 2011		1,152
Credit losses on securities for which other-than-temporary impairment was not previously recognized		-
Additional increases as a result of impairment charges recognized on investments for which an OTTI charge was not previously recognized		5
December 31, 2012	$	1,157

At December 31, 2012 and 2011, the Bank did not have any corporate bonds whose book value exceeded 10% of equity.

The following table shows the Company’s investments’ 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 December 31, 2012 and 2011:

As of December 31, 2012
(Dollar amounts in thousands)	Less than 12 Months						12 Months or more						Total
	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		-	$	-	$	-		9	$	36,179	$	8,234		9	$	36,179	$	8,234
Municipal securities		5		4,179		58		2		3,059		186		7		7,238		244
Corporate bonds		5		15,604		110		5		20,020		981		10		35,624		1,091
Mortgage-backed securities
U.S. sponsored entities		8		28,246		246		-		-		-		8		28,246		246
Total		18	$	48,029	$	414		16	$	59,258	$	9,401		34	$	107,287	$	9,815

As of December 31, 2011
(Dollar amounts in thousands)	Less than 12 Months						12 Months or more						Total
	# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses		# of Securities		Fair Value		Unrealized losses
Trust preferred securities		-	$	-	$	-		9	$	35,789	$	8,615		9	$	35,789	$	8,615
Municipal securities		2		3,094		149		3		2,627		81		5		5,721		230
Equity securities		-		-		-		1		130		2		1		130		2
Corporate bonds		27		91,046		2,928		-		-		-		27		91,046		2,928
Mortgage-backed securities
U.S. sponsored entities		1		4,596		8		-		-		-		1		4,596		8
Private label		3		3,084		302		-		-		-		3		3,084		302
Subtotal mortgage-backed securities		4		7,680		310		-		-		-		4		7,680		310
Total		33	$	101,820	$	3,387		13	$	38,546	$	8,698		46	$	140,366	$	12,085

The Company primarily invests in mortgage-backed securities, variable and fixed rate corporate bonds, municipal bonds, trust preferred securities, government bonds and to a lesser extent equity securities. The policy of the Company is to recognize an OTTI on equity securities where the fair value has been significantly below cost for three consecutive quarters. Declines in the fair value of the corporate bonds that can be attributed to specific adverse conditions affecting the credit quality of the investment would be recorded as OTTI losses and charged to earnings. In order to determine if a decline in fair value is other than temporary, the Company reviews corporate ratings of the investment, analyst reports and SEC filings of the issuers. For fixed maturity investments with unrealized losses due to interest rates where the Company expects to recover the entire amortized cost basis of the security, declines in value below cost are not assumed to be other than temporary. The Company reviews its position quarterly and has asserted that at December 31, 2012, the declines outlined in the above table represent temporary declines due to changes in interest rates and are not reflections of impairment in the credit quality of the securities. Additionally, the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

The Company reviews investment debt securities on an ongoing basis for the presence of OTTI with formal reviews performed quarterly. Credit–related OTTI losses on individual securities were recognized during 2012 in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in AOCI. The credit-related OTTI recognized during 2012 and 2011 was $31,000 and $447,000, respectively and was related to securities having a book value of $608,000 at December 31, 2012 and $2.1 million at December 31, 2011. The noncredit-related OTTI was $375,000 and $548,000 for 2012 and 2011, respectively.

The following table summarizes scheduled maturities of the Company’s securities as of December 31, 2012, excluding equity securities which have no maturity dates:

(Dollar amounts in thousands)	Available for sale
	Weighted     Average Yield			Amortized cost		Fair value
Due in one year or less		3.80	%	$	19,137	$	19,411
Due from one year to five years		3.05	%		187,595		195,182
Due from five to ten years		3.27	%		108,288		111,879
Due after ten years		3.30	%		749,285		782,486
		3.26	%	$	1,064,305	$	1,108,958

For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on weighted-average contractual maturities of underlying collateral. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

Securities, with carrying values of $229.0 million and $206.4 million as of December 31, 2012 and 2011, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.