Note 7. Accrued Interest Receivable and Other Assets

The following table provides the details of accrued interest receivable and other assets:


	At December 31,
(Dollars in thousands)	2011		2010

Other real estate owned	$	6,600	$	2,438
Accrued interest receivable		6,904		7,206
Accrued income and other receivables		3,106		2,843
Fair market value of derivative financial instruments		1,079		1,291
Prepaid FDIC insurance assessments		4,025		6,132
Other prepaid expenses		9,813		7,256
Federal Reserve Bank stock, Federal Home Loan Bank stock and other not readily marketable equity securities		9,145		10,457
Net deferred tax assets		13,579		15,557
Other		624		624

Total accrued interest receivable and other assets	$	54,875	$	53,804

The FDIC Board implemented an institutional prepaid FDIC assessment to recapitalize the Deposit Insurance Fund during the fourth quarter of 2009. The amount was paid on December 30, 2009 for the fourth quarter 2009, and for all of 2010, 2011 and 2012. At December 31, 2011, $4.0 million remained in the prepaid asset account. The prepaid amount of $4.0 million has a zero percent risk-weighting for risk-based capital ratio calculations. The remaining prepaid amount will be expensed over the 2012 though 2013 period as the actual FDIC assessments are determined for each interim quarterly period. Any excess prepaid amounts may be utilized up to December 30, 2014 at which time any excess will be returned to the Bank.

At December 31, 2011 and 2010, the Bank held $3.3 million in Federal Reserve Bank stock as required by member banks of the Federal Reserve System. The Bank is also required to hold stock in the Federal Home Loan Bank of Pittsburgh (FHLB) in relation to the level of outstanding borrowings. The Bank held FHLB stock of $5.8 million and $7.1 million as of December 31, 2011 and 2010, respectively. On December 23, 2008, the FHLB announced that it would be suspending the payment of its dividends and the repurchase of excess capital stock in order to rebuild its capital levels. Additionally, the FHLB might require its members to increase its capital stock requirement. During the fourth quarter of 2010 and the first through fourth quarter of 2011, the FHLB repurchased a limited amount of excess capital stock. The FHLB will make decisions on future repurchases of excess capital stock on a quarterly basis. Effective February 28, 2011, the FHLB entered into a Joint Capital Enhancement Agreement with the other 11 Federal Home Loan Banks (collectively, the FHLBanks). The agreement calls for a plan for each FHLBank to build additional retained earnings and enhance capital. Under the plan, each FHLBank will, on a quarterly basis, beginning in the third quarter of 2011, allocate at least 20 percent of its net income to a separate restricted retained earnings account until the balance of the account equals one percent of that FHLBank’s balance of outstanding obligations. On August 5, and August 8, 2011, the Standard & Poor’s Rating Services downgraded the credit ratings of the U.S government and federal agencies, including the FHLB, respectively, from AAA to AA+, with a negative outlook. These recent downgrades, and any future downgrades in the credit ratings of the U.S. government and the FHLB could increase the borrowing costs of the FHLB and possibly have a negative impact on its operations and long-term performance. It is possible this could have an adverse effect on the value of the Corporation’s investment in the FHLB stock. However, based on current information from the FHLB, management believes that if there is any impairment in the FHLB stock, it is temporary. Therefore, as of December 31, 2011, the FHLB stock is recorded at cost.