INVESTMENT SECURITIES HELD TO MATURITY

3 Months Ended

Mar. 31, 2012

Investment Securities Held To Maturity

INVESTMENT SECURITIES HELD TO MATURITY

2.          INVESTMENT SECURITIES HELD TO MATURITY

A summary of amortized cost and estimated fair value of investment securities held to maturity included in the consolidated statements of condition as of March 31, 2012 and December 31, 2011 follows:

	March 31, 2012
				Gross		Gross
		Carrying		Unrecognized		Unrecognized			Fair
(In Thousands)		Amount		Gains		Losses			Value
Mortgage-Backed Securities -Residential	$	61,941	$	1,484	$	—		$	63,425
State and Political Subdivisions		18,220		35		—			18,255
Trust Preferred Pooled Securities		8,506		2,356		(4,340	)		6,522
Total	$	88,667	$	3,875	$	(4,340	)	$	88,202

	December 31, 2011
			Gross		Gross
	Carrying		Unrecognized		Unrecognized			Fair
(In Thousands)	Amount		Gains		Losses			Value
Mortgage-Backed Securities -Residential	$	67,394	$	1,393	$	(1	)	$	68,786
State and Political Subdivisions		24,608		52		—			24,660
Trust Preferred Pooled Securities		8,717		2,170		(4,906	)		5,981
Total	$	100,719	$	3,615	$	(4,907	)	$	99,427

The following tables present the Corporation’s investment securities held to maturity with continuous unrealized losses and the estimated fair value of these investments as of March 31, 2012 and December 31, 2011.

	March 31, 2012
	Duration of Unrealized Loss
	Less Than 12 Months				12 Months or Longer					Total
		Fair		Unrecognized		Fair		Unrecognized			Fair		Unrecognized
(In Thousands)		Value		Losses		Value		Losses			Value		Losses
Trust Preferred Pooled Securities	$	—	$	—	$	3,270	$	(4,340	)	$	3,270	$	(4,340	)
Total	$	—	$	—	$	3,270	$	(4,340	)	$	3,270	$	(4,340	)

	December 31, 2011
	Duration of Unrealized Loss
	Less Than 12 Months					12 Months or Longer					Total
		Fair		Unrecognized			Fair		Unrecognized			Fair		Unrecognized
(In Thousands)		Value		Losses			Value		Losses			Value		Losses
Mortgage-Backed Securities - Residential	$	3,194	$	(1	)	$	—	$	—		$	3,194	$	(1	)
Trust Preferred Pooled Securities		—		—			2,729		(4,906	)		2,729		(4,906	)
Total	$	3,194	$	(1	)	$	2,729	$	(4,906	)	$	5,923	$	(4,907	)

The trust preferred pooled securities within the Corporation’s held to maturity investment portfolio are collateralized by trust preferred securities issued primarily by individual bank holding companies, but also by insurance companies and real estate investment trusts. There has been little or no active trading in these securities for several years; therefore the Corporation believes in most cases it is more appropriate to estimate fair value using discounted cash flow analysis. As of December 31, 2008, to estimate fair value, and determine whether the securities were other-than-temporarily impaired, the Corporation retained and worked with a third party to review the issuers (the collateral) underlying each of the securities. Among the factors analyzed were the issuers’ profitability, credit quality, asset mix, capital adequacy, leverage and liquidity position, as well as an overall assessment of credit, profitability and capital trends within the portfolio’s issuer universe. These factors provided an assessment of the portion of the collateral of each security which was likely to default in future periods. The cash flows associated with the collateral likely to default, together with the cash flows associated with collateral which had already deferred or defaulted, were then eliminated. In addition, the Corporation assumed constant rates of default in excess of those based upon the historic performance of the underlying collateral. The resulting cash flows were then discounted to the current period to determine fair value for each security. The discount rate utilized was based on a risk-free rate (LIBOR) plus spreads appropriate for the product, which include consideration of liquidity and credit uncertainty.

Each quarter since December 2008, to periodically assess the credit assumptions and related input data that could affect the fair value of each security, Management compared actual deferrals and defaults to the assumed deferrals and defaults included in the valuation model.

As of each year end since December 2008, the Corporation again worked with a third party to model the securities and review its valuation. The modeling process and related assumptions were similar to the process and related assumptions employed as of December 31, 2008. No additional impairment charges were recorded for the three months ended March 31, 2012.

Further significant downturns in the real estate markets and/or the economy could cause additional issuers to defer paying dividends on these securities and/or ultimately default. Such occurrences, if beyond those assumed in the current valuation, could cause an additional write-down of the portfolio, with a negative impact on earnings; however, the Corporation has already recorded a substantial write-down of its trust preferred pooled securities portfolio. We do not expect that an additional write-down would have a material effect on the cash flows from the securities or on our liquidity position.