Investments (Tables)

6 Months Ended

Jun. 30, 2013

Amortized Cost and Fair Values of Securities

The amortized cost and approximate fair values of securities as of June 30, 2013 and December 31, 2012 are as follows.

	June 30, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for Sale Securities
Mortgage-backed securities
Government sponsored agencies	$	113,687	$	2,112	$	(1,090)	$	114,709
Collateralized mortgage obligations
Government sponsored agencies		120,710		2,185		(1,081)		121,814
Federal agencies		5,000		-		(198)		4,802
Municipals		10,556		81		(135)		10,502
Small Business Administration		6		-		-		6
Corporate obligations		28,902		194		(3,825)		25,271
Total	$	278,861	$	4,572	$	(6,329)	$	277,104

	December 31, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available for Sale Securities
Mortgage-backed securities
Government sponsored agencies	$	121,260	$	5,115	$	-		$	126,375
Collateralized mortgage obligations
Government sponsored agencies		114,782		3,463		(10	)		118,235
Federal agencies		13,000		8		(2	)		13,006
Municipals		3,129		208		(16	)		3,264
Small Business Administration		8		-		-			8
Corporate obligations		27,488		431		(4,269	)		20,309
Total	$	276,326	$	9,168	$	(4,297	)	$	281,197

Amortized Cost and Fair Value of Available for Sale Securities by Contractual Maturity

	Available for Sale
	Amortized		Fair
Description Securities	Cost		Value
Security obligations due
One to five years	$	13,930	$	14,054
Five to ten years		15,221		14,985
After ten years		15,307		11,536
		44,458		40,575
Mortgage-backed securities		113,687		114,709
Collateralized mortgage obligations		120,710		121,814
Small Business Administration		6		6
Totals	$	278,861		277,104

Gross Unrealized Losses and Fair Value in Continuous Unrealized Loss Position

The following tables show our 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 June 30, 2013 and December 31, 2012:

	June 30, 2013
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Available for Sale
Mortgage-backed securities
Government sponsored agencies	$	51,834	$	(1,090	)	$	-	$	-		$	51,834	$	(1,090	)
Collateralized mortgage obligations
Government sponsored agencies		45,629		(1,081	)		-		-			45,629		(1,081	)
Federal agencies		4,802		(198	)		-		-			4,802		(198	)
Municipals		6,060		(104	)		742		(31	)		6,802		(135	)
Corporate obligations		17,847		(80	)		3,000		(3,745	)		20,847		(3,825	)
Total temporarily impaired securities	$	126,172	$	(2,553	)	$	3,742	$	(3,776	)	$	129,914	$	(6,329	)

	December 31, 2012
	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Available for Sale
Mortgage-backed securities
Government sponsored agencies	$	4,962	$	(10	)	$	-	$	-		$	5,076	$	(10	)
Federal Agencies		4,998		(2)								4,998		(2)
Municipals		874		(16	)		-		-			874		(16	)
Corporate obligations		-		-			2,475		(4,269	)		2,475		(4,269	)
Total temporarily impaired securities	$	10,834	$	(28	)	$	2,475	$	(4,269	)	$	13,309	$	(4,297	)

Bank's Investment in Trust Preferred Securities

The following table provides additional information related to the Bank’s investment in trust preferred securities as of June 30, 2013:

Deal	Class	Original Par		Book Value		Fair Value		Unrealized Loss		Recognized Losses 2013		Lowest Rating	Number of Banks/Insurance Companies Currently Performing		Actual Deferrals/Defaults (as % of original collateral)			Total Projected Defaults (as a % of performing collateral)^a			Excess Subordination (after taking into account best estimate of future deferrals/defaults)^b

Alesco Preferred Funding IX	A2A	$	1,000	$	905	$	439	$	466	$	-	CCC-		41		16.04	%		15.02	%		48.07	%
Preferred Term Securities XIII	B1		1,000		822		382		440		-	Ca		44		25.56	%		20.84	%		5.30	%
Preferred Term Securities XVIII	C		1,000		917		277		640		-	Ca		48		28.69	%		14.93	%		1.40	%
Preferred Term Securities XXVII	C1		1,000		710		252		458		-	Ca		32		25.08	%		18.83	%		5.99	%
U.S. Capital Funding I	B1		3,000		2,891		1,412		1,479		-	Caa1		29		12.92	%		9.79	%		4.52	%
U.S. Capital Funding III	B1		1,000		500		238		262		-	Ca		28		21.94	%		14.74	%		0.00	%

Total		$	8,000	$	6,745	$	3,000	$	3,745	$	-

(a) A 10% recovery is applied to all projected defaults. A 15% recovery is applied to all projected insurance defaults. No recovery is applied to current defaults.

(b) Excess subordination represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences any credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.

Debt Securities for which Credit Loss was Recognized in Income and Other Losses Recorded in Other Comprehensive Income

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 Three Months Ended June 30,
	2013		2012
Credit losses on debt securities held
Beginning of period	$	1,205	$	1,205
Reductions related to actual losses incurred		-		-

As of June 30,	$	1,205	$	1,205

	Accumulated Credit Losses Six Months Ended June 30,
	2013		2012
Credit losses on debt securities held
Beginning of year	$	1,205	$	3,567
Reductions related to actual losses incurred		-		(2,362	)

As of June 30,	$	1,205	$	1,205

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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