Note 3 - Securities

9 Months Ended

Sep. 30, 2012

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3.  SECURITIES

Securities available-for-sale are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in stockholders’ equity as a separate component of accumulated other comprehensive loss. Securities classified as held-to-maturity are securities that management has the positive intent and ability to hold to maturity and are stated at cost.

Trading securities are reported at fair value. Net trading gains (losses) represent changes in the fair value of the trading securities portfolio and are included as a separate component of other noninterest income in the Condensed Consolidated Statements of Income.

Securities Portfolio

(Dollar amounts in thousands)

	September 30, 2012												December 31, 2011
	Amortized		Gross Unrealized							Fair			Amortized			Gross Unrealized							Fair
	Cost		Gains			Losses				Value			Cost			Gains			Losses				Value
Securities Available-for-Sale
U.S. agency securities	$	2,003		$	-		$	(1	)		$	2,002		$	5,060		$	-		$	(25	)		$	5,035
Collateralized residential mortgage obligations (“CMOs”)		511,242			4,054			(1,864	)			513,432			383,828			2,622			(2,346	)			384,104
Other residential mortgage-backed securities (“MBSs”)		128,750			6,399			(14	)			135,135			81,982			5,732			(23	)			87,691
Municipal securities		474,461			28,901			(47	)			503,315			464,282			26,155			(366	)			490,071
Collateralized debt obligations (“CDOs”)		46,633			-			(35,087	)			11,546			48,759			-			(35,365	)			13,394
Corporate debt securities		13,008			2,304			-				15,312			27,511			2,514			(11	)			30,014
Equity securities:
Hedge fund investment		1,230			984			-				2,214			1,231			385			-				1,616
Other equity securities		8,296			330			-				8,626			958			123			-				1,081
Total equity securities		9,526			1,314			-				10,840			2,189			508			-				2,697
Total	$	1,185,623		$	42,972		$	(37,013	)		$	1,191,582		$	1,013,611		$	37,531		$	(38,136	)		$	1,013,006
Securities Held-to-Maturity
Municipal securities	$	41,944		$	3,689		$	-			$	45,633		$	60,458		$	1,019		$	-			$	61,477
Trading Securities (1)											$	15,512												$	14,469

(1) Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

Remaining Contractual Maturity of Securities

(Dollar amounts in thousands)

	September 30, 2012
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	10,118	$	10,044	$	7,003	$	7,619
One year to five years		364,520		361,848		10,368		11,280
Five years to ten years		91,830		91,157		8,409		9,148
After ten years		69,637		69,126		16,164		17,586
CMOs		511,242		513,432		-		-
Other residential MBSs		128,750		135,135		-		-
Equity securities		9,526		10,840		-		-
Total	$	1,185,623	$	1,191,582	$	41,944	$	45,633

The carrying value of securities available-for-sale that were pledged to secure deposits and for other purposes as permitted or required by law totaled $650.1 million at September 30, 2012 and $592.7 million at December 31, 2011. No securities held-to-maturity were pledged as of September 30, 2012 or December 31, 2011.

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in net securities (losses) gains in the Condensed Consolidated Statements of Income. The cost of securities sold is recorded using the specific identification method.

Securities (Losses) Gains

(Dollar amounts in thousands)

	Quarters Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Proceeds from sales	$	38,574		$	80,126		$	50,633		$	177,456
(Losses) gains on sales of securities:
Gross realized gains	$	131		$	671		$	1,734		$	3,453
Gross realized losses		(348	)		(45	)		(601	)		(756	)
Net realized (losses) gains on securities sales		(217	)		626			1,133			2,697
Non-cash impairment charges:
Other-than-temporary impairment (“OTTI”)		-			(641	)		(2,328	)		(641	)
Portion of OTTI recognized in other comprehensive income		-			464			186			464
Net non-cash impairment charges		-			(177	)		(2,142	)		(177	)
Net realized (losses) gains	$	(217	)	$	449		$	(1,009	)	$	2,520
Income tax (benefit) expense on net realized (losses) gains	$	(89	)	$	184		$	(413	)	$	1,031
Net trading gains (losses) (1)	$	685		$	(2,352	)	$	1,511		$	(1,610	)

(1) All net trading gains (losses) relate to trading securities still held as of September 30, 2012 and September 30, 2011.

The non-cash impairment charges in the table above primarily relate to OTTI charges on CDOs. Accounting guidance requires that only the credit portion of an OTTI charge be recognized through income. If a decline in fair value below carrying value is not attributable to credit loss and the Company does not intend to sell the security or believe it would not be more likely than not required to sell the security prior to recovery, the Company records the non-credit related portion of the decline in fair value in other comprehensive income. In deriving the credit component of the impairment on the CDOs, projected cash flows were discounted at the contractual rate. Fair values are computed by discounting future projected cash flows at the London Interbank Offered Rate (“LIBOR”) plus an adjustment to reflect the higher risk inherent in these securities given their complex structures and the impact of market factors.

Credit-Related CDO Impairment Losses

(Dollar amounts in thousands)

	Quarters Ended September 30,				Nine Months Ended September 30,
CDO Number	2012		2011		2012		2011		Life-to-Date
1	$	-	$	-	$	-	$	-	$	10,360
2		-		-		1,535		-		9,403
3		-		177		591		177		2,161
4		-		-		-		-		1,078
5		-		-		-		-		8,570
6		-		-		-		-		243
7		-		-		-		-		6,750
	$	-	$	177	$	2,126	$	177	$	38,565

Changes in the amount of credit losses recognized in earnings on CDOs and other securities are summarized in the following table.

Changes in Credit Losses Recognized in Earnings

(Dollar amounts in thousands)

	Quarters Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Cumulative amount recognized at beginning of period	$	38,667	$	35,589	$	36,525	$	35,589
Credit losses included in earnings (1):
Losses recognized on securities that previously had credit losses		-		177		2,142		177
Losses recognized on securities that did not previously have credit losses		-		-		-		-
Cumulative amount recognized at end of period	$	38,667	$	35,766	$	38,667	$	35,766

(1) Included in net securities (losses) gains in the Condensed Consolidated Statements of Income.

The following table presents the aggregate amount of unrealized losses and the aggregate related fair values of securities with unrealized losses as of September 30, 2012 and December 31, 2011.

Securities in an Unrealized Loss Position

(Dollar amounts in thousands)

			Less Than 12 Months				12 Months or Longer				Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
As of September 30, 2012
U.S. agency securities		1	$	2,002	$	1	$	-	$	-	$	2,002	$	1
CMOs		34		216,137		1,722		7,167		142		223,304		1,864
Other residential MBOs		4		517		1		103		13		620		14
Municipal securities		9		2,473		14		3,128		33		5,601		47
CDOs		6		-		-		11,546		35,087		11,546		35,087
Total		54	$	221,129	$	1,738	$	21,944	$	35,275	$	243,073	$	37,013
As of December 31, 2011
U.S. agency securities		2	$	-	$	-	$	5,035	$	25	$	5,035	$	25
CMOs		30		163,819		1,818		12,628		528		176,447		2,346
Other residential MBOs		4		182		17		1,072		6		1,254		23
Municipal securities		19		934		2		7,857		364		8,791		366
CDOs		6		-		-		13,394		35,365		13,394		35,365
Corporate debt securities		1		2,157		11		-		-		2,157		11
Total		62	$	167,092	$	1,848	$	39,986	$	36,288	$	207,078	$	38,136

Approximately 99% of the Company’s CMOs and other MBSs are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises. Municipal securities are issued by municipal authorities, and the majority is supported by third-party insurance or some other form of credit enhancement. Management does not believe any individual unrealized loss on these securities as of September 30, 2012 represents an OTTI. The unrealized losses associated with these securities are not believed to be attributed to credit quality, but rather to changes in interest rates and temporary market movements. In addition, the Company does not intend to sell the securities with unrealized losses, and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The unrealized losses on CDOs as of September 30, 2012 reflect the market’s unfavorable view of structured investment vehicles given the current interest rate and liquidity environment. Management does not believe the unrealized losses on the CDOs represent OTTI related to credit deterioration. In addition, the Company does not intend to sell the CDOs with unrealized losses, and the Company does not believe it is more likely than not that it will be required to sell them before recovery of their amortized cost basis, which may be at maturity. As of September 30, 2012, the portion of OTTI on these securities recognized in accumulated other comprehensive loss (i.e., not related to credit deterioration) totaled $35.1 million.

Significant judgment is required to calculate the fair value of the CDOs, all of which are pooled. Generally, fair value determinations are based on several factors regarding current market and economic conditions related to these securities and the underlying collateral. For these reasons and due to the illiquidity in the secondary market for the CDOs, the Company estimates the fair value of these securities using discounted cash flow analyses with the assistance of a structured credit valuation firm. For additional discussion of the CDO valuation methodology, refer to Note 12, “Fair Value.”