NOTE 3 – SECURITIES

The following tables summarize the amortized costs and estimated fair values of securities available-for-sale (“AFS”), as of June 30, 2012 and December 31, 2011:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2012
Obligations of states and political subdivisions	$	35,161	$	2,073	$	—		$	37,234
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises		611,806		18,212		(84	)		629,934
Private issue collateralized mortgage obligations		11,708		—		(1,614	)		10,094
Total securities available for sale	$	658,675	$	20,285	$	(1,698	)	$	677,262
December 31, 2011
Obligations of U.S. government sponsored enterprises	$	29,996	$	116	$	(5	)	$	30,107
Obligations of states and political subdivisions		37,138		2,620		—			39,758
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises		488,226		17,489		(331	)		505,384
Private issue collateralized mortgage obligations		12,557		—		(1,916	)		10,641
Total debt securities		567,917		20,225		(2,252	)		585,890
Equity securities		5,000		—		(854	)		4,146
Total securities available for sale	$	572,917	$	20,225	$	(3,106	)	$	590,036

Net unrealized gains on AFS at June 30, 2012 and December 31, 2011 and included in accumulated other comprehensive income amounted to $12.1 million and $11.1 million, net of deferred taxes of $6.5 million and $6.0 million, respectively.

Impaired Securities

Management periodically reviews the Company’s investment portfolio to determine the cause, magnitude and duration of declines in the fair value of each security. Thorough evaluations of the causes of the unrealized losses are performed to determine whether the impairment is temporary or other-than-temporary in nature. Considerations such as the ability of the securities to meet cash flow requirements, levels of credit enhancements, risk of curtailment, recoverability of invested amount over a reasonable period of time and the length of time the security is in a loss position, for example, are applied in determining other-than-temporary impairment (“OTTI”). Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

The following table presents the estimated fair values and gross unrealized losses of investment securities that were in a continuous loss position at June 30, 2012 and December 31, 2011, by length of time that individual securities in each category have been in a continuous loss position:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2012
Mortgage-backed securities	$	19,401	$	(84	)	$	38	$	—		$	19,439	$	(84	)
Private issue collateralized mortgage obligations		—		—			10,094		(1,614	)		10,094		(1,614	)
Total	$	19,401	$	(84	)	$	10,132	$	(1,614	)	$	29,533	$	(1,698	)
December 31, 2011
U.S. government sponsored enterprises	$	9,995	$	(5	)	$	—	$	—		$	9,995	$	(5	)
Mortgage-backed securities		38,025		(331	)		66		—			38,091		(331	)
Private issue collateralized mortgage obligations		—		—			10,641		(1,916	)		10,641		(1,916	)
Equity securities		—		—			4,146		(854	)		4,146		(854	)
Total	$	48,020	$	(336	)	$	14,853	$	(2,770	)	$	62,873	$	(3,106	)

At June 30, 2012, the Company held $29.5 million in investment securities with unrealized losses that are considered temporary. Included in the unrealized losses were $9.3 million in private issue collateralized mortgage obligations (“CMOs”) which have been downgraded to non-investment grade. The Company’s share of these downgraded CMOs is in the senior tranches. Management believes the unrealized losses for the CMOs are the result of current market illiquidity and the underestimation of value in the market. Including the CMOs, there were 18 securities with a fair value of $10.1 million in the investment portfolio which had unrealized losses for twelve months or longer. Management currently has the intent and ability to retain these investment securities with unrealized losses until the decline in value has been recovered. Stress tests are performed regularly on the higher risk bonds in the investment portfolio using current statistical data to determine expected cash flows and forecast potential losses. The results of the stress tests at June 30, 2012, indicated potential future credit losses were lower than previously recorded OTTI. The Company did not record any OTTI write-downs during the second quarter of 2012.

Security Gains and Losses

The following information details the Company’s sales of securities:

	Six Months Ended June 30,
Available for sale	2012			2011
Proceeds from sales of securities	$	31,364		$	7,842
Gross realized gains		1,104			93
Gross realized (losses)		(203	)		(73	)

During the first six months of 2012, the Company sold one agency security, six mortgage-backed securities, and 587,481 shares of Federal Home Loan Mortgage Corporation (“Freddie Mac”) preferred stock and voluntarily tendered one auction rate security (Duff & Phelps Select Income Fund Auction Preferred Stock) (“DNP”). The Company had recorded a $14.95 million OTTI write-down on auction pass-through certificates collateralized by the Freddie Mac preferred stock in 2008.

The Company voluntarily tendered its DNP auction rate security in response to an unexpected tender offer issued by DNP to buy back certain auction rate security pools at 96% of par. No OTTI was previously recorded as management believed the unrealized losses were due to the lack of liquidity in the market and were temporary in nature. Additionally, the Company was collecting all amounts due according to contractual terms and had the ability and intent to hold the securities until maturity or recovery.

Securities Pledged

At June 30, 2012 and 2011, securities with an amortized cost of $431.1 million and $515.8 million and a fair value of $448.8 million and $532.2 million, respectively, were pledged to secure Federal Home Loan Bank (“FHLB”) advances, public deposits, and securities sold under agreements to repurchase and for other purposes required or permitted by law.

Contractual Maturities

The amortized cost and estimated fair values of debt securities by contractual maturity at June 30, 2012 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available for sale	Amortized Cost		Fair Value
Due in one year or less	$	4,810	$	4,881
Due after one year through five years		16,982		17,477
Due after five years through ten years		141,396		146,321
Due after ten years		495,487		508,583
	$	658,675	$	677,262