Securities

9 Months Ended

Sep. 30, 2011

Securities [Abstract]

SECURITIES

NOTE 3 — SECURITIES

     The following table presents a summary of the amortized cost, gross unrealized holding gains and losses, other-than-temporary impairment recorded in other comprehensive income and fair value of securities available for sale and securities held to maturity for the periods below:

	September 30, 2011												December 31, 2010
			Gross		Unrealized			Other-Than-							Gross		Unrealized			Other-Than-
	Amortized		Unrealized		Losses			Temporary			Fair		Amortized		Unrealized		Losses			Temporary			Fair
	Cost		Gains		Other			Impairment			Value		Cost		Gains		Other			Impairment			Value
					(Dollars In Thousands)												(Dollars In Thousands)
Available for Sale Securities
U.S. Treasury Securities	$	—	$	—	$	—		$	—		$	—	$	715	$	2	$	—		$	—		$	717
Agency Mortgage-Backed Securities		226,216		16,853		(2	)		—			243,067		296,821		16,481		—			—			313,302
Agency Collateralized Mortgage Obligations		35,550		607		(2	)		—			36,155		45,426		779		(70	)		—			46,135
Private Mortgage-Backed Securities		6,892				—			(67	)		6,825		10,408		—		—			(154	)		10,254
Single Issuer Trust Preferred Securities Issued by Banks		5,000		—		(862	)		—			4,138		5,000		—		(779	)		—			4,221
Pooled Trust Preferred Securities Issued by Banks and Insurers		8,517		—		(2,433	)		(3,196	)		2,888		8,550		—		(2,309	)		(3,413	)		2,828
Total Available for Sale Securities	$	282,175	$	17,460	$	(3,299	)	$	(3,263	)	$	293,073	$	366,920	$	17,262	$	(3,158	)	$	(3,567	)	$	377,457
Held to Maturity Securities
U.S. Treasury Securities	$	1,014	$	96	$	—		$	—		$	1,110	$	—	$	—	$	—		$	—		$	—
Agency Mortgage-Backed Securities		122,264		4,809		—			—			127,073		95,697		1,348		(1,778	)		—			95,267
Agency Collateralized Mortgage Obligations		81,191		3,333		—			—			84,524		89,823		600		(1,691	)		—			88,732
State, County, and Municipal Securities		4,450		50		—			—			4,500		10,562		167		—			—			10,729
Single Issuer Trust Preferred Securities Issued by Banks		6,623		21		(171	)		—			6,473		6,650		19		(163	)		—			6,506
Corporate Debt Securities		5,010		65		—			—			5,075		—		—		—			—			—
Total Held to Maturity Securities	$	220,552	$	8,374	$	(171	)	$	—		$	228,755	$	202,732	$	2,134	$	(3,632	)	$	—		$	201,234
TOTAL	$	502,727	$	25,834	$	(3,470	)	$	(3,263	)	$	521,828	$	569,652	$	19,396	$	(6,790	)	$	(3,567	)	$	578,691

     When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The following table shows the gross gains and losses on available for sale securities for the periods indicated:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2011		2010			2011		2010
	(Dollars in Thousands)					(Dollars in Thousands)
Gross Gains on Available for Sale Securities	$	—	$	—		$	723	$	480
Gross Losses on Available for Sale Securities		—		(22	)		—		(22	)
NET GAINS (LOSSES) ON AVAILABLE FOR SALE SECURITIES	$	—	$	(22	)	$	723	$	458

     The actual maturities of certain securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of securities available for sale and securities held to maturity is presented below:

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in Thousands)				(Dollars in Thousands)
Due in One Year or Less	$	—	$	—	$	720	$	724
Due from One Year to Five Years		2,995		3,151		8,095		8,204
Due from Five to Ten Years		64,263		68,414		3,051		3,268
Due after Ten Years		214,917		221,508		208,686		216,559
TOTAL	$	282,175	$	293,073	$	220,552	$	228,755

     Inclusive in the table above is $13.2 million and $24.3 million, respectively, of callable securities in the Company’s investment portfolio at September 30, 2011 and December 31, 2010.

     At September 30, 2011 and December 31, 2010 investment securities carried at $352.5 million and $350.3 million, respectively, were pledged to secure public deposits, assets sold under repurchase agreements, treasury tax and loan notes, letters of credit, and for other purposes.

     At September 30, 2011 and December 31, 2010, the Company had no investments in obligations of individual states, counties, or municipalities, which exceeded 10% of stockholders’ equity.

Other-Than-Temporary Impairment

     The Company continually reviews investment securities for the existence of other-than-temporary impairment (“OTTI”), taking into consideration current market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, the credit worthiness of the obligor of the security, volatility of earnings, current analysts’ evaluations, the Company’s intent to sell the security or whether it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery, as well as other qualitative factors. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment.

     The following tables show the gross unrealized losses and fair value of the Company’s investments in an unrealized loss position, which the Company has not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	September 30, 2011
			Less than 12 months					12 months or longer					Total
			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	# of holdings		Value		Losses			Value		Losses			Value		Losses
								(Dollars In Thousands)
Agency Mortgage-Backed Securities		1	$	135	$	(2	)	$	—	$	—		$	135	$	(2	)
Agency Collateralized Mortgage Obligations		1		228		(2	)		—		—			228		(2	)
Single Issuer Trust Preferred Securities Issued by Banks and Insurers		2		4,922		(171	)		4,138		(862	)		9,060		(1,033	)
Pooled Trust Preferred Securities Issued by Banks and Insurers		2		—		—			2,214		(2,433	)		2,214		(2,433	)
TOTAL TEMPORARILY IMPAIRED SECURITIES		6	$	5,285	$	(175	)	$	6,352	$	(3,295	)	$	11,637	$	(3,470	)

	December 31, 2010
			Less than 12 months					12 months or longer					Total
			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	# of holdings		Value		Losses			Value		Losses			Value		Losses
								(Dollars In Thousands)
Agency Mortgage-Backed Securities		4	$	48,956	$	(1,778	)	$	—	$	—		$	48,956	$	(1,778	)
Agency Collateralized Mortgage Obligations		6		72,631		(1,761	)		—		—			72,631		(1,761	)
Single Issuer Trust Preferred Securities Issued by Banks and Insurers		2		4,950		(163	)		4,221		(779	)		9,171		(942	)
Pooled Trust Preferred Securities Issued by Banks and Insurers		2		—		—			2,364		(2,309	)		2,364		(2,309	)
TOTAL TEMPORARILY IMPAIRED SECURITIES		14	$	126,537	$	(3,702	)	$	6,585	$	(3,088	)	$	133,122	$	(6,790	)

     The Company does not intend to sell these investments and has determined based upon available evidence that it is more likely than not that the Company will not be required to sell the security before the recovery of its amortized cost basis. As a result, the Company does not consider these investments to be OTTI. The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.

     As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category are as follows at September 30, 2011:

• Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations: This portfolio has contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. Government or one of its agencies.

• Single Issuer Trust Preferred Securities: This portfolio consists of two securities, both of which are below investment grade. The unrealized loss on these securities is attributable to the illiquid nature of the trust preferred market in the current economic environment. Management evaluates various financial metrics for each of the issuers, including capitalization rates.

• Pooled Trust Preferred Securities: This portfolio consists of two below investment grade securities of which one is performing while the other is deferring payments as contractually allowed. The unrealized loss on these securities is attributable to the illiquid nature of the trust preferred market and the significant risk premiums required in the current economic environment.

Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.

     Management monitors the following issuances closely for impairment due to the history of OTTI losses recorded within these classes of securities. Management has determined that the securities possess characteristics which in the current economic environment could lead to further OTTI charges. The following tables summarize pertinent information as of September 30, 2011, that was considered by management in determining if OTTI existed:

																Total Cumulative
								Non-Credit					Total Cumulative			Other-Than-
								Related Other-					Credit Related			Temporary
			Amortized		Gross Unrealized			Than-Temporary			Fair		Other-Than-			impairment
	Class		Cost (1)		Gain/(Loss)			Impairment			Value		Temporary Impairment			to date
								(Dollars in Thousands)
Pooled Trust Preferred Securities
Pooled Trust Preferred Security A		C1	$	1,283	$	—		$	(1,179	)	$	104	$	(3,676	)	$	(4,855	)
Pooled Trust Preferred Security B		D		—		—			—			—		(3,481	)		(3,481	)
Pooled Trust Preferred Security C		C1		506		—			(435	)		71		(482	)		(917	)
Pooled Trust Preferred Security D		D		—		—			—			—		(990	)		(990	)
Pooled Trust Preferred Security E		C1		2,081		—			(1,582	)		499		(1,368	)		(2,950	)
Pooled Trust Preferred Security F		B		1,891		(1,310	)		—			581		—			—
Pooled Trust Preferred Security G		A1		2,756		(1,123	)		—			1,633		—			—
TOTAL POOLED TRUST PREFERRED SECURITIES			$	8,517	$	(2,433	)	$	(3,196	)	$	2,888	$	(9,997	)	$	(13,193	)
Private Mortgage-Backed Securities
Private Mortgage-Backed Securities — One		2A1	$	3,285	$	—		$	(104	)	$	3,181	$	(650	)	$	(754	)
Private Mortgage-Backed Securities — Two		A19		3,607		—			37			3,644		(85	)		(48	)
TOTAL PRIVATE MORTGAGE-BACKED SECURITIES			$	6,892	$	—		$	(67	)	$	6,825	$	(735	)	$	(802	)
TOTAL			$	15,409	$	(2,433	)	$	(3,263	)	$	9,713	$	(10,732	)	$	(13,995	)

(1) The amortized cost reflects previously recorded OTTI charges recognized in earnings for the applicable securities.

											Excess Subordination
			Number of		Current			Total Projected			(After Taking into
			Performing		Deferrals/			Defaults/			Account Best
			Banks and Insurance		Defaults/Losses			Losses (as a			Estimate of Future
			Cos. in Issuances		(As a % of Original			% of Performing			Deferrals/			Lowest credit
	Class		(Unique)		Collateral)			Collateral)			Defaults/Losses) (1)			Ratings to date (2)
Pooled Trust Preferred Securities
Trust Preferred Security A		C1		57		36.96	%		22.19	%		0.00	%	C (Fitch & Moody’s)
Trust Preferred Security B		D		57		36.96	%		22.19	%		0.00	%	C (Fitch & Moody’s)
Trust Preferred Security C		C1		50		34.09	%		21.13	%		0.00	%	C (Fitch & Moody’s)
Trust Preferred Security D		D		50		34.09	%		21.13	%		0.00	%	C (Fitch & Moody’s)
Trust Preferred Security E		C1		50		28.26	%		17.57	%		0.00	%	C (Fitch & Moody’s)
Trust Preferred Security F		B		33		28.14	%		23.52	%		24.56	%	CC (Fitch)
Trust Preferred Security G		A1		33		28.14	%		23.52	%		48.68	%	CCC+ (S&P)
Private Mortgage-Backed Securities
Private Mortgage-Backed Securities — One		2A1		N/A		4.14	%		12.63	%		0.00	%	C (Fitch)
Private Mortgage-Backed Securities — Two		A19		N/A		2.39	%		6.12	%		0.00	%	B3 (Moody’s)

(1)	Excess subordination represents the additional default/losses in excess of both current and projected defaults/losses that the security can absorb before the security experiences any credit impairment.
(2)	The Company reviewed credit ratings provided by S&P, Moody’s and Fitch in its evaluation of issuers.

     Per review of the factors outlined above, seven of the securities shown in the table above were deemed to be OTTI. The remaining securities were not deemed to be OTTI as the Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell the securities before the recovery of their amortized cost basis.

     During 2011 and 2010, the Company recorded OTTI credit losses on certain securities. The following table shows the total OTTI that the Company recorded for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(Dollars in Thousands)						(Dollars in Thousands)
Total OTTI Gains (Losses)	$	(318	)	$	207		$	101		$	325
Less: Non-credit Related OTTI Gains (Losses) Recognized in OCI		(290	)		214			305			594
CREDIT RELATED OTTI LOSSES	$	(28	)	$	(7	)	$	(204	)	$	(269	)

     The following table shows the cumulative credit related component of OTTI for the periods indicated:

	Credit Related Component of Other-Than-Temporary Impairment
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(Dollars in Thousands)						(Dollars in Thousands)
Balance at Beginning of Period	$	(10,704	)	$	(10,456	)	$	(10,528	)	$	(10,194	)
Add:
Incurred on Securities not Previously Impaired		—			(7	)		—			(41	)
Incurred on Securities Previously Impaired		(28	)		—			(204	)		(228	)
Less:
Realized Gain/Loss on Sale of Securities		—			—			—			—
Reclassification Due to Changes in Company’s Intent		—			—			—			—
Increases in Cash Flow Expected to be Collected		—			—			—			—
BALANCE AT END OF PERIOD	$	(10,732	)	$	(10,463	)	$	(10,732	)	$	(10,463	)