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Investment Securities | 9 Months Ended
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Sep. 30, 2011
Investment Securities [Abstract] |
INVESTMENT SECURITIES | NOTE 4 — INVESTMENT SECURITIES The following is a summary of investment securities held to maturity:
|  | Amortized Cost |  |  | Gross Unrealized Gain |  |  | Gross Unrealized Loss |  |  | Estimated Fair Value |
|  | (In Thousands) |
September 30, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal Bonds |  | $ | 41,397 |  |  | $ | 100 |  |  | $ | 178 |  |  | $ | 41,319 |
U.S. Government Agency Securities |  |  | 7,994 |  |  |  | — |  |  |  | — |  |  |  | 7,994 |
Mortgage-Backed Securities (1) |  |  | 3,247 |  |  |  | 2 |  |  |  | 2 |  |  |  | 3,247 |
|  | $ | 52,638 |  |  | $ | 102 |  |  | $ | 180 |  |  | $ | 52,560 |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal Bonds |  | $ | 696 |  |  | $ | — |  |  | $ | — |  |  | $ | 696 |
Mortgage-Backed Securities (1) |  |  | 149 |  |  |  | 2 |  |  |  | — |  |  |  | 151 |
|  | $ | 845 |  |  | $ | 2 |  |  | $ | — |  |  | $ | 847 |
(1) | Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities.
The following is a summary of investment securities available for sale:
|  | Amortized Cost |  |  | Gross Unrealized Gain |  |  | Gross Unrealized Loss |  |  | Estimated Fair Value |
|  | (In Thousands) |
September 30, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized Mortgage Obligations ( 1) |  | $ | 141,305 |  |  | $ | 1,967 |  |  | $ | 226 |  |  | $ | 143,046 |
U.S. Government Agency Securities |  |  | 93,362 |  |  |  | 236 |  |  |  | 1 |  |  |  | 93,597 |
Mortgage-Backed Securities (1) |  |  | 90,193 |  |  |  | 2,662 |  |  |  | — |  |  |  | 92,855 |
Municipal Bonds |  |  | 9,293 |  |  |  | 293 |  |  |  | — |  |  |  | 9,586 |
Corporate Bonds |  |  | 20,457 |  |  |  | — |  |  |  | 496 |  |  |  | 19,961 |
Other Securities |  |  | 3,305 |  |  |  | 69 |  |  |  | 37 |  |  |  | 3,337 |
Equity Securities ( 3) |  |  | 647 |  |  |  | 64 |  |  |  | 33 |  |  |  | 678 |
|  | $ | 358,562 |  |  | $ | 5,291 |  |  | $ | 793 |  |  | $ | 363,060 |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized Mortgage Obligations ( 1) |  | $ | 139,053 |  |  | $ | 470 |  |  | $ | 2,330 |  |  | $ | 137,193 |
U.S. Government Agency Securities |  |  | 114,066 |  |  |  | 98 |  |  |  | 830 |  |  |  | 113,334 |
Mortgage-Backed Securities (1) |  |  | 108,436 |  |  |  | 2,137 |  |  |  | 731 |  |  |  | 109,842 |
Municipal Bonds |  |  | 22,420 |  |  |  | 48 |  |  |  | 1,440 |  |  |  | 21,028 |
Corporate Bonds |  |  | 20,449 |  |  |  | 13 |  |  |  | 257 |  |  |  | 20,205 |
Asset-Backed Securities (2) |  |  | 7,115 |  |  |  | 269 |  |  |  | — |  |  |  | 7,384 |
Other Securities |  |  | 3,305 |  |  |  | — |  |  |  | 46 |  |  |  | 3,259 |
Equity Securities ( 3) |  |  | 647 |  |  |  | 226 |  |  |  | — |  |  |  | 873 |
|  | $ | 415,491 |  |  | $ | 3,261 |  |  | $ | 5,634 |  |  | $ | 413,118 |
(1) | Collateralized by residential mortgages and guaranteed by U.S. government sponsored entities.
(2 ) | Collateralized debentures of small business investment companies and state and local development companies, and guaranteed by SBA.
(3) | Balances presented for amortized cost, representing two equity securities, were net of an OTTI charge of $790,000, which was related to a credit loss, as of December 31, 2010. We recorded an OTTI charge of $790,000 to write down the value of one equity investment to its fair value during the year ended December 31, 2010.
The amortized cost and estimated fair value of investment securities at September 30, 2011, by contractual maturity, are shown below. Although collateralized mortgage obligations, mortgage-backed securities and asset-backed securities have contractual maturities through 2041, expected maturities may 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 |  |  | Held to Maturity |
|  | Amortized Cost |  |  | Estimated Fair Value |  |  | Amortized Cost |  |  | Estimated Fair Value |
|  | (In Thousands) |
Within One Year |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Over One Year Through Five Years |  |  | 93,487 |  |  |  | 93,164 |  |  |  | 697 |  |  |  | 697 |
Over Five Years Through Ten Years |  |  | 29,764 |  |  |  | 30,077 |  |  |  | 19,542 |  |  |  | 19,538 |
Over Ten Years |  |  | 3,166 |  |  |  | 3,240 |  |  |  | 29,152 |  |  |  | 29,078 |
Collateralized Mortgage Obligations |  |  | 141,305 |  |  |  | 143,046 |  |  |  | — |  |  |  | — |
Mortgage-Backed Securities |  |  | 90,193 |  |  |  | 92,855 |  |  |  | 3,247 |  |  |  | 3,247 |
Equity Securities |  |  | 647 |  |  |  | 678 |  |  |  | — |  |  |  | — |
|  | $ | 358,562 |  |  | $ | 363,060 |  |  | $ | 52,638 |  |  | $ | 52,560 |
In accordance with FASB ASC 320, “Investments – Debt and Equity Securities,” amended current other-than-temporary impairment (“OTTI”) guidance, we periodically evaluate our investments for OTTI. For the three and nine months ended September 30, 2011, there were no OTTI charges recorded in earnings. For the three and nine months ended September 30, 2010, we recorded $790,000 in OTTI charges in earnings on available for sale securities. As of September 30, 2010, we had investment securities in mutual funds (“Special Series A Shares”) with an aggregate carrying value of $925,000. During the first quarter of 2010, the issuer of such securities completed a comprehensive restructuring which resulted in the exchange of our Special Series A shares into common shares of the issuer. Based on the closing price of the shares at September 30, 2010, we recorded an OTTI charge of $790,000 to write down the value of the investment securities to their fair value. We perform periodic reviews for impairment in accordance with FASB ASC 320. Gross unrealized losses on investment securities available for sale, the estimated fair value of the related securities and the number of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows as of September 30, 2011 and December 31, 2010:
|  | Holding Period |
|  | Less than 12 Months |  |  | 12 Months or More |  |  | Total |
Investment Securities Available for Sale |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Number of Securities |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Number of Securities |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Number of Securities |
|  | (In Thousands) |
September 30, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-Backed Securities |  | $ | — |  |  | $ | — |  |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | — |
Collateralized Mortgage Obligations |  |  | 226 |  |  |  | 22,965 |  |  |  | 9 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 226 |  |  |  | 22,965 |  |  |  | 9 |
Municipal Bonds |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
U.S. Government Agency Securities |  |  | 1 |  |  |  | 3,001 |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 3,001 |  |  |  | 1 |
Equity Securities |  |  | 33 |  |  |  | 103 |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 33 |  |  |  | 103 |  |  |  | 1 |
Other Securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 37 |  |  |  | 962 |  |  |  | 1 |  |  |  | 37 |  |  |  | 962 |  |  |  | 1 |
Corporate Bonds |  |  | 31 |  |  |  | 4,454 |  |  |  | 2 |  |  |  | 465 |  |  |  | 15,507 |  |  |  | 4 |  |  |  | 496 |  |  |  | 19,961 |  |  |  | 6 |
|  | $ | 291 |  |  | $ | 30,523 |  |  |  | 13 |  |  | $ | 502 |  |  | $ | 16,469 |  |  |  | 5 |  |  | $ | 793 |  |  | $ | 46,992 |  |  |  | 18 |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-Backed Securities |  | $ | 731 |  |  | $ | 62,738 |  |  |  | 16 |  |  | $ | — |  |  | $ | — |  |  |  | — |  |  | $ | 731 |  |  | $ | 62,738 |  |  |  | 16 |
Collateralized Mortgage Obligations |  |  | 2,330 |  |  |  | 99,993 |  |  |  | 20 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,330 |  |  |  | 99,993 |  |  |  | 20 |
Municipal Bonds |  |  | 1,440 |  |  |  | 16,907 |  |  |  | 11 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,440 |  |  |  | 16,907 |  |  |  | 11 |
U.S. Government Agency Securities |  |  | 830 |  |  |  | 69,266 |  |  |  | 14 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 830 |  |  |  | 69,266 |  |  |  | 14 |
Other Securities |  |  | 3 |  |  |  | 1,997 |  |  |  | 2 |  |  |  | 43 |  |  |  | 957 |  |  |  | 1 |  |  |  | 46 |  |  |  | 2,954 |  |  |  | 3 |
Corporate Bonds |  |  | 257 |  |  |  | 17,210 |  |  |  | 5 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 257 |  |  |  | 17,210 |  |  |  | 5 |
|  | $ | 5,591 |  |  | $ | 268,111 |  |  |  | 68 |  |  | $ | 43 |  |  | $ | 957 |  |  |  | 1 |  |  | $ | 5,634 |  |  | $ | 269,068 |  |  |  | 69 |
The impairment losses described previously are not included in the table above as the impairment losses were recorded. All individual securities that have been in a continuous unrealized loss position for 12 months or longer as of September 30, 2011 and December 31, 2010 had investment grade ratings upon purchase. The issuers of these securities have not established any cause for default on these securities and the various rating agencies have reaffirmed these securities’ long-term investment grade status as of September 30, 2011. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. FASB ASC 320 requires other-than-temporarily impaired investment securities to be written down when fair value is below amortized cost in circumstances where: (1) an entity has the intent to sell a security; (2) it is more likely than not that an entity will be required to sell the security before recovery of its amortized cost basis; or (3) an entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income. We do not intend to sell these securities and it is not more likely than not that we will be required to sell the investments before the recovery of its amortized cost bases. Therefore, in management’s opinion, all securities that have been in a continuous unrealized loss position for the past 12 months or longer as of September 30, 2011 and December 31, 2010 are not other-than-temporarily impaired, and therefore, no impairment charges as of September 30, 2011 and December 31, 2010 are warranted. Realized gains and losses on sales of investment securities, proceeds from sales of investment securities and the tax expense on sales of investment securities were as follows for the periods indicated:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
|  | (In Thousands) |
Gross Realized Gains on Sales of Investment Securities |  | $ | 1,704 |  |  | $ | 4 |  |  | $ | 2,673 |  |  | $ | 222 |
Gross Realized Losses on Sales of Investment Securities |  |  | — |  |  |  | — |  |  |  | (1,039 | ) |  |  | (105 | )
Net Realized Gains on Sales of Investment Securities |  | $ | 1,704 |  |  | $ | 4 |  |  | $ | 1,634 |  |  | $ | 117 |
Proceeds from Sales of Investment Securities |  | $ | 38,691 |  |  | $ | 15,000 |  |  | $ | 152,468 |  |  | $ | 18,825 |
Tax Expense on Sales of Investment Securities |  | $ | 716 |  |  | $ | 2 |  |  | $ | 687 |  |  | $ | 50 |
For the three months ended September 30, 2011, $584,000 ($339,000, net of income taxes) of net unrealized gains arose during the period and was included in comprehensive income, and we recognized an $1.7 million gain in earnings resulting from the sale of investment securities that had previously recorded net unrealized gains of $1.6 million in comprehensive income. For the three months ended September 30, 2010, $865,000 ($501,000, net of income taxes) of net unrealized losses arose during the period and was included in comprehensive income, and we recognized a $4,000 gain in earnings resulting from the sale of investment securities that had previously recorded net unrealized gains of $88,000 ($51,000, net of income taxes) in comprehensive income. For the nine months ended September 30, 2011, $6.9 million ($4.0 million, net of income taxes) of net unrealized gains arose during the period and was included in comprehensive income, and we recognized an $1.6 million gain in earnings resulting from the sale of investment securities that had previously recorded net unrealized losses of $249,000 ($105,000, net of income tax) in comprehensive income. For the nine months ended September 30, 2010, $2.1 million ($1.2 million, net of income taxes) of net unrealized gains arose during the period and was included in comprehensive income, and we recognized an $117,000 gain in earnings resulting from the sale of investment securities that had previously recorded net unrealized gains of $199,000 ($115,000, net of income taxes) in comprehensive income. Investment securities available for sale with carrying values of $48.5 million and $118.0 million as of September 30, 2011 and December 31, 2010, respectively, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.

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