SECURITIES

Securities available for sale at March 31, 2012 and December 31, 2011 are as follows:


	March 31, 2012									December 31, 2011
	Amortized		Unrealized					Fair		Amortized		Unrealized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. Treasury	$	8,050	$	47	$	—		$	8,097	$	8,064	$	66	$	—		$	8,130
U.S. Gov't sponsored entities		108,891		4,757		(3	)		113,645		102,258		5,249		(15	)		107,492
State & political subdivisions		150,768		7,981		(148	)		158,601		149,685		8,844		(92	)		158,437
Residential mortgage & asset backed		368,459		6,890		(667	)		374,682		292,297		8,043		(214	)		300,126
Commercial mortgage & asset backed		2,074		62		—			2,136		2,077		45		—			2,122
Corporate notes & bonds		16,360		30		(2,995	)		13,395		17,358		50		(3,548	)		13,860
Pooled trust preferred		800		—		(460	)		340		800		—		(460	)		340
Pooled SBA		47,882		1,328		(65	)		49,145		44,851		1,282		(77	)		46,056
Other securities		1,521		24		—			1,545		1,521		23		—			1,544


Total	$	704,805	$	21,119	$	(4,338	)	$	721,586	$	618,911	$	23,602	$	(4,406	)	$	638,107

At March 31, 2012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.

Trading securities accounted for under the fair value option at March 31, 2012 and December 31, 2011 are as follows:


	March 31, 2012		December 31, 2011

Corporate equity securities	$	1,900	$	1,959
Certificates of deposit		357		255
International mutual funds		288		257
Large cap growth mutual funds		174		145
Large cap value mutual funds		108		105
Corporate notes and bonds		101		100
Money market mutual funds		84		241
Real estate investment trust mutual funds		66		68
U.S. Government sponsored entities		55		55
Small cap mutual funds		27		25
Mid cap mutual funds		27		23


Total	$	3,187	$	3,233

Securities with unrealized losses at March 31, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows (in thousands):

		$122,700		$122,700			$122,700		$122,700			$122,700		$122,700
March 31, 2012	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss

U.S. Treasury	$	—	$	—		$	—	$	—		$	—	$	—
U.S. Gov't sponsored entities		10,545		(3	)		—		—			10,545		(3	)
State & political subdivisions		5,566		(147	)		498		(1	)		6,064		(148	)
Residential mortgage & asset backed		91,279		(626	)		10,692		(41	)		101,971		(667	)
Commercial mortgage & asset backed		—		—			—		—			—		—
Corporate notes & bonds		1,948		(52	)		9,408		(2,943	)		11,356		(2,995	)
Pooled trust preferred		—		—			340		(460	)		340		(460	)
Pooled SBA		13,362		(65	)		—		—			13,362		(65	)
Other securities		—		—			—		—			—		—

	$	122,700	$	(893	)	$	20,938	$	(3,445	)	$	143,638	$	(4,338	)

		$122,700		$122,700			$122,700		$122,700			$122,700		$122,700
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2011

U.S. Treasury	$	—	$	—		$	—	$	—		$	—	$	—
U.S. Gov't sponsored entities		7,671		(15	)		—		—			7,671		(15	)
State & political subdivisions		5,314		(92	)		—		—			5,314		(92	)
Residential mortgage & asset backed		36,626		(162	)		9,485		(52	)		46,111		(214	)
Commercial mortgage & asset backed		—		—			—		—			—		—
Corporate notes & bonds		2,860		(139	)		8,841		(3,409	)		11,701		(3,548	)
Pooled trust preferred		—		—			340		(460	)		340		(460	)
Pooled SBA		8,139		(77	)		—		—			8,139		(77	)
Other securities		—		—			—		—			—		—

	$	60,610	$	(485	)	$	18,666	$	(3,921	)	$	79,276	$	(4,406	)

The Corporation evaluates securities for other-than-temporary impairment on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation.

At March 31, 2012, management evaluated the structured pooled trust preferred securities for other-than-temporary impairment by estimating the cash flows expected to be received from each security within the collateral pool, taking into account future estimated levels of deferrals and defaults by the underlying issuers, and discounting those cash flows at the appropriate accounting yield. Management also assumed that all issuers in deferral will default prior to their next payment date. Trust preferred collateral is deeply subordinated within issuers' capital structures, so large recoveries are unlikely. Accordingly, management assumed 10% recoveries on bank collateral and none on collateral issued by other companies. Due to the ongoing difficulties in the U.S. economy, management also added a baseline default rate of 2% annually for the next two years to default projections for specific issuers. This percentage represents the peak, post-war bank default rate that occurred at the height of the savings and loan crisis, which we believe is an accurate proxy for the current environment. Management expects that credit markets have begun to normalize and that banks with the financial strength to survive will default at a .36% average annual rate, which represents Moody's idealized default probability for BBB corporate credits, and is in line with historical bank failure rates. In addition, management expects prepayments to occur at a rate of approximately 5% over a five year period, with the exception of certain large institutions that are expected to call their collateral in 2012 as a result of the elimination of the Tier I capital treatment of trust preferred securities for institutions with greater than $15 billion in assets beginning in 2013.

Using this methodology, five of the Corporation's structured pooled trust preferred securities are deemed to be other-than-temporarily impaired as disclosed in the table that follows. The Corporation separated the other-than-temporary impairment related to these structured pooled trust preferred securities into (a) the amount of the total impairment related to credit loss, which is recognized in the income statement, and (b) the amount of the total impairment related to all other factors, which is recognized in other comprehensive income. The Corporation measured the credit loss component of other-than-temporary impairment based on the difference between the cost basis and the present value of cash flows expected to be collected.

The following table provides detailed information related to the Corporation's structured pooled trust preferred securities as of March 31, 2012 and for the three months ended March 31, 2012 and 2011:


	Adjusted Amortized Cost		Unrealized Gain (Loss)			Fair Value		Credit Losses Realized in Earnings Three Months Ended March 31, 2012		Credit Losses Realized in Earnings Three Months Ended March 31, 2011

ALESCO Preferred Funding V, Ltd.	$	800	$	(460	)	$	340	$	—	$	—
ALESCO Preferred Funding XII, Ltd.		—		—			—		—		280
ALESCO Preferred Funding XVII, Ltd.		—		—			—		—		—
Preferred Term Securities XVI, Ltd.		—		—			—		—		118
US Capital Funding VI, Ltd.		—		—			—		—		—


Total	$	800	$	(460	)	$	340	$	—	$	398

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three months ended March 31, 2012 is as follows:


Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	4,054
Additional credit loss for which other-than-temporary impairment was not previously recognized		—
Additional credit loss for which other-than-temporary impairment was previously recognized		—


Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

A roll-forward of the other-than-temporary impairment amount related to credit losses for the three months ended March 31, 2011 is as follows:


Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, beginning of period	$	3,656
Additional credit loss for which other-than-temporary impairment was not previously recognized		—
Additional credit loss for which other-than-temporary impairment was previously recognized		398


Balance of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income, end of period	$	4,054

At March 31, 2012, the Corporation held five structured pooled trust preferred securities, primarily from issuers in the financial services industry, which are not currently trading in an active, open market with readily observable prices. As a result, these securities were classified within Level 3 of the valuation hierarchy. The fair values of these securities have been calculated using a discounted cash flow model and market liquidity premium. With the current market conditions, the assumptions used to determine the fair value of Level 3 securities have greater subjectivity due to the lack of observable market transactions. The fair values of these securities have declined due to the fact that subsequent offerings of similar securities pay a higher market rate of return. This higher rate of return reflects the increased credit and liquidity risks in the marketplace. Except as described above, based on management's evaluation of the structured pooled trust preferred securities, the present value of the projected cash flows is sufficient for full repayment of the amortized cost of the securities and, therefore, it is believed that the decline in fair value is temporary due to current market conditions. However, without recovery of these securities, other-than-temporary impairments may occur in future periods.

For the securities that comprise corporate notes and bonds and the securities that are issued by state and political subdivisions, management monitors publicly available financial information, such as filings with the Securities and Exchange Commission, in order to evaluate the securities for other-than-temporary impairment. For financial institution issuers, management also monitors information from quarterly "call" report filings that are used to generate Uniform Bank Performance Reports. When reviewing this information, management considers the financial condition and near-term prospects of the issuer and whether downgrades by bond rating agencies have occurred. Management also considers the length of time and extent to which fair value has been less than cost and the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

As of March 31, 2012 and December 31, 2011, management concluded that the securities described in the previous paragraph were not other-than-temporarily impaired for the following reasons:

•

There is no indication of any significant deterioration of the creditworthiness of the institutions that issued the securities.

•

The unrealized losses are predominantly attributable to liquidity disruptions within the credit markets and the generally stressed condition of the financial services industry.

•

All contractual interest payments on the securities have been received as scheduled, and no information has come to management's attention through the processes previously described which would lead to a conclusion that future contractual payments will not be received timely.

The Corporation does not intend to sell and it is not more likely than not that it will be required to sell the securities in an unrealized loss position before recovery of its amortized cost basis.

Information pertaining to security sales is as follows:


	Proceeds		Gross Gains		Gross Losses
Three months ended March 31, 2012	$	42,149	$	636	$	(70	)
Three months ended March 31, 2011		23,610		146		(72	)

The following is a schedule of the contractual maturity of securities available for sale, excluding equity securities, at March 31, 2012:


	March 31, 2012
	Amortized Cost		Fair Value

1 year or less	$	18,990	$	19,132
1 year – 5 years		81,542		83,710
5 years – 10 years		130,144		137,725
After 10 years		102,075		102,656


		332,751		343,223
Residential mortgage & asset backed securities		368,459		374,682
Commercial mortgage & asset backed securities		2,074		2,136


Total debt securities	$	703,284	$	720,041

Mortgage and asset backed securities are not due at a single date; periodic payments are received based on the payment patterns of the underlying collateral.

On March 31, 2012 and December 31, 2011, securities carried at $237,081 and $264,166, respectively, were pledged to secure public deposits and for other purposes as provided by law.