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Investment Securities

9 Months Ended

Sep. 30, 2011

Investment Securities [Abstract]

Investment Securities

Note 3. Investment Securities

As of September 30, 2011, and December 31, 2010, the amortized cost and estimated fair value of available-for-sale securities were as follows:


		September 30, 2011
(In Thousands)		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value				OTTI in AOCI*
States and political subdivisions		$	124,582			$	5,438			$	(1	)		$	130,019			$	—
Single issue trust preferred securities			55,631				—				(15,590	)			40,041				—
Corporate FDIC insured			13,758				17				—				13,775				—
Mortgage-backed securities:
Agency			248,480				6,051				(111	)			254,420				—
Non-Agency Alt-A residential			17,728				—				(7,130	)			10,598				(7,130	)

Total mortgage-backed securities			266,208				6,051				(7,241	)			265,018				(7,130	)
Equity securities			434				216				(116	)			534				—

Total		$	460,613			$	11,722			$	(22,948	)		$	449,387			$	(7,130	)


		December 31, 2010
(In Thousands)		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value				OTTI in AOCI*
U.S. Government agency securities		$	10,000			$	—			$	(168	)		$	9,832			$	—
States and political subdivisions			178,149				2,649				(4,660	)			176,138				—
Trust preferred securities:
Single issue			55,594				—				(14,350	)			41,244				—
Pooled			23				241				—				264				—

Total trust preferred securities			55,617				241				(14,350	)			41,508				—
Corporate FDIC insured			25,282				378				—				25,660				—
Mortgage-backed securities:
Agency			209,281				7,039				(1,307	)			215,013				—
Non-Agency Alt-A residential			19,181				—				(7,904	)			11,277				(7,904	)

Total mortgage-backed securities			228,462				7,039				(9,211	)			226,290				(7,904	)
Equity securities			495				206				(65	)			636				—

Total		$	498,005			$	10,513			$	(28,454	)		$	480,064			$	(7,904	)

*	Other-than-temporary impairment in accumulated other comprehensive income.

As of September 30, 2011, and December 31, 2010, the amortized cost and estimated fair value of held-to-maturity securities were as follows:


		September 30, 2011
(In Thousands)		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
States and political subdivisions		$	3,342			$	42			$	—			$	3,384

Total		$	3,342			$	42			$	—			$	3,384


		December 31, 2010
(In Thousands)		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
States and political subdivisions		$	4,637			$	67			$	—			$	4,704

Total		$	4,637			$	67			$	—			$	4,704

The amortized cost and estimated fair value of available-for-sale securities by contractual maturity at September 30, 2011, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


(In Thousands)		Amortized Cost				Fair Value
Due within one year		$	450			$	452
Due after one year but within five years			27,527				28,044
Due after five years but within ten years			21,740				22,833
Due after ten years			144,254				132,506

			193,971				183,835
Mortgage-backed securities			266,208				265,018
Equity securities			434				534

Total		$	460,613			$	449,387

The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity at September 30, 2011, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


(In Thousands)		Amortized Cost				Fair Value
Due within one year		$	901			$	913
Due after one year but within five years			2,441				2,471
Due after five years but within ten years			—				—
Due after ten years			—				—

Total		$	3,342			$	3,384

The carrying value of securities pledged to secure public deposits as required by law and for other purposes was $292.32 million and $302.67 million at September 30, 2011, and December 31, 2010, respectively.

The following table presents the Company’s gross gains and gross losses from the sale of securities for the three- and nine-month periods ended September 30, 2011 and 2010.


		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(In Thousands)		2011				2010				2011				2010
Gross gains		$	209			$	3,032			$	6,889			$	4,517
Gross losses			(31	)			(458	)			(1,651	)			(492	)

Net gains on sales of securities		$	178			$	2,574			$	5,238			$	4,025

The following tables reflect those investments, both available-for-sale and held-to-maturity, in a continuous unrealized loss position for less than 12 months and for 12 months or longer at September 30, 2011, and December 31, 2010.


		September 30, 2011
		Less than 12 Months								12 Months or longer								Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
States and political subdivisions		$	—			$	—			$	183			$	(1	)		$	183			$	(1	)
Single issue trust preferred securities			—				—				40,041				(15,590	)			40,041				(15,590	)
Mortgage-backed securities:
Agency			31,566				(111	)			17				—				31,583				(111	)
Alt-A residential			—				—				10,598				(7,130	)			10,598				(7,130	)

Total mortgage-backed securities			31,566				(111	)			10,615				(7,130	)			42,181				(7,241	)
Equity securities			—				—				171				(116	)			171				(116	)

Total		$	31,566			$	(111	)		$	51,010			$	(22,837	)		$	82,576			$	(22,948	)


		December 31, 2010
		Less than 12 Months								12 Months or longer								Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
U.S. Government agency securities		$	9,832			$	(168	)		$	—			$	—			$	9,832			$	(168	)
States and political subdivisions			80,420				(4,660	)			—				—				80,420				(4,660	)
Single issue trust preferred securities			—				—				41,244				(14,350	)			41,244				(14,350	)
Mortgage-backed securities:
Agency			71,613				(1,307	)			18				—				71,631				(1,307	)
Alt-A residential			—				—				11,277				(7,904	)			11,277				(7,904	)

Total mortgage-backed securities			71,613				(1,307	)			11,295				(7,904	)			82,908				(9,211	)
Equity securities			155				(55	)			93				(10	)			248				(65	)

Total		$	162,020			$	(6,190	)		$	52,632			$	(22,264	)		$	214,652			$	(28,454	)

At September 30, 2011, the combined depreciation in value of the 24 individual securities in an unrealized loss position was approximately 5.11% of the combined reported value of the aggregate securities portfolio. At December 31, 2010, the combined depreciation in value of the 214 individual securities in an unrealized loss position was approximately 5.93% of the combined reported value of the aggregate securities portfolio.

The Company reviews its investment portfolio on a quarterly basis for indications of other-than-temporary impairment (“OTTI”). The analysis differs depending upon the type of investment security being analyzed. For debt securities, the Company has determined that it does not intend to sell securities that are impaired and has asserted that it is not more likely than not that the Company will have to sell impaired securities before recovery of the impairment occurs. This determination is based upon the Company’s investment strategy for the particular type of debt security and its cash flow needs, liquidity position, capital adequacy and interest rate risk position.

For non-beneficial interest debt securities, the Company analyzes several qualitative factors such as the severity and duration of the impairment, adverse conditions within the issuing industry, prospects for the issuer, performance of the security, changes in rating by rating agencies and other qualitative factors to determine if the impairment will be recovered. Non-beneficial interest debt securities consist of U. S. government agency securities, states and political subdivisions, and single issue trust preferred securities. If it is determined that there is evidence that the impairment will not be recovered, the Company performs a present value calculation to determine the amount of credit related impairment and records any credit related OTTI through earnings and the non-credit related OTTI through other comprehensive income (“OCI”). During the three- and nine-month periods ended September 30, 2011, the Company incurred no OTTI charges related to non-beneficial interest debt securities. The temporary impairment on these securities is primarily related to changes in interest rates, certain disruptions in the credit markets, destabilization in the Eurozone, and other current economic factors.

For beneficial interest debt securities, the Company reviews cash flow analyses on each applicable security to determine if an adverse change in cash flows expected to be collected has occurred. Beneficial interest debt securities consist of pooled trust preferred securities, corporate FDIC insured, and mortgage-backed securities. An adverse change in cash flows expected to be collected has occurred if the present value of cash flows previously projected is greater than the present value of cash flows projected at the current reporting date and less than the current book value. If an adverse change in cash flows is deemed to have occurred, then an OTTI has occurred. The Company then compares the present value of cash flows using the current yield for the current reporting period to the reference amount, or current net book value, to determine the credit-related OTTI. The credit-related OTTI is then recorded through earnings and the non-credit related OTTI is accounted for in OCI.

During the three- and nine-month periods ended September 30, 2011, the Company incurred credit-related OTTI charges related to beneficial interest debt securities of $210 thousand and $737 thousand, respectively. These charges were related to a non-Agency mortgage-backed security (“MBS”). During the three-month period ended September 30, 2010, the Company incurred no credit-related OTTI charges related to beneficial interest debt securities. During the nine-month period ended September 30, 2010, the Company incurred credit-related OTTI charges on beneficial interest debt securities of $134 thousand. These charges were related to two pooled trust preferred security holdings and brought the carrying value of those securities to zero.

For the non-Agency, Alt-A residential MBS, the Company models cash flows using the following assumptions: voluntary constant prepayment speed of 5, a customized constant default rate scenario that assumes approximately 23% of the remaining underlying mortgages will default, and a loss severity of 60.

The table below provides a cumulative roll forward of credit losses recognized in earnings for debt securities for which a portion of an OTTI is recognized in OCI:


(In Thousands)		For the Three Months Ended September 30, 2011				For the Nine Months Ended September 30, 2011
Estimated credit losses, beginning balance (1)		$	4,778			$	4,251
Additions for credit losses on securities not previously OTTI			—				—
Additions for credit losses on securities previously OTTI			210				737
Reduction for increases in cash flows			—				—
Reduction for securities management no longer intends to hold to recovery			—				—
Reduction for realized losses			—				—

Estimated credit losses, ending balance		$	4,988			$	4,988

(1)	The beginning balance includes credit-related losses included in OTTI charges recognized on debt securities in prior periods.

For equity securities, the Company reviews for OTTI based upon the prospects of the underlying companies, analysts’ expectations, and certain other qualitative factors to determine if impairment is recoverable over a foreseeable period of time. During the three- and nine-month periods ended September 30, 2011, the Company did not recognize any OTTI charges on equity securities. For the three months ended September 30, 2010, the Company recognized no OTTI charges on its equity securities. For the nine months ended September 30, 2010, the Company recognized OTTI charges on certain of its equity securities of $51 thousand.

As a condition to membership in the Federal Home Loan Bank (“FHLB”) system, the Company is required to subscribe to a minimum level of stock in the FHLB of Atlanta (“FHLBA”). The Company believes this ownership position provides access to relatively inexpensive wholesale and overnight funding. The Company accounts for FHLBA and Federal Reserve Bank stock as a long-term investment in other assets. At September 30, 2011, and December 31, 2010, the Company owned approximately $11.14 million and $12.24 million, respectively, in FHLBA stock, which is classified as other assets. The Company’s policy is to review for impairment of such assets at the end of each reporting period. Based on the Company’s review of publicly available information about the FHLBA and its own internal analysis, the Company believes that its FHLBA stock was not impaired as of September 30, 2011.