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Investment Securities
 12 Months Ended
Dec. 31, 2011
Investment Securities [Abstract]  
Investment Securities
Note 3. Investment Securities

The amortized cost and estimated fair value of securities, with gross unrealized gains and losses, classified as available-for-sale at December 31, 2011 and 2010, were as follows:

 

                                         
    December 31, 2011  
    Amortized
Cost		     Unrealized
Gains		     Unrealized
Losses		     Fair
Value		     OTTI in
AOCI (1)		  
(Amounts in thousands)                              

States and political subdivisions

   $ 131,498     $ 6,317     $ —       $ 137,815     $ —    

Single issue trust preferred securities

     55,649       —         (15,405 )      40,244       —    

Corporate FDIC insured securities

     13,685       33       —         13,718       —    

Mortgage-backed securities:

                                        

Agency

     274,384       6,003       (285 )      280,102       —    

Non-Agency Alt-A residential

     15,980       —         (5,950 )      10,030       (5,950 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total mortgage-backed securities

     290,364       6,003       (6,235 )      290,132       (5,950 ) 

Equity securities

     419       206       (104 )      521       —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 491,615     $ 12,559     $ (21,744 )    $ 482,430     $ (5,950 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                         
    December 31, 2010  
    Amortized
Cost		     Unrealized
Gains		     Unrealized
Losses		     Fair
Value		     OTTI in
AOCI (1)		  
(Amounts in thousands)                              

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 securities

     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 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Other-than-temporary impairment in accumulated other comprehensive income

 

The amortized cost, fair value, and weighted-average yield of available-for-sale securities by contractual maturity at December 31, 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.

 

                                 
(Amounts in thousands)   States and
Political
Subdivisions		     Corporate Notes     Total     Tax
Equivalent
Purchase
Yield (1)		  

Available-for-Sale

                                

Amortized cost maturity:

                                

Within one year

   $ 115     $ 13,685     $ 13,800       0.51 % 

After one year through five years

     16,562       —         16,562       5.78 % 

After five years through ten years

     17,333       —         17,333       6.28 % 

After ten years

     97,488       55,649       153,137       3.87 % 
   

 

 

    

 

 

    

 

 

          

Amortized cost

   $ 131,498     $ 69,334       200,832          
   

 

 

    

 

 

                  

Mortgage-backed securities

                     290,364       2.78 % 

Equity securities

                     419       2.14 % 
                   

 

 

          

Total amortized cost

                   $ 491,615          
                   

 

 

          

Tax equivalent purchase yield

     5.45 %      1.27 %      3.28 %         

Average contractual maturity (in years)

     11.00       12.96       17.61          
         

Fair value maturity:

                                

Within one year

   $ 117     $ 13,718     $ 13,835          

After one year through five years

     17,305       —         17,305          

After five years through ten years

     18,194       —         18,194          

After ten years

     102,199       40,244       142,443          
   

 

 

    

 

 

    

 

 

          

Fair value

   $ 137,815     $ 53,962       191,777          
   

 

 

    

 

 

                  

Mortgage-backed securities

                     290,132          

Equity securities

                     521          
                   

 

 

          

Total fair value

                   $ 482,430          
                   

 

 

          

 

(1) Fully taxable equivalent at the rate of 35%.

The amortized cost and estimated fair value of securities, with gross unrealized gains and losses, classified as held-to-maturity at December 31, 2011 and 2010, were as follows:

 

                                 
    December 31, 2011  
    Amortized
Cost		     Unrealized
Gains		     Unrealized
Losses		     Fair
Value		  
(Amounts in thousands)                        

States and political subdivisions

   $ 3,490     $ 42     $ —       $ 3,532  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 3,490     $ 42     $ —       $ 3,532  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

                                 
    December 31, 2010  
    Amortized
Cost		     Unrealized
Gains		     Unrealized
Losses		     Fair
Value		  
(Amounts in thousands)                        

States and political subdivisions

   $ 4,637     $ 67     $ —       $ 4,704  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 4,637     $ 67     $ —       $ 4,704  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The amortized cost, fair value, and weighted-average yield of securities by contractual maturity at December 31, 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.

 

                 
(Amounts in thousands)   States and
Political
Subdivisions		     Tax
Equivalent
Purchase
Yield (1)		  

Held-to-Maturity

                

Amortized cost maturity:

                

Within one year

   $ 1,048       7.59 % 

After one year through five years

     2,442       8.16 % 

After five years through ten years

     —         0.00 % 

After ten years

     —         0.00 % 
   

 

 

          

Total amortized cost

   $ 3,490          
   

 

 

          

Tax equivalent purchase yield

     7.99 %         

Average contractual maturity (in years)

     2.08          
     

Fair value maturity:

                

Within one year

   $ 1,054          

After one year through five years

     2,478          

After five years through ten years

     —            

After ten years

     —            
   

 

 

          

Total fair value

   $ 3,532          
   

 

 

          

 

(1) Fully taxable equivalent at the rate of 35%.

The carrying value of securities pledged to secure public deposits and for other purposes required by law were $288.80 million and $302.67 million at December 31, 2011 and 2010, respectively.

The following table details the gains and losses from the sale of securities:

 

                         
    2011     2010     2009  
(Amounts in thousands)                  

Gross gains

   $ 6,963     $ 8,969     $ 4,111  

Gross losses

     (1,699 )      (696 )      (15,784 ) 
   

 

 

    

 

 

    

 

 

  

Net gains (losses) on sales of securities

   $ 5,264     $ 8,273     $ (11,673 ) 
   

 

 

    

 

 

    

 

 

  

 

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 December 31, 2011 and 2010. There were 14 securities in a continuous unrealized loss position for 12 or more months for which the Company does not intend to sell any and has determined that it is more likely than not going to be required to sell at December 31, 2011, until the security matures or recovers in value.

 

                                                 
    December 31, 2011  
    Less than 12 Months     12 Months or longer     Total  

Description of Securities

   Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		  
(Amounts in thousands)                                    

Single issue trust preferred securities

   $ —       $ —       $ 40,244     $ (15,405 )    $ 40,244     $ (15,405 ) 

Mortgage-backed securities:

                                                

Agency

     52,300       (285 )      —         —         52,300       (285 ) 

Non-Agency Alt-A residential

     —         —         10,030       (5,950 )      10,030       (5,950 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total mortgage-backed securities

     52,300       (285 )      10,030       (5,950 )      62,330       (6,235 ) 

Equity securities

     —         —         188       (104 )      188       (104 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $   52,300     $    (285 )    $ 50,462     $ (21,459 )    $ 102,762     $ (21,744 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                 
    December 31, 2010  
    Less than 12 Months     12 Months or longer     Total  

Description of Securities

   Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		     Fair
Value		     Unrealized
Losses		  
(Amounts in thousands)                                    

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

     3,390       (1,517 )      37,854       (12,833 )      41,244       (14,350 ) 

Mortgage-backed securities:

                                                

Agency

     71,613       (1,307 )      18       —         71,631       (1,307 ) 

Non-Agency 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

   $ 165,410     $ (7,707 )    $ 49,242     $ (20,747 )    $ 214,652     $ (28,454 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

At December 31, 2011, the combined depreciation in value of the 28 individual securities in an unrealized loss position was 4.51% 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 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 years ended December 31, 2011 and 2010, 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. At December 31, 2011, the Company’s investment in single issue trust preferred securities is comprised of investments in 5 of the nation’s 25 largest bank holding companies.

 

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 securities, and mortgage-backed securities (“MBS”). 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 years ended December 31, 2011 and 2010, the Company incurred credit-related OTTI charges related to beneficial interest debt securities of $2.29 million and $134 thousand, respectively. These charges were related to a non-Agency Alt-A residential MBS in 2011 and two pooled trust preferred security holdings in 2010.

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 15% of the remaining underlying mortgages will default within the next three years, and a loss severity of 60.

The following table 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:

 

                 
    December 31, 2011     December 31, 2010  
(Amounts in thousands)            
     

Estimated credit losses, beginning balance (1)

   $ 4,251     $ 4,251  

Additions for credit losses on securities not previously recognized

     —         —    

Additions for credit losses on securities previously recognized

     2,285       —    

Reduction for increases in cash flows

     —         —    

Reduction for securities management no longer intends to hold to recovery

     —         —    

Reduction for securities sold/realized losses

     —         —    
   

 

 

    

 

 

  

Estimated credit losses, ending balance

   $ 6,536     $ 4,251  
   

 

 

    

 

 

  

 

(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 2011, the Company recognized no OTTI charges on equity securities. During 2010, the Company recognized OTTI charges of $51 thousand on certain of its equity positions.